St. Petersburg University
Graduate School of Management
[Master in Management Program]
DEVELOPMENT OF INTERNET-BASED
VALUE ADDED SERVICES IN HOUSING
ESTATE BUSINESS IN RUSSIA
Master’s Thesis by the 2nd year student
Concentration — Master in Management
Aleksandr Mikhnevich
Research advisor:
Assistant Professor,
Johanna Pia Maria Frösén
St. Petersburg
2016
ЗАЯВЛЕНИЕ О САМОСТОЯТЕЛЬНОМ ХАРАКТЕРЕ ВЫПОЛНЕНИЯ
ВЫПУСКНОЙ КВАЛИФИКАЦИОННОЙ РАБОТЫ
Я, Михневич Александр Вадимович, студент второго курса магистратуры
направления «Менеджмент», заявляю, что в моей магистерской диссертации на тему
«Разработка интернет сервисов повышения ценности для Российского рынка
жилищного строительства», представленной в службу обеспечения программ
магистратуры для последующей передачи в государственную аттестационную
комиссию для публичной защиты, не содержится элементов плагиата.
Все прямые заимствования из печатных и электронных источников, а также из
защищенных ранее выпускных квалификационных работ, кандидатских и докторских
диссертаций имеют соответствующие ссылки.
Мне известно содержание п. 9.7.1 Правил обучения по основным
образовательным программам высшего и среднего профессионального образования в
СПбГУ о том, что «ВКР выполняется индивидуально каждым студентом под
руководством назначенного ему научного руководителя», и п. 51 Устава
федерального государственного бюджетного образовательного учреждения высшего
профессионального
образования
«Санкт-Петербургский
государственный
университет» о том, что «студент подлежит отчислению из Санкт-Петербургского
университета за представление курсовой или выпускной квалификационной работы,
выполненной другим лицом (лицами)».
_______________________________________________ (Подпись студента)
_____25/05/2016_____________________________ (Дата)
2
STATEMENT ABOUT THE INDEPENDENT CHARACTER
OF THE MASTER THESIS
I, Mikhnevich Aleksandr, (second) year master student, Master in Management
program «Management», state that my master thesis on the topic «Development of internetbased value added services in housing estate business in Russia», which is presented to the
Master Office to be submitted to the Official Defense Committee for the public defense,
does not contain any elements of plagiarism.
All direct borrowings from printed and electronic sources, as well as from master
theses, PhD and doctorate theses which were defended earlier, have appropriate references.
I am aware that according to paragraph 9.7.1. of Guidelines for instruction in major
curriculum programs of higher and secondary professional education at St. Petersburg
University «A master thesis must be completed by each of the degree candidates individually
under the supervision of his or her advisor», and according to paragraph 51 of Charter of the
Federal State Institution of Higher Professional Education Saint-Petersburg State University
«a student can be expelled from St. Petersburg University for submitting of the course or
graduation qualification work developed by other person (persons)».
________________________________________________ (Student’s signature)
_____25/05/2016_____________________________ (Date)
3
АННОТАЦИЯ
Автор
Название магистерской
диссертации
Факультет
Направление подготовки
Год
Научный руководитель
Описание цели, задач и
основных результатов
Ключевые слова
Михневич Александр Вадимович
Разработка интернет сервисов повышения ценности
для Российского рынка жилищного строительства
Высшая Школа Менеджмента
Менеджмент
2016
Johanna Pia Maria Frösén
Целью данного исследования является разработка
интернет сервисов повышения ценности для
Российского рынка жилищного строительства.
Исследование представляет собой анализ Российского
рынка жилищной недвижимости и использует
триангуляцию методов для достижения результата.
Для анализа качественных данных было проведено 7
интервью с руководителями региональных отделов
строительных компаний из разных регионов России.
Для анализа количественных данных был проведен
опрос 128 жителей жилых комплексов СанктПетербурга. Для анализа результатов были
использованы факторный анализ и описательная
статистика, включая перекрестные табулирования и
хи-квадрат тесты на значимость. Результатом данного
исследования являются разработанные 19 интернет
сервисов, которые могут быть предоставлены через
онлайн
платформы
на
рынке
жилищной
недвижимости. Кроме того, в данном исследовании
был затронут вопрос монетизации онлайн-платформ
на рынке жилищной недвижимости. В результате,
были разработаны три бизнес-модели.
сервисы повышения ценности, интернет сервисы,
монетизация онлайн платформ, бизнес модели,
жилищная недвижимость, жилищное строительство
4
ABSTRACT
Master Student’s Name
Aleksandr Mikhnevich
Master Thesis Title
Development of internet-based value added services in
housing estate business in Russia
Faculty
Graduate School of Management
Main field of study
Management
Year
2016
Academic Advisor’s Name
Johanna Pia Maria Frösén
Description of the goal,
The purpose of this research is to develop internet-based
tasks and main results
value added services for housing estate business in Russia.
The research is a case study of Russian housing estate
market utilising a triangulation of methods for better
results. For the qualitative data analysis, 7 interviews with
heads of regional departments of construction companies
from different regions of Russia were conducted. For the
quantitative data analysis, a survey of 128 inhabitants of
Saint-Petersburg housing estates was held. Factor analysis
and descriptive statistics including cross-tabulations and
chi-square tests for significance were used to analyse the
results. In this study, a list 19 value added services that can
be provided through online platforms in housing estate
market was developed. These services fall into three big
groups: social networking services, compulsory and
additional
services.
Additionally,
the
question
of
monetisation of online platforms in housing estate market
was discussed and three business models were suggested.
Keywords
value added services, e-services, monetisation, business
models, housing estate
5
List of Contents
Introduction ............................................................................................................................8
Background ........................................................................................................................8
Research problem ...............................................................................................................9
Organisation of the study .................................................................................................10
Chapter 1. Theoretical Background .....................................................................................12
1.1.
The concept of Business Model ............................................................................12
1.1.1.
Defining Business Model ...............................................................................12
1.1.2.
Internet Business Model.................................................................................13
1.1.3.
Online earnings logics ....................................................................................16
1.2.
The concept of Value Added Services ..................................................................19
1.2.1.
Defining Value Added Service ......................................................................19
1.2.2.
Strategies of providing Value Added Services ..............................................21
1.2.3.
Value Added Services categorisation.............................................................24
1.2.4.
Value Added Services in different industries.................................................27
1.3.
State Information System description ...................................................................30
Chapter 2. Methodology ......................................................................................................33
2.1.
Methodology justification .....................................................................................33
2.2.
Interview ................................................................................................................34
2.3.
Survey ....................................................................................................................37
Chapter 3. Findings ..............................................................................................................40
3.1.
Interview ................................................................................................................40
3.2.
Survey ....................................................................................................................48
Chapter 4. Discussion ..........................................................................................................56
4.1
Theoretical contribution ........................................................................................56
4.2
Managerial implications ........................................................................................57
4.3
Limitations and future research .............................................................................59
List of References ................................................................................................................60
Appendix 1. Survey form .................................................................................................66
Appendix 2. Final list of value added services ................................................................68
6
List of Figures
Figure 1. Components of Business Model ................................................................................13
Figure 2. Online revenue models classification ........................................................................16
Figure 3. The boundaries of VAS in telecommunications........................................................20
Figure 4. A typology of service strategies ................................................................................22
Figure 5. Trajectories of service addition .................................................................................23
Figure 6. New service development process cycle ...................................................................27
Figure 7. Respondents’ distribution by age ..............................................................................38
Figure 8. Respondents’ distribution by income per family member ........................................38
Figure 9. VAS realisation in housing estate business in Russia ...............................................41
Figure 10. The mechanism of promotional business model .....................................................45
Figure 11. The mechanism of construction business model .....................................................46
Figure 12. The mechanism of vending business model ............................................................48
Figure 13. Interest in HSN basing on age .................................................................................48
Figure 14. Housing Social Network Functions .........................................................................49
Figure 15. Interest in special offers according to age ...............................................................51
Figure 16. Interest in additional services according to income ................................................52
Figure 17. Desire to pay for communal services compared to meter readings reporting .........53
List of Tables
Table 1. Relative strengths of case study and survey methods .................................................33
Table 2. Interview timetable .....................................................................................................35
Table 3. List of transferred value added services .....................................................................43
Table 4. Pattern Matrix for factor analysis of social networking functions .............................50
Table 5. Reliability analysis of company-related services .......................................................50
Table 6. Reliability analysis of fully social services ................................................................51
Table 7. Significance of correlation between age and interest in special offers .......................51
Table 8. Significance of correlation between income and interest in additional services ........52
Table 9. Significance test of desires correlation .......................................................................53
Table 10. Value added services created with the help of survey ..............................................54
7
Introduction
Background
Nowadays customer-oriented industries have significantly changed. Currently,
customers expect from the purchase more than just a product or service. They tend to become
loyal if their expectation are met; to reach it companies usually offer their clients some
additional things. These additional elements are called value added services. Such services have
positive impact on the perceived value of the core product [van Riel et al., 2001, Gwinner et
al., 2000]. Therefore as consumers tend to expect high quality of the core product and take this
high quality largely for granted [Gwinner et al., 2000], value added services play a significant
role in modern business. Another reason for value services introduction is the fact that physical
products don’t provide companies with competitive advantage, financial performance or market
opportunities anymore [Oliva, Kallenberg, 2003; Gebauer, Fleisch, Friedli, 2005]. Also value
added services help companies to deal with low or decreasing revenues from the core product
[Ahn et al., 2011; Goyal, 2004]. So the better value added services the company offers the
higher is the value of its core product from the customer perspective. Thus value added services
is becoming one of the key competitive advantages for companies on different markets.
These changes started in 90-s when value added services were first introduced in
telecommunication industry. Since then many different studies were conducted on the topic of
value added services: Dowling (1991), Stoetzer (1992), Wittenbach (1995), Goyal (2004),
Ulaga and Reinartz (2011) and many others.
All business fields and issues, including value added services, changed significantly
with emergence of the Internet, for example, new e-business models appeared [CasadesusMasanell, Ricart, 2009]. Also Internet-based value added services differ a lot from basic ones,
which is very common for the majority of e-services based on traditional ones [Riedl,
Leimeister, Krcmar, 2011].
All the mentioned changes have global character and affect almost all industries in all
countries. Previous studies were conducted to identify peculiarities of different regions
[Dowling, Witte, 1991; Stoetzer, 1991], nevertheless, Russian market have not been examined
yet. The need in development of value added services is increasing in different business fields:
foodservice [Wittenbach, 1995], internet telephony [Wang, 1999], next-generation networks
[Whalley, 2008], health micro insurance [Pott, Holtz, 2014] and many others. Housing estate is
not an exception as the changes affect this industry, too.
8
Key definitions:
Business model – a simplified description of a complex business, which allows to
explore its structure, different elements’ relationships and its response to the real world
[Applegate, 2001].
Value Added Service – additional service, not a part of primary business activity, which
creates additional value for the clients.
E-service is considered to be a service that is provided to the customers over electronic
networks [Rust, Kannan, 2003].
Commoditisation – a process by which products tend to lose their uniqueness and
respectively value for customers [Davenport, 2005].
Business-to-consumer (B2C, sometimes also called Business-to-Customer) describes
activities of businesses serving end consumers with products and/or services [Nemat, 2011].
Consumer-to-consumer (C2C) (or citizen-to-citizen) electronic commerce involves the
electronically facilitated transactions between consumers through some third party [Nemat,
2011].
Research problem
Despite the fact that the topic of value added services is rather new there are many
different studies covering this topic. Researchers suggested different classification of value
added services [Youngdahl, Loomba, 2000, Backhaus et al., 2010, Ulaga, Reinartz, 2011],
identified their effect on customers’ behaviour [Gwinner et al., 2000, van Riel et al., 2001] and
analysed strategies of their development [Oliva, Kallenberg, 2003, Matthyssens, Vandenbempt,
2010].
The least studies field of value added services is the implementation issue, which
implies studying particular examples of value added services provided in various business
fields. There are several researches regarding implementation of value added services in such
industries as internet telephony, foodservice, logistics and healthcare micro insurance.
However, there is a limited number of researches in housing estate business field, especially
regarding the issue of online services.
The topic of online value-added services in housing estate market in Russia is very
significant. The housing estate business is different from other industries that sell real things:
9
purchasing a housing estate is very important decision customers as the price of the housing
estate is very high. That makes customers to be very cautious and accurate; they discover all
available information before the purchase. As value added services increase the perceived value
of the core product [van Riel et al., 2001, Gwinner et al., 2000] it can be a strong method of
attracting customers and motivating them to make a choice.
Currently, internet-based value added services started to develop in housing estate
business as internet is one of the easiest ways to communicate with consumers. However, their
development is still very slow, especially in Russia. It means that companies that will be the
“first-movers” in internet-based value added services implementation can get a very strong
competitive advantage on the market. Also there should be some special place for offering value
added services tightly connected to a particular housing estate company to get all the benefits
of such services implementation. Private online platform can be such special place for
customers.
Therefore, the aim of this research is to identify the opportunities of internet-based value
added services provided through online platforms in housing estate business in Russia. The
research question and sub-questions are presented below.
Research question: What are the opportunities for development of online platforms in
housing estate business in Russia?
Sub-questions:
•
Is it relevant to develop private online platforms for value added services provision
in housing estate business in Russia?
•
What are the internet-based value added services that can be provided in housing
estate business in Russia?
•
What are the possible earnings logics through internet platform in housing estate
business in Russia?
Organisation of the study
The research consists of four main parts. First chapter reviews theoretical background
and consists of two main parts: the concept of business model and the concept of value added
services. Value added services are the part of companies’ business models, so the brief
description of the business model concept is presented. Then the modern (online) business and
revenue models are considered as they are the prerequisites to the issues of value added services
10
and are also necessary for answering the third sub-question of the study. The second part of the
first chapter is devoted particularly to value added services as the central field of this study.
Firstly, the definition of value added service and explanation of their effects are presented to
give the overall understanding of the issue. Then different strategies of value added services
provision are examined in order to clarify the direction of the future research. In addition, value
added services are categorised in this part of the study to review the issue from different
perspectives, which cam assist in the development of value added services. The second chapter
of the research presents the brief description of methods that were used during the study and
the reasoning behind their selection. In the third chapter the main findings of the study are
discussed and described in details. This part is organized according to used methodology. The
last chapter of the study represents theoretical contribution of this research, into the scientific
field, managerial implications with practical recommendation to companies and limitations of
the research. Future research directions are also suggested in this part.
11
Chapter 1. Theoretical Background
1.1.
The concept of Business Model
1.1.1. Defining Business Model
There are many different approaches to definition of a business model. Some researchers
assume that business model should follow a certain structure when describing any business.
Three-dimensional models were described by Timmers (1998), Osterwalder, Pigneur (2002)
and Cea-Esterualas (2013). Taking into consideration key differences and similarities among
them, this study suggests three generic dimensions of business model: description of product
and value proposed to consumers, a network of actors involved (it may include organisational
architecture as well as market environment) and financial flows model (including revenue
generation and financing). Other researchers [Applegate, 2001; Petrovic et al., 2001; Auer,
Follack, 2002] view business model as a simplified description of a complex business without
any certain structure in it. However, they set following requirements to this description. For
example, it should allow to explore structure, different elements’ relationships and response to
the real world [Applegate, 2001]. Despite the fact, that the latter approach may be more relevant
for practical implementation and description of particular company business model, a defined
structure may be more helpful for comparison of different models or while creating general
business models for whole industries. A synergy of both approaches was reached in the research
of Shafer, Smith and Linder (2005). Researchers studied twelve different business models
definitions [Timmers, 1998; Hamel, 2000; Afuah, Tucci, 2001; Amit, Zott, 2001; Weill, Vitale,
2001; Dubosson-Torbay et al., 2002; Magretta, 2002; Rayport, Jaworski, 2002; Van Der Vorst
et al., 2002; Hoque, 2002; Chesbrough, 2003; Hedman, Kalling, 2003] and created an affinity
diagram to compare them all. As the result of the analysis, four main components of a business
model were determined, which can be very useful for comparison of particular cases or in
practical use by companies (Figure 1). However, this approach is too detailed to be used in
theoretical development of business models. As this study aims to develop business models for
housing estate market in general, a broader perspective should be taken into consideration. A
generalisation of business model components developed by Shafer et al. (2005) results in the
already proposed definition of business model generic dimensions: description of product and
value proposed to consumers, a network of actors involved and financial flows model.
12
Figure 1. Components of Business Model
Source: Shafer et al., 2005
1.1.2. Internet Business Model
With the development of the internet and its’ wide adoption in all spheres of life
including business, new business models appeared. The key difference between online business
models and traditional ones is that online business models are mainly focused on the issue of
generating income on the Internet rather than on any other issues [Casadesus-Masanell, Ricart,
2009].
One of the broadest definitions of an online business model was suggested by Lyubareva
et al. (2014). The main concept proposed by the researchers includes three elements, which
remind generic dimensions suggested in this study. Three main components proposed by
Lyubareva et al. (2014) are creation of value, value capture and value network. The first
component includes three different areas [Lyubareva et al., 2014]:
position of the company in the value chain, specifically original creation activity;
market segmentation, namely, identifying whether the offered content is a mass
market one or it attracts some special interest and market segments;
conditions of the content exploitation defining its value: the way of consumption
(online / offline), temporary access available only through content location, and
multiple offerings, for instance, streaming or downloading, which indicates
strategic choice of the offer diversification.
The second element of a business model is capturing value, which depicts the digital
content revenue generation mechanisms and embraces four main types [Lyubareva et al., 2014]:
13
revenue sources: subscription fee and pay per view;
unearned revenue: selling sponsored links and advertising;
public financing and donations;
offering free content.
The third dimension of a business model is value network; it describes suppliers of the
offered content and its distribution [Lyubareva et al., 2014]. Firstly, it refers to the first two
elements of a business model value creation and value capture which manage the presence of
external producers’ and user-generated content; the latter includes reviews and self-produced
content. Also value network dimension is about the distribution channels. This dimension
controls the way of delivering the content, which can be distributed via multiple channels or
not. For example, the content can be offered through different platforms or physical support.
Summarising, this definition fits the generic dimensions suggested in this study, however makes
stronger emphasis on online nature, therefore it will be used for the development of business
models in further chapters.
The development of new business models for housing estate market will be based on
different business models categories suggested by other authors. With the increasing popularity
of online business models many approaches to categorisation were undertaken by different
authors. Hayes et al. (2005) provide business models categorisation that combines three
different researches [Ticoll et al., 1998; Timmers, 1999; Kaplan, Sawhney, 1999]. Researchers
suggested that electronic business models could be classified according to five different
characteristics: the way of exhibiting the economic control degrees, functional and value chain
integration, business and technical innovations. However, the model refers to organisational
perspective rather than industry in general and does not provide the details behind factors
mentioned; therefore, it will not be taken into consideration in this study.
Another approach to e-business models categorisation was created recently by
Lyubareva et al. (2014). It relates to digital media and is based on empirical study of 34 cultural
content websites. Authors found out that all internet media business models can be divided into
three different classes: participative, distribution and editorial models. The first class of online
business models assumes using sponsored links and advertising as the main revenue source.
The content in this type of business model can be generated by users or by the company itself;
also the self-produced content can be mixed with the content created by third-parties.
Participative model is characterised by offering multiple ways of content exploitation like
downloading and streaming. The most crucial factor for value creation in this model is users’
14
contributions. In this internet media business model the content is offered for free, however
some revenues can be obtained from the end market by using advertising-based model.
Advertising-based model assumes company to act on a multi-sided market providing customers
with free-of-charge content and gaining profit from selling advertisers an access to the
customers [Rochet, Tirole, 2006].
The second class of internet media business models is distribution model. This business
model is characterised by focusing on a particular segment of the market by attracting attention
of the special-interest users groups [Lyubareva et al., 2014]. Distribution model assumes
developing a unique content inside the firm without any external parties, either professionals or
users, and delivering it through different platforms and physical supports. The major part of
revenues in this business model is received by offering the content for a charge, however, some
content can be provided for free. Also some revenues can be gained by public funding and
donations. Sponsored links and advertising are not widely used in distribution model because
of high level of content specificity. This revenue generation mechanisms is usually used in the
mass market with universal content offered to a great number of customers; on the specific
market with unique content the application of sponsored links and advertising are rather limited.
The third class of internet media business models is editorial model. This business
model is characterised by offering content from external professional for a charge; free content
is almost never offered to users [Lyubareva et al., 2014]. In editorial business model there are
two main ways of offering the content: for offline and for online (rental) consumption. Firstly,
the content can be designed for offline usage; this type of selling the content assumes that the
purchased piece of content can be used by the consumer forever. The second type of offering
the content is rental system where a user gets access to a piece of information for a particular
time period and where the level of access (permitted actions and amount of information, for
instance) depends on the amount of payment. Editorial internet media business model is similar
to a “merchant” mode of intermediation [Hagiu, 2007]. where a firm acts like an intermediary
buying content from sellers and reselling it to the end customers.
Talking about online platform in housing estate market, the content generated is news
about housing estate, therefore distribution and editorial models that are based on selling of the
content do not fit. Participative model perfectly fits to the case; however, it suggests only
advertisement as a revenue source. Therefore, a more detailed analysis of other ways of
monetisation should be conducted.
15
1.1.3. Online earnings logics
Different studies on the earnings logics of internet platforms were examined to create a
generic classification for further discussion with industry experts. Basing on the researches of
Clemons (2009), Dasgupta (2013), Laudon and Traver (2007), Anderson (2009), Mounier
(2011), Lyons (2012) the categorisation of online revenue models was developed (Figure 2).
Figure 2. Online revenue models classification
First category, users based revenue models imply that profits are generated by users’
payments. It does not necessarily mean that the use of such platforms is not provided for free,
however, there are no other revenue sources apart from users. Transaction revenue model refers
to the case, when the company provides its customers with a place for conducting transactions
[Laudon, Traver, 2007]. It supposes that users pay money to broker (website), which brings
buyers and service providers together [Lyons, 2012]. In this model, the company acts as a
market place operator and gets a commission fee from the customers’ transactions. There are
two types of customers: sellers and buyers; the role is not fixed and the same customer can both
sell and purchase goods or services. There are also two types of fees that can be applied on the
market place operator’s platform: fixed fee or percentage from the transaction [Dasgupta,
2013]. However, with the development of websites, utilising such model (eBay, Avito, Taobao)
some companies started creating accounts on such websites to utilise them as a channel for
sales. Websites reacted to this and developed special ways of interaction as well as special
account types for corporate users (e.g. eBay). Taobao even tried to separate C2C and B2C
segments by launching specialised platform for official sellers called Tmall. Therefore, in the
categorisation provided in this study (Figure 2) transaction revenue models are divided on C2C
and B2C.
16
Second type of online revenue models inside users based category is content sales
revenue models. They include subscription, limited access and virtual things. Subscription
revenue model refers to the case when company sells the access to the content to its users for a
particular time period: usually day, month or year for a subscription fee [Dasgupta, 2013]. The
access restrictions differ among different companies: each firm makes decision about users’
rights (read, download, etc.) and sets the fee; the level of the charge can be different for different
access options. Subscription revenue models can be utilised by general websites [Lyons, 2012]
as well as social networks (e.g. Classmates, Stayfriends) [Dasgupta, 2013]. Clemons (2009)
also studied this issue; the researcher calls it “experience and virtual community participation”
and attributes it to pay-to-play online games, such as World of Warcraft. Additionally,
subscription models include “merchant” models studied by Lyons (2012). The mechanism is
the following: the user pays to the website to get access to the goods and services. All the
products and services available on the website can be produced by the provider itself or
procured from third parties. Summarising, subscription revenue models assume that the access
to the platform is provided for a certain payment. Such revenue models may have a variety of
interpretations, except providing any free-of-charge access. Limited access category of online
revenue models supposes that users to pay money to provider (the website) for service/content,
which becomes available only after the payment is done [Lyons, 2012]. Content and
information are sold not through subscription, but by direct purchasing. Another example is
“freemium” model suggested by Anderson (2009). This model implies that the software, webcontent and services are provided to different types of users, including the basic one. This basic
tier always provides user with a limited access, while the full access must be paid. According
to “freemium” model only 1% of users shifts from the basic type and pays for the product or
service. As the expenditures for the good production are low the shifted users’ payments cover
all the costs, while other users stay at the basic tier and use the product of service free-of-charge
[Anderson, 2009]. Virtual things category generally refers to the gaming industry [Clemons,
2009]. It means selling virtual accessories enhancing gaming experience. Most of free-to-play
online games utilise this revenue model (e.g. Dota 2, League of Legends).
The last type of users based online revenue models is real sales. This issue was studied
by Clemons (2009) and Lyons (2012). The latter calls it manufactures (direct) revenue model,
where users pay the provider for the product or service. Selling real things perfectly matches
free-to-use internet platform concept, as companies are investing in internet services to attract
customers to buy their goods or services. However, in this case, online platform is rather a
distribution channel and does not generate any revenues by itself.
17
Second category, third party based revenue models. Models in this category assume that
the customer is provided with product or service for free. The company can eliminate
customers’ payments because the advertisers become the source of revenues and profits are
generated by third parties. First type in this category is analytics revenue models which are
based on selling information gathered from online experience. For instance, information from
Facebook or any other social network can be used for commercial purposes in background
checks and evaluation of market trends. Such revenue models are relevant when the amount of
users is huge and there are lots of diverse user information available [Clemons, 2009]. Second
type of third party based revenue models category is advertising. Clemons (2009) suggested the
idea, that online advertising does not meet current expectations of companies. The researcher
states three main reasons of online advertisement failure:
1.
The lack of consumers trust in advertising. It was defined that messages from rating
services have more credibility among customers, while the influence of the
commercial sources on the product perception is rather low [Ariely, 2008].
2.
Reluctance to view advertising. To prove this Clemons (2009) describes a real-life
example of television: advertisements are shown on all the major channels almost
at the same time, so that viewers cannot avoid them by channel surfing. In case
customers desired to watch advertisement it wouldn’t be necessary to synchronize
advertising on different networks.
3.
Advertising is not necessary for customers. Customers act in a way as if the main
part of information about offered products is obtained from two types of Internet
sources: independent professional ratings and communities with user-generated
ratings.
However, according to the results of the research, 13 of 15 (about 87%) popular social
networks from different countries are using advertising as their source of revenue [Dasgupta,
2013]. First subcategory of advertising models is pure advertisement. This model is based on
contacts with advertisers; third-party companies (advertisers) pay for access to company’s
clients, who have particular interests, which are demonstrated by their use of the offered
products and services. Another example of pure advertisement was suggested by Lyons (2012).
The researchers describes a payed-for-performance mechanism, where a third party pays to
websites a commission to for performing a particular action that leads to getting a measurable
outcome [Lyons, 2012]. The online platform (affiliate) places an affiliate link on its website,
which includes an identification code that helps to track clicks and sales. The seller advertises
and sells its products or services through such links and pays the commission to an affiliate.
18
The affiliate in this case acts as an intermediary between sellers and buyers. There are different
terms of paying the commission depending on the actions; commission can be paid for clicks,
landing, leads or sales. Affiliate revenue model is considered as a win-win solution for both the
merchant and the partner company (affiliate) as both get measurable outcomes: the seller
realizes his products or services and the affiliate company gets the revenue in a form of
commission. One more possible variation inside this type of revenue models was described by
Mounier (2011). It is one of the major models in the field of open access academic publications
– the “author-pays” model. The authors usually bear all the publishing costs of their articles and
books on their own without any external financing. The consumers usually get the content for
free in open access as the all the expenditures were already covered by the author. “Authorpays” model can be considered as a type of advertisement, as the procedure is similar: authors
pay to show their content to users. Second subcategory is participative advertisement. While it
looks similar to pure advertisement, there is a difference: the website in this case is a
consolidator of information about service-providers; their ranking is available to users. An
advertisement is sold in order to provide an advertiser with a higher rank in the list. This means
that only companies, participating in the ranking, can purchase an advertisement.
1.2.
The concept of Value Added Services
1.2.1. Defining Value Added Service
Value added services (VAS) first appeared in the telecommunications industry in 90-s.
More than twenty years ago, there was no precision in the use of this term. Stoetzer (1991) one
of the first stated the definition for value added service: VAS is a telecommunication service
that, firstly, combines the use of computers and telecommunications networks, and secondly,
adds value (new functions) to the customer in comparison with the plain old telephone service.
As value added services moved beyond one industry, in this study they are defined as following:
VAS is an additional service, not a part of primary business activity that creates value for the
customers.
Figure 3 is a graphical representation of four main problems of identifying VAS in
borders of telecommunication industry [Stoetzer, 1991]. However, most of them are relevant
for other business fields as well. Circle 1 represents the first problem of identifying VAS in
borders of telecommunications – it was difficult to split up traditional telephone services from
the new ones which added value to the simple voice transmission. The problem still exists: after
some time of value added service implementation, it often gets tied up with the product in
customers’ perception [Oliva, Kallenberg, 2003]. The second issue (circle 2) is referred to a
19
need to distinguish telecommunication services offering from telecommunications network
maintenance. Circle 3 represent the issue of excluding all different kinds of broadcast
telecommunications from value added services. It worth mentioning that this border is very
blurry, because in some cases broadcasting may work as a value added service. The author
supposed that this border might vanish in the future. It may have disappeared in
telecommunications; however, it still resides in general terms. Many of supportive and
maintenance services provided by different companies in various industries may be considered
to be value added services and separate activity at the same time.
Figure 3. The boundaries of VAS in telecommunications
Source: Stoetzer, 1991
After the implementation of value added services in telecommunications, companies in
other industries started the development of such services as well. The reason for interest in them
was studied on pharmaceutics manufacturing market and it was found out that their
implementation helps to build customer loyalty [Szeinbach et al., 1997]. Differences in politics,
economics and history led to some differences in the development of value added services
among different countries. Dowling, Witte (1991) analysed and compared the value added
services market development, and the regulatory systems on the market in two different
parts of the world: the USA and Europe. It was found out that despite different regulations in
the sphere of VAS development and provision, finally markets of both countries turned to free
competition. Moreover, after majority of players on the market implements value added
services, they transform from a competitive advantage to a must-have competition instrument
[Dowling, Witte, 1991]. Thus, only first-comers will be able to benefit from VAS
implementation, others will be forced to implement them in order to stay competitive.
20
The importance of value added services is proved by survey of Amdocs company1 in
2012. It conducted a survey among 120 communication executives aimed at discovering their
thoughts on the value added services trends in Asia-Pacific market. The survey showed that the
majority of the respondents consider value added services to be the key ones for companies.
More than 60% of interviewed communication executives replied that such services are
essential or very essential for their organisation. Over 70% of respondents from Australia and
India considered value added services to be one of the key success factors for their business. In
Thailand and Vietnam this number reached about 50%. There are several reasons underlying
behind companies’ decisions to attach value added services to their core products. Basing on
several interviews, it was found out that offering value added services is thought to have a
positive impact on the perceived value of the core product [van Riel et al., 2001]. The second
reason of adding value added services to the core product is to deal with low or decreasing
revenues from the latter [Ahn et al., 2011; Goyal, 2004]. Another important aspect is that
consumers have come to expect high core product quality and to take this high quality
largely for granted [Gwinner et al., 2000]. To deal with this issue, an implementation of
value added services could be used, as they have a positive impact on perceived value of the
product [Gwinner et al., 2000; van Riel et al., 2001]. According to several researches physical
products don’t provide companies with competitive advantage, financial performance or market
opportunities anymore [Oliva, Kallenberg, 2003; Gebauer et al., 2005]. Nowadays products
tend to lose their uniqueness and respectively value very fast; as a result, it becomes more and
more difficult to fight commoditisation.
1.2.2. Strategies of providing Value Added Services
As many companies started to implement value added services, different strategies of
VAS providing were developed. In this study, Matthyssens and Vandenbempt (2010) typology
of service addition is adopted to housing estate market. Authors conducted the analysis of
existing theoretical concepts and interviews with the manufacturing experts to identify four
types of service addition strategies. The classification considers two dimensions for each
service addition strategy type:
1.
The level of embeddedness of the service into the core product. There are two
contrary options: build-in services that are an integral part of the product and the
additional services that are perceived by the customer as a separate from the core
product part but still increasing its value [Oliva, Kallenberg, 2003];
1
Amdocs – American company, market leader in customer experience software solutions and services.
21
2.
The level of product customisation, which has two different options either standard
or customised product.
These two dimensions compose a four-service addition strategies matrix: after sales
service, service partner, value partner and solution partner. This typology of strategies is
presented on Figure 4.
Figure 4. A typology of service strategies
Source: Matthyssens, Vandenbempt, 2010
The majority of manufacturers enter the market with the lower left quadrant strategy
and use “after sales service” strategy, which is characterised by offering standardised product
with build-in services. Related to housing estate market, “after sales service” strategy refers to
general product-related services such as meter readings submission. There are two ways of
changing the strategy and moving to another position of the matrix. Firstly, companies can
become a “service partner” by changing the level of embeddedness of the service into the core
product. The connection between product and services is decreased, separate services, not
directly related to core product are offered. This shift is supported by the idea of decreasing
physical products’ value [Gebauer et al., 2005]. Secondly, companies can become “solution
partners” by increasing the level of product customisation and making their offering more
complex. In housing estate market conditions, the customisation of the apartments may take
place. Companies with “value partner” strategy have pure integrated solutions characterised by
22
high level of customisation and offering separate services that add value to the core product.
Despite the fact, that researchers consider it a separate dimension, it actually is a simple
combination of previous two quadrants. Therefore, in this study, trajectories of moving from
one type of service addition strategy to another are simplified from original ones presented on
Figure 5.
Figure 5. Trajectories of service addition
Source: Matthyssens, Vandenbempt, 2010
As the “value partner” strategy is considered to be a mix of “service partner” and
“solution partner”, companies can move from the left lower quadrant by changing both
dimensions simultaneously or move step by step. Four trajectories described are grouped in two
main directions:
1.
Addition of services (standardised service addition trajectory). It can be followed
by customisation (tailored service addition trajectory);
2.
Customisation of the core product (product-focused customisation trajectory). It
can be followed by addition of services (customer process optimisation trajectory).
From the Oliva’s and Kallenberg’s (2003) point of view after strengthening the productrelated services and exploiting the installed base service market, there are two main paths for
companies to follow either to focus on the customer relations or follow the route of offering
process-centred services. Customer relations path is adopted in housing estate market for more
than 10 years: companies are shifting from product orientation to customer orientation [Palm,
2011]. This is mostly related to after-purchase services in housing estate market, therefore these
23
services are provided by service company. Product-service strategies in turn are related to
services offered by construction company and are usually implemented as a response to specific
market needs [Matthyssens, Vandenbempt, 2010].
1.2.3. Value Added Services categorisation
Talking about value added services providing, there are not only different strategies of
making such services available, but also different kinds of value added services. Various
categorisations should be examined before the development. One of the oldest ones considers
dividing value added services into two groups: generalised and narrow [Youngdahl, Loomba,
2000]. Generalised refer to all manufacturing-related services and can be oriented on product
or on customer. Narrow value added services are focused only on customers and are often used
to increase the level of consumers’ satisfaction [Youngdahl, Loomba, 2000]. A study among
manufacturers based on the information about willingness-to-pay for value added services issue
showed that value added services can be beneficial for manufacturers [Backhaus et al., 2010].
Basing on this research, 3 main groups of value added services in terms of pricing were
determined: no-price or free, costs covering (low price, no profit making from service
providing) and beneficial. In this study, a special emphasis will be made on services generating
revenues, as they can be a basis for development of revenue models for online platform.
Another categorisation approach is based on the business process stage; value added services
can be divided into 3 groups: installation, training and maintenance [Ulaga, Reinartz, 2011].
This business-specific categorisation differs among all business fields, but still there is an
overall explanation for these VAS groups. Installation services imply services that have a direct
connection with the supplier’s core product, so the value acquires from the common definition
of service that is perceived as a promise to perform something on behalf of the consumer. The
most common example of installation service is warranty this service implies the producer’s
liability to repair or replace defective good within a specific time period that is contractually
agreed-on before the purchase. Training services is teaching customers to use goods in order to
make them able to perform troubleshooting and simple maintenance tasks themselves. For
example, ERP-systems producers always teach their customers how to use the systems; as a
result users understand how the system works and become able to fix small problems without
the help of the ERP-system producer. In such case both the client and seller saves time and
money as the latter hasn’t wait for the help with minor problems and the former doesn’t have
to deal with such. The last type of VAS maintenance refers to services rendered during the
period of good usage, for example the company provides customers with the hotline, so they
can call and ask any question about the good utilizing.
24
Stoetzer (1991) believes that technological factors have a great impact on the further
development of the value added services market. Emerging technologies are helping to create
new value added services. Talking about technological effect on value added services, there are
several different definitions of e-service, but most frequently e-service is considered to be a
service that is provided to the customers over electronic networks [Rust, Kannan, 2003].
According to Baida, Gordijn and Omelayenko (2004) in business literature e-service is usually
understood as an internet-based “copy” of the traditional service. Overall, there are five key
areas of difference between e-services and general ones that are covered by existing researches:
the costs structure, the degree of outsourcing, the speed of development, the availability of
transparent feedback and the continuous improvement [Riedl, Leimeister, Krcmar, 2011].
1.
The costs structure of services
According to Evans and Wurster (2000), the cost of electronic services provision is
marginal as they can be easily scaled [Menor et al., 2002]. However, at the same time the cost
of development and application of e-services is fixed and rather high, unlike general services,
which are usually labour intensive on all stages [Whinston, Choi, Stahl, 1997; Bakos, 1998].
This means that because of high initial investments needed, companies may stay aside of the
development of internet-based services. Nevertheless, their nature brings more benefits after
the development stage in comparison with general services [Menor et al., 2002].
2.
The degree of outsourcing
There is no need to locate services near the consumers as they can be easily delivered
from remote locations [Miles, 2005]. Moreover, technical frameworks used to create all kinds
of e-services are highly standardised, it allows to outsource components from different
providers and then easily integrate them [Champion, Ferris, Newcomer, Orchard, 2002;
Beisiegel et al., 2005]. Mentioned advantages of e-services create opportunities for outsourcing
of these services. However, it may result in complex value networks, which can be very hard
to manage because of a number of different actors working together [Vanhaverbeke, Cloodt,
2006].
3.
The speed of development of new services
Electronic services can be easily replicated; therefore, the only way to stay successful
in competition is constant innovations approach [Porter, 2001; Hipp, Grupp, 2005; Evans,
Wurster, 2000]. Except the high level of launching costs, other enetry barriers on e-services
market are very low because of high degree of service scalability, global availability of
25
information and high level of remote accessibility to services, which leads to a great need of
rapid advances in e-services to gain success [Menor at al., 2002]. In addition, impetuous
technological development increases customers’ expectations and needs; to meet them
companies get involved in continuous innovations.
4.
The availability of transparent service feedback
As services assume interaction between service and its consumer, the transparency of
such interactions is determined by the electronic nature of the service. All steps of such
connections in electronic services can be monitored, gathered, recorded and then used to
analyse and predict consumers’ needs [Riedl, Böhmann, Rosemann, Krcmar, 2008].
5.
The continuous improvement of services
Morris (2006) and O’Reilly (2007) consider that electronic services no longer require
much time to be fixed and changed, they can reside in perpetual beta phase (continuous
improvement). For instance, there are many online applications that are continuously updated.
Also e-services don’t have any local differences anymore as updated versions are delivered
globally and instantly for all users.
There are also many different typologies of service innovations created by different
authors. One of the most common and frequently used classifications is one created by
Edvardsson and Olsson (1996) and supported then by Essen and Conrick (2008). They
suggested three main areas that influence service innovation in a way that it becomes more
complex and multidimensional: service concept, service process and service system. The
authors consider service concept to be a “prototype for service, covering needs of the customer
and the design of service” [Essen, Conrick, 2008]. Other researchers believe that service
concept refers to a detailed description of consumer needs and the way the company is going
to provide the service; it specifies the domain of clients’ needs and the service offer to meet this
domain [Goldstein et al., 2002]. Service process is about the way of how the service is designed
and produced; it is a chain(s) of parallel and sequential activities which are conducted to
produce the service. Service system refers to resources used in the service process for service
concept creation: company’s staff, physical and technical environment [Edvardsson, Olsson,
1996].
Coming to the question of new VAS development, the first approach was proposed by
Johnson and Menor (1997). The researchers proposed a basic model of new services
development, which is presented in a form of a process cycle. Johnson’s and Menor’s model
26
includes four process phases: design, analysis, development, and launch. Later this model was
improved by adding 13 detailed tasks on different phases of process cycle and 3 internal keysuccess factors: organisational environment, people (teams) and instruments. The renewed
model is presented on Figure 6; it underlines complexity and nonlinearity of the new service
development with the help of an ongoing cycle.
Figure 6. New service development process cycle
Source: Johnson et al., 2000
Despite the fact that internet-based services differ from general ones, this model has no
contradictions to nature of e-services, especially reversed cost structure, so it is considered as
suitable for development of new e-services.
1.2.4. Value Added Services in different industries
In this part, different studies will be examined to find best practices in other industries.
Basing on that, industry experts will be interviewed on the topic of transferability of these
services to housing estate business.
Pott and Holtz (2013) state the need of value added services in health micro insurance
and describes the main of them. Overall, the article combines already existing value added
services and suggests some new to be implemented by insurance companies. In addition,
authors examine the popularity of services among clients and the costs of implementation. The
popularity of VAS was observed in the study. However, researchers used not an absolute scale,
but a comparative to each other; therefore, it is not relevant to housing estate field. The costs
27
analysis was also conducted in comparative way and does not contain exact figures, therefore
it is not representative. That is why these parts of the article will not be considered in this
research. Totally, researchers mentioned 10 value added services in health micro insurance:
health education, health camp, health check-ups, in-person consultation, remote consultation
(dial-a-doctor, technology enabled diagnostics), low-cost medicines, low-cost clinics, low-cost
diagnostics and emergency medical assistance. Health education service refers to the education
of clients for disease prevention and health promotion, for instance, customers are educated in
fields of hygiene and nutrition. Health camps are the most common of preventative value added
services in this field. During health check-ups clients are checked for health risks or illnesses
like hypertension, for example. In-person consultation is an appointment with medical
professional, who examines the patient in real-time and gives him recommendations. This
service usually is limited in number of visits to control costs and focused at out of pocket
expenditures reduction and facilitating access to primary medical care. Dial-a-Doctor is a type
of remote consultation that means contacting healthcare professional presented by a nurse or a
doctor by a telephone call. This service is usually considered to be low-cost and convenient
way for patients to get preliminary diagnosis or medical recommendation. Dial-a-Doctor
service often leads to personal consultation. Another type of remote consultation is technology
enabled diagnostics. This value added service implies sending basic diagnostic information like
pulse, blood pressure or electrocardiography results to the doctor by electronic means. The aim
of this service is providing patient with diagnosis and recommendations about the treatment
remotely with the help of medical assistant and modern technologies. Additionally, companies
in this business field provide customers with quality medical care and diagnostics at a discount.
This value added service is focused at out of pocket expenditures reduction and facilitating
access to primary medical care. Next service is emergency medical assistance. This service
utilizes satellite navigation system (GPS) and dispatching centre for incoming calls for
providing quick access to medical care in case of emergent situation. Emergency medical
assistance service offers ambulance transportation to appropriate healthcare institution for
patients with serious diseases or injures. This research suggests that half of healthcare micro
insurance industry value added services could be transferred to housing estate business. Mostly
they refer to general consultations, but three of them are different: health education can be
realised in form of seminars (webinars in terms of online service) and low-cost supplies can be
also provided through website. More detailed these services will be described and shaped during
the interview with industry experts.
28
Another case is related to intelligence transportation systems. Martinez-Torres et al.
(2010) conducted an analysis of a broad number of VAS used in the industry to relate them to
the bigger groups. The analysis showed that there are three main regions of services: region 1
is safety and security, region 2 relates to information services and region 3 is about
transportation systems management, which is related to the communication with the authorities.
During the interview, housing estate services will be viewed from the same perspective as well.
Wittenbach (1995) describes value added services for foodservice industry.
Additionally, value added services in steel, packaging, transportation and material-handling
industries are covered in his research. Value added services provided by metal distributors have
included processes and options. Processes include blanking, cutting to length, sawing, shearing,
and slitting. All these mean shaping a product to the customer. On the internet platform, this
can be a customizable design for the users. Options provided by metal distributors as value
added services include bar coding and identification marking, skid-packing, interleaving,
exterior bundle protection, electronic data exchange, facsimile processing, client assistance
about issues connected to products themselves, or alternative grades and materials. Referring
to housing estate, the final product is the apartment. Therefore, its customisation seems possible
only for shared construction. However, this issue will be discussed deeper during interviews
with industry experts.
End-users in the packaging field have related value added services to graphic
capabilities of the distributor and the availability for environmental assistance. Distributors are
responding to the environmental needs of end users providing services that assist with reducing
sources, recyclability and recycled content, and alternative recycling techniques. These services
may be partly realised through social networking functions, such as news or group decisionmaking. The latter way needs to be reviewed during interviews.
In the transportation carrier industry, there are many questions posed with regard to
value added services and what should be considered as minimum standards for carrier
performance. According to Carlos Fallas, vice-president of sales for Con-Way Transportation
Services, the only value added services are those perceived by the end-user [Wittenbach, 1995].
Transportation carriers can add value by decreasing costs or increasing sales and by product
enhancement. The traditional value added services in the transportation industry have included:
"kitting", product rework, and repackaging. According to [Bradley, 1993], carriers add value in
hidden ways, which have included: expansion of market penetration, assisting in avoiding
capital costs, inventory costs, cycle time and administrative costs reduction and offering just29
in-time delivery. In an interview with [Bradley, 1993], Bill Elston, president and chief
executive of the Unit Cos, stated that hidden value added services are not genuinely value added
in nature but are "value enhancers". In the same interview, Bob Baker, CEO of Skyway Freight
Systems, stated value is added for the end-users in two ways: an effective information system
and assistance with inventory management. The information system offered to the end-users
has included preparing bills of lading, conducting audits, and paying freight bills. In regard to
inventory management, Skyway Freight Systems has offered assistance in monitoring the flow
of products from the distributor to the end-user [Wittenbach, 1995].
In the material-handling industry, value added services have included providing
assistance in doing routine maintenance and simple repairs promptly either in-house or at the
dealership. Extensive training programs in the areas of new equipment, state-of-the-art
electronics, and safety are value added services considered beneficial by both the end-user and
the final customer (customer to the end-user) [Avery, 1993]. Talking about housing estate, this
can relate to group already mentioned group decision-making process about repairs etc.
Finally, value added services offered in foodservice industry include: product cutting,
product specialist, food show, nutritional analysis, custom computerisation and software,
operational consulting, menu and recipe writing, sanitation certification and registered dietitian
[Wittenbach, 1995]. Some of these value added services are very similar to services in other
industries and can be replicated the same way: for example, product specialist, nutritional
analysis, registered dietitian and operational consulting remind different types of consulting;
product cutting, menu and recipe writing are similar to customisation services in other
industries.
Summarising, all mentioned value added services in different industries will be further
discussed with industry experts to analyse the possibility of transferring these services to
housing estate business.
1.3.
State Information System description
The idea of governmental internet-platform in housing estate service industry firstly
appeared about 4 years ago. The plans were to launch it over the whole country until 2013,
however the website was created only in 2014, and now, in 2016, it is still in beta-test. State
information system “Gosuslugi” aims to provide a high-quality service for Russian citizens
through offering nine core functions, five of them are still in development. There are two main
groups of the functions: those that can be used only by authorised users and those that can be
30
used without registration. Before describing the functions it worth noting the registration
process, which is quite complicated. Firstly, a person needs to register his account, fill in several
forms with information about different documents. Secondly, the platform checks the
information; this process can last from several minutes to several days. Only after inputted
information is confirmed the person has to confirm his identity. There are three ways of
confirmation: order a postal letter (it comes approximately after two weeks), visit a postal office
or use E-key. The last way is used very rarely because not so many people in Russia have such
key, so only first two ways remain for the majority. When the process of registration is clear,
the functions of State information system can be described. There are nine functions: online
payment for the communal services, find on map, check service company license, send an
application, send meter readings, learn about subsidies and privileges, check the arrears, learn
about major home repairs and learn about the activities and domestic services.
1.
Online payment for the communal services
To pay for the communal services online after the registration the user needs to add a
special billing account for every bill issuer. After all information is verified, the user can start
paying the communal services through the platform. At present there are only two service
providers of water and other supplies, it means that despite the availability of the function not
all users can use it. However, electricity and gas payments are available for all users.
2.
Find on map
This function gives user an opportunity to search on map and view general information
about housing estate, service companies, resource suppliers, and local governments.
3.
Send meter readings
To use this function the user needs to do the same actions as in function 1 – online
payment for the communal services. Then the user can input meter readings online. It should
be noted that this page of the portal doesn’t work in some browsers, Google Chrome, for
instance; moreover, it crashes the work of the browser and the user needs to reload it through
task manager.
4.
Learn about subsidies and privileges
In this section, the user can find out information about the possibility of providing
subsidies and privileges to pay for housing and communal services. This part of the portal can
be used without authorisation by filling in a special form.
31
Despite the fact, that 60% of the functions are not available for users now, people are
starting to use this platform. This platform may have a significant effect on the market.
Basically, this project is exactly what companies in housing estate have started to create: an
internet platform that provides additional services from news to bills payment. As this project
is free-to-use and offers kind of the same but on governmental level, it should be very
interesting for people. On the other hand, because of complicated registration procedure and
long development time, people may start using substitutes before the platform will become fully
functional.
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Chapter 2. Methodology
2.1.
Methodology justification
Talking about methodology, this research is a case study of Russian housing estate
market. It utilises both survey and interview methods to reach broad, generalizable results of
analysis as well as depth understanding within a single investigation. An interview of industry
experts is used to understand the commercial actors’ perspective and investigate the
professional outlook at current market state and co-existence of private platforms with
governmental portal in order to answer the first research sub-question (Is it relevant to develop
private online platforms for value added services provision in housing estate business in
Russia?). The format of interviews will be different depending on goals. First interviews were
structured, because such format is good at comparability of the results [Kothari, 2004]. Second
interviews were unstructured, because it best helps to explore a topic in depth [Kothari, 2004].
In addition, basing on the analysis of previous studies, experts will be asked about the
transferability of value added services to housing estate market in order to answer the second
research sub-question (What are the internet-based value added services that can be provided
in housing estate business in Russia?) and possible ways of monetisation to answer the third
sub-question (What are the possible earnings logics through internet platform in housing estate
business in Russia?). To avoid the lack of generalizability a survey method is used as a part of
triangulation [J. Zivkovic]. A cluster sampling technique is used to select information-rich
group of people that will best enable to answer the research questions. In this study, inhabitants
of some YIT housing estates in Saint-Petersburg, where the simple online platform function
was implemented (meter readings submission), were surveyed. As it can be seen from Table 1,
relative weaknesses of the pure qualitative case study are compensated by strengths of the
survey method and vice versa.
Table 1. Relative strengths of case study and survey methods
Source: Gable, 1994
33
In this study, research questions will be analysed from multiple perspectives with the
use of different methods to increase the validity of the results. This approach is called
triangulation and brings certain benefits such as “increasing confidence in research data,
creating innovative ways of understanding a phenomenon, revealing unique findings,
challenging or integrating theories, and providing a clearer understanding of the problem”
[Thurmond, 2001]. Mentioned benefits are mostly supported by diversity of analysed data.
Guion, Diehl, McDonald (2001) identified five methods of data triangulation, two of them will
be used in this study. Data triangulation means the use of different data sources. In this study,
data triangulation will be used during the analysis of interview results – viewpoints of different
people will be compared. Methodological triangulation refers to the use of multiple qualitative
and/or quantitative methods. In this study, to answer the first research question (Is it relevant to
develop private online platforms for value added services provision in housing estate business
in Russia?) results from the survey and interviews will be compared. If findings observed are
similar, we can draw a conclusion about the validity of the results.
Summarising, using interviews together with survey helps to get in-depth results, which
are statistically relevant and generalizable, what is not possible using a single-strategy study.
This increases validity and utility of the findings. [Guion, Diehl, McDonald, 2001]
2.2.
Interview
In this study, seven experts from different regions of Russia were interviewed. As YIT
company has experience of online platform implementation on foreign markets and starting the
development for Russian market, the majority of the interviewees are heads of YIT Russian
regional departments. Additionally, an executive director of “Severstroy” construction
company that is not involved in online platform development was interviewed to get another
perspective on this issue in order to avoid misleading. Respondents were interviewed in person,
by telephone and internet (with the use of skype); their names, interview dates and tools,
companies and regions of operation are presented in the Table 2.
34
Table 2. Interview timetable
Name
Company
Alla Vinnik
Vadim
YIT
YIT
Region
Saint-Petersburg
Moscow
Interview
First
Second
tool
interview
interview
date & time
date & time
Face-to-
03/06/2015
13/06/2015
Face
09:30-10:30
11:00-11:30
Skype
03/06/2015
13/06/2015
11:00-12:00
10:00-10:30
05/06/2015
13/06/2015
09:30-10:30
10:30-11:00
05/06/2015
13/06/2015
11:00-12:00
13:00-13:30
08/06/2015
14/06/2015
10:00-11:00
10:30-11:00
08/06/2015
14/06/2015
15:00-15:30
11:00-11:30
10/06/2015
14/06/2015
11:00-12:00
12:30-13:00
Morozov
Andrey
YIT
Rostov region
Skype
Chernoivanov
Dmitriy
YIT
Moscow region
Skype
Zaharov
German
YIT
Malyshev
Republic of
Skype
Tatarstan
Oleg
YIT
Shapovalov
Sverdlovsk
Telephone
region,
Tyumen region
Igor Petrov
Severstroy Republic of
Skype
Komi
The format of first interviews was a structured interview divided into two main parts.
The first part was mostly focused on the discussion of State Information System development
and how it affected the market. The list of guiding questions for the first part is presented below:
1.
Do you have previous experience of housing estate online platforms use? If yes,
what do you feel about it? Was the functional clear for you?
2.
Do you know about any online platforms developed by your competitors? If yes,
what services do they provide through it?
3.
Do you know about State Information System? How is development going in your
region? Have you already reported to it?
35
4.
How do you think, will this platform have a success on Russian market? Why?
5.
How do you think, can/should private platforms compete with State Information
System?
6.
What are the key factors for development of private platforms?
The second part was devoted to the discussion of value added services transferability
from other industries. The guideline questions for the second part are presented below:
1.
Companies in the healthcare industries provide healthcare education for its clients.
Do you see any opportunities for some kind of education in housing estate business?
How do you think, can it be realised through internet platform?
2.
Additionally, many various consultations are provided in healthcare industry. What
are the possible ways for online consultations in your business? Are your customers
interested in it?
3.
Is there an opportunity to provide your buyers with low-cost supplies (for example
for apartments finishing)? Will they be interested in this?
4.
Companies in the intelligence transportation systems industry make a strong
emphasis on making their customers feel safe and secure. Are there any
opportunities to make your customers feel safe through some services provided on
online platform?
5.
Metal distributors provide a wide range of opportunities to customise final product.
Can some customisation be done in housing estate? Is there a way to connect it with
online platform?
6.
In transportation carriers industry, one of the important services for customers is
ability to check the current state information. What do you think a replication of
this service in housing estate business can be?
7.
One of services that can be provided through online platform is group decisionmaking (for example about some repairs or cleaning issues). Are there any barriers
in implementation of this feature?
8.
Do you have any additional suggestions of services that can be provided through
housing estate online platform?
Second interviews with experts were conducted to discuss the monetisation possibilities
in a format of unstructured interview. As a guideline for this discussion a classification of online
revenue models suggested in this study (Figure 2) was used.
36
Talking about interview analysis, it generally refers to qualitative data analysis. The use
of computer packages is recommended only in case of collection of lots of interview data (more
than 40 interviews) [Adams et al., 2007]. As the data collected during interviews in this study
is not large in volumes, it will be managed by traditional means. One of the methods that will
be used is “quote-research”. This technique means the use of quotes from interview as
illustrative or confirming examples [Folkestad, 2008]. Particularly, it will be used for presenting
current market state as well as to form a list of services that can be transferred to housing estate
business. Second method that will be used is cross-case analysis as a part of comparative
research tool. This technique enhances generalisability of the results [Miles, Huberman, 1994];
therefore, it will be used for identifying whether State Information System creates threats or
opportunities for development of private platforms. Additionally, this tool will be used to
compare experts’ opinion on different transferable services suggested by others.
2.3.
Survey
To identify customers’ perspective, whether people are interested in private online
platforms or not as well as develop value added services for such platforms, the survey was
conducted. A cluster sampling technique was used to select information-rich group of people.
It means that the population was divided into discrete groups prior to sampling. The criteria for
cluster selection were geographical area and experience/understanding of online platforms in
housing estate market. As YIT company already started development of value added services
and implemented a simple online function (meter readings submission) for some of housing
estates in Saint-Petersburg, inhabitants of these housing estates were chosen for the survey.
The survey consists of 1 open-ended question and 14 multiple-choice questions (7 with
binary outcomes and 7 with categorical outcomes). Respondents were asked to identify their
interest in particular features from the pre-determined list of social networking functions.
Additionally, they were asked on their intentions to use features similar to those provided by
State Information System. Finally, respondents were given an opportunity to give some
feedback about the platform or suggest services they would like to see. A survey form with the
list of questions is presented in the Appendix 1. The survey was conducted online through the
YIT website in mentioned housing estate. All inhabitants were invited to participate in survey
by three ways: in a news section on a website, by e-mail and by paper-based posters on the
entrances. Overall, 128 responses were collected in the time period from 15th of June, 2015 to
30th of July, 2015. A final sample included respondents of various ages and income levels, the
distribution of respondents by age (Figure 7) and income (Figure 8) is presented below.
37
Figure 7. Respondents’ distribution by age
Figure 8. Respondents’ distribution by income per family member
For the analysis of survey data, different statistical approaches to quantitative data
analysis are used. First, for the binary data, a factor analysis was conducted to investigate
pattern of correlations within a set of social networking functions. Despite the fact that principal
components analysis (PCA) is the default method of extraction in many popular statistical
software packages, it is considered to be insufficient by many scientists and suitable only as
38
data reduction method [Costello, Osborne, 2005]. Jensen (1983) suggests that there is almost
no difference in the results or in any theoretical or practical conclusions of principal components
analysis and principal axis factoring (PAF). However, the comparison of accuracy of these two
methods by Snook and Gorsuch (1989) showed that PAF produced accurate estimates of the
nonzero factor loadings, especially when the number of variables was small. For that reason,
this method of factor analysis was chosen in this study. As for the rotation technique, some
authors say that it depends on a correlation between components: an orthogonal rotation (e.g.
varimax) is used when there is no correlation and the oblique rotation (e.g. promax) is used in
other cases [Lewis-Beck et al., 2003]. However, the comparative study of performance of these
two methods by Finch (2006) showed that two approaches are equally able to recover the
underlying factor structure, regardless of the correlations among the factors. Nevertheless, the
oblique method is preferable for identifying simple structure when it is present [Finch, 2006].
Therefore, promax rotation technique was selected in this study. Assessing the practical
significance and factor loadings of variables, different researchers have different opinions on
this topic. As common magnitudes in the social sciences are low to moderate loadings of .40 to
.70 [Costello, Osborne, 2005], this study refers to Stevens (1992) suggestion of using a cut-off
of 0.4, irrespective of sample size. To estimate whether the factors identified are reliable,
reliability analysis was conducted. Cronbach's alphas calculated are indicators of internal
consistency among variables attributed to each of the factors. It shows how closely related a set
of items are as a group. A coefficient of .70 or higher is considered acceptable, while an alpha
of 0.5 indicates an absence of unidimensional scale [Lee, Cadogan, 2013]. Additionally, for
multiple-choice responses, descriptive statistics will be used. Particularly, emphasis will be
made on cross tabulations, as they present the results of the entire group of respondents as well
as results from sub-groups of survey respondents. Cross tabulations enable to examine
relationships between two or more variables. However, to ensure that correlation is not only
visual, chi-square tests will be conducted for significance assessment. In this study, the
confidence interval is considered to be 95% (alpha=0.05).
39
Chapter 3. Findings
3.1.
Interview
Basing on the analysis of the first part of the interview, experts’ opinion on the topic of
State Information System development was collected. One of the experts believes that as the
platform is governmental and united it will have a great success: “State Information System is
obligatory for companies, therefore they will not have enough resources to support private
platforms as well. Moreover, as it is governmental project, it will be similar for all people will
all required functions. I’m not sure that people need something else” [expert A]. Others at the
same time treat the same points as a problem. “A great amount of information makes platform
complicated. This is definitely negative point from the final user perspective” [expert B].
Moreover, “a big internet platform cannot provide its users with immediate responses from
support” [expert C]. Experts highlight that response time is important: “Users do not like to
wait a long time to get their problems solved” [expert G]. Therefore, it provides an opportunity
for existence of companies’ online platforms and can be one of the strongest competitive
advantages. Additionally, one of the experts faced similar situation in his region: “There was a
case of similar governmental project and it had no success – people simply refused to use it”
[expert D]. Overall, the majority is not sure about the future of the State Information System,
especially taking into consideration the fact that the creation started several years ago and is
still in progress: “I doubt that it (State Information System) will be able to compete with welldeveloped private platforms” [expert E].
Talking about the development of private online platforms, experts highlight there are
some difficulties, which slow down the process of the development. First, implementation of
governmental portal obliged companies to report necessary data on it. Therefore, some experts
stay resistant to development of private online platforms as it means replication of all
procedures related to it. “I will have company website, State Information System, second
governmental project “reforma zhkh” and online portal: all about the same. State Information
System is very poorly organised, it requires lots of information. But I will be responsible for all
4 resources” [expert D]. Another point is that housing estate market in Russia is divided into
two main segments. The first one is construction industry – this part of the market relates to all
construction companies that are selling housing estate to customers. The second one is a service
industry – this segment relates to the post-purchase house maintenance. “Our business ends
right after the construction. We do not provide house maintenance like many other construction
companies; third-party service company is responsible for it” [expert E]. Therefore, if we divide
40
value added services on the ones that are provided before the purchase is conducted (prepurchase) and the ones that are provided after the purchase (post-purchase), the latter ones are
realised not by the particular housing estate seller, but by the service companies. Talking about
online platforms, even some of pre-purchase value added services, provided by construction
company, may be presented on the internet platform of service company.
Internet
platform
core business
interactions
other
interactions
Maintenance
Service
company
Customers
Benefits
Construction
company
Figure 9. VAS realisation in housing estate business in Russia
Service companies operate their main business through direct communication with
customers (Figure 9); and implementation of internet platform may facilitate and enhance this
interaction. Therefore, investing in development and maintenance of such platforms may sound
reasonable for them. However, there are few benefits in providing superior service. “According
to Russian law, in case the construction company is not providing housing maintenance, a
service company is being selected by inhabitants or during an open tender. As in new housing
estates only few inhabitants are presented at the end of construction, in most cases service
company is being selected by open tender. Therefore, the main focus of service companies is
to fit tender requirements rather than provide superior service at higher price” [expert E]. This
results in fact, that the only parties, who are interested in value added services, are customers
(to receive better service) and construction company (to increase customers’ loyalty and sales).
In case, if service company is a part of construction company, there’s in-house cooperation and
control. “It is an often case in our region, when construction company takes the responsibility
for further housing maintenance” [expert F]. However, if the service company is independent
from construction company, how the latter can be sure that the former will spend enough money
and efforts on internet platform maintenance, while getting almost no benefits from it?
41
Therefore, the majority of experts agreed that if an online platform will be generating revenue
flows to cover its costs, the development makes sense. “I think about such online platform in a
positive way, especially if it will be able to generate some revenues” [expert B]. “In case if this
platform can bring revenue and payback, construction companies will be ready to invest money
in that” [expert E]. “I don’t see the point in development of private platforms. In my opinion it
will never payback” [expert A]. Basing on the analysis of different online earnings models
provided in previous parts, an online platform will be considered as an independent business
model; therefore, the ways of how this platform can finance itself will be suggested later.
Second part of the interview was devoted to investigation of value added services
replication from other industries. Overall, the following industries were examined in this study:
healthcare micro insurance, intelligence transportation systems, foodservice, metal distribution,
packaging, material-handling and transportation. Talking about healthcare industry three key
value added services were identified: healthcare education, consultations and access to low-cost
supplies. As for the education, there are different opinions. Some experts believe, that “there
are not much things to educate people in this business” [expert G]. Other experts at the same
time supported the idea of customers’ education. “We can explain them the process and answer
main questions about purchasing the housing estate from our company” [expert C]. “It is
important to explain to customers all the specifics of housing estate selection to help them make
right decision. This will be beneficial for both sides” [expert B]. “Educating online is not only
possible and convenient nowadays; it also provides a great opportunity to attract people from
different regions” [expert E]. There are many opportunities to replicate consulting services
through online platform as well: “Online consultation can be realised in many different ways.
It may vary from simple “FAQ” page on the website or call-back button up to fully integrated
online chat with professional consultant” [expert F]. As for low-cost supplies, there are certain
limitations on implementation of this service. “Definitely customers will be interested in
purchasing some materials with the discount, especially the ones who are purchasing
apartments for finishing. However, as one of the leading construction companies, we have some
requirements to the size of corporate partners and quality of their products. I won’t say that this
option is not viable, but it needs to be assessed individually by every company” [expert A].
Referring to intelligence transportation systems industry and services aimed at increasing
customers’ safety, experts suggested various ways of realisation. “People feel safe after buying
a housing estate if nothing goes wrong. However, sometimes they face problems and may not
be aware of how to fix them. A useful online service would be an ability to make an appointment
of plumber or locksmith on website. Imagine a timetable, where a user can choose appropriate
42
date and time of visit” [expert D]. “We are placing video cameras for security reasons in many
housing estates. They include video intercom, elevator cameras and outdoor cameras. I think
that we can provide people with the access to online translation from these cameras in personal
account. I think especially people with cars would appreciate this function, when they can
ensure that everything is ok anytime anywhere” [expert E]. Referring to customisation issue
inspired by metal distributors experts suggest the following service. “The trend of customisation
appears in many different industries, housing estate is not an exception. Some construction
companies provide people with opportunity to customise finishing of the apartments or even
the layout during the construction phase. As for online features, I think an application can be
developed, where a customer can view different options – the one like IKEA has” [expert A].
“I think a good idea is to let people customise the interface of online platform to meet their
needs” [expert B]. Transportation industry service for transfer is customers’ ability to check the
current status of delivery. “We can post news on online platform to keep customers informed”
[expert G]. “For customers purchasing housing estate in shared construction, we can post news
of the status of construction processing. Additionally, some photos of construction may be
available for them” [expert D]. Talking about group decision-making, “if inhabitants’ identities
are verified in online platform, there are no barriers in use of this service” [expert B]. “Online
voting is a good opportunity, as generally people are not willing to participate in all residents
meetings. In our region, we tested similar function: inhabitants were voting for or against the
installation of special trash cans for batteries. We managed to get relatively high rate of
involvement, I think it is good result” [expert A].
A list of all suggested services with their description is presented in the Table 3.
Table 3. List of transferred value added services
Value added service
Description of VAS in housing estate
Housing estate acquisition
Users can register for the webinar. Before the beginning,
webinar
they will receive the notification with the link to the
webinar. All users can view the video in real time and ask
questions in chat.
Remote consultation (online
Online chat is organised for consultations with sales
chat)
department of construction company.
43
“Call-back” feature
“Call back” feature is available for all users to request a
call from the sales department of construction company.
Access to low-cost supplies
This service can include different ways of providing
access to low-cost supplies. It can be advertisement about
special offers or fully working online mall for users.
On-site application for plumber
Users can request a visit of plumber or locksmith from
or locksmith
their personal account. They can choose appropriate date
and time of visit from available.
Online video from cameras in
Users can view the video from video intercom, elevator
personal account
cameras and outdoor cameras.
Customisable design for the
Users can customize the interface of the online platform.
users
This can include change of buttons places, colours and
themes.
Finishing of apartments for
Buyers can use the online application to choose finishing
shared construction
from the options available. Additionally, the can view,
how this finishing will look like.
Layout change for shared
Buyers can use the online application to choose possible
construction
layout changes.
Construction status online
Buyers, participating in shared construction can view the
status of construction processing. Additionally, they can
view photos of construction and receive news about it.
Group decision-making (voting)
Users can participate in decision making through voting.
Housing company places the voting in the network,
available for users for certain period of time. The results
of voting are available for all voted users.
During second interviews, experts were asked to express their opinion on possible
monetisation ways of online platforms in housing estate market. As for third party based
revenue models, analytics models are barely suitable for online platforms in housing estate as
“…the amount of users is limited by housing estate size” [respondent B]. Advertisement models
44
value is enhanced by the specifics of housing estate online platforms: “…users can be easily
targeted by geographical region, as all of them are assigned to a particular housing estate they
live in. As geographical location is defined, many local advertisers may be interested in
advertisement placement among particular users (for example laundry operating nearby)”
[respondent C]. “In my opinion, advertisement is one of the strongest revenue sources for such
online platforms. A social networking element of the platform (including communities of
interest) provides an opportunity to add interests as a targeting filter. This can increase the price
of advertisement by providing different advertisement filters. However, to implement those,
users should be motivated in filling their personal profiles” [respondent G]. “Construction
companies, selling apartments for finishing, can benefit most from selling advertisement places
to hardware stores” [respondent A].
Basing on the advertisement revenue source, the first business model suggested is
Promotional model (Figure 10). As a service company is getting revenues from advertisers for
providing access to inhabitants, main actors are service company, advertisers and inhabitants.
This model will mostly fit companies with big amount of users on the platform with high
attendance, because this increases advertisement price. “A provision of access to platform not
only for inhabitants, but also for those, who intent to purchase a housing estate will help to raise
an attendance rate” [respondent D].
Figure 10. The mechanism of promotional business model
Referring to user based revenue models, selling real things through online platforms in
housing estate market can refer to selling of already described construction services: finishing
of apartment and layout changes. These services should be sold while the construction is going,
therefore only customers, who are participating in shared construction, can afford them.
Therefore, “this can be not only a revenue source, but also a strong incentive to participate in
shared construction” [respondent A]. Nevertheless, only companies with strong brand, which
consumers have relatively high initial expectations of the value added service quality, can sell
the product and the service simultaneously [Zhang et al., 2014]. Companies, which consumers
45
have relatively low expectations, should decrease the degree of information asymmetry to sell
the service and product together. In other cases, the service will be sold during the product life
cycle, and this does not fit to the mentioned construction services [Zhang et al., 2014].
The second business model, basing selling of construction services is Construction
model (Figure 11). A service company receives a fixed commission or a percentage from the
revenue earned on additional construction services from construction company for providing it
with clients. There are three main actors: construction company, service company and
customers. “A user can select a particular service (finishing or layout change) and a variant of
customisation through online application on the platform” [respondent E]. “It is especially
important to ensure that the selection procedure is simple and well visualised” [respondent B].
It should be noted, that this business model fits only to construction companies selling
apartments in shared construction. Therefore, such model suits most to companies with reliable
brand and high quality of construction.
Figure 11. The mechanism of construction business model
As for content sales revenue models types, “subscription model is not relevant, because
State Information System is realised on free basis. People wouldn’t pay for a platform, when
there’s free alternative” [respondent D]. “No one would pay for such platform in Russia”
[respondent A]. As for direct purchase models, they may be implemented. However, “fresh
news and information about housing estate are one of the core reasons to use the platform: users
should not be charged for this” [respondent F]. At the same time, experts were unable to suggest
possible content for charging under direct purchase model. Virtual things selling is the main
way of earning revenue in free-to-play gaming industry [Clemons, 2009] and “it is not
applicable for online platforms in housing estate” [respondent E].
46
Referring to transaction models in housing estate, “C2C models are not applicable,
because the amount of users is limited by housing estate size. There are various websites
providing such functions for much higher amount of people. Online platforms in housing estate
can not provide any advantages” [respondent B]. The most evident way of getting commission
fee from B2C segment is connected with communal services payments. However, “introduction
of additional fee might be a significant threat for the online platform: it will make the platform
less attractive in comparison with the common payment methods. As a result, inhabitants’
interest in using the online platform can decrease a lot” [respondent C]. “I don’t see the point
in creating a general B2C marketplace on online platforms in housing estate – the amount of
potential customers is not big. Instead of that, a strong point of such platforms may be utilised
– all users are living in the same place. This may be very good for the logistics issue”
[respondent E]. “Group purchases can be organised through such platform. There should be
some discount for purchasing goods in a bulk” [respondent G]. “Vendors can offer their goods
or services on online platform. The description of the deal should contain the price, terms of
purchase, time period and amount of users needed to get discount” [respondent D]. Amount of
users left should be updated in real time. If a user wants to purchase a good, he pays for it to
the service company account. If the required amount of purchases is met before the end of
period, service company conducts a purchase and then users receive their goods. If the required
amount of purchases is not met, service company returns money back to the users. “This way
of organizing deals is possible only if users trust the intermediary, which collects money. In
case of housing estate online platforms, the trust is built on a construction company brand”
[respondent A].
The third business model is Vending model, which is based on a group deals procedure
described above (Figure 12). Main actors are service company, its vendors and inhabitants.
Service company can receive a revenue in different ways. One variant is a commission fee from
the goods/services sold through the platform. Other way is taking a one-time payment for the
deal placement on the website. The latter variant “mostly fit to small partners, when a service
company can’t be sure that users would like offered product” [respondent B]. A third way is to
collect a monthly payment for access to deals placement. This way can be offered after some
time of successful business model utilisation for partners, intending to offer several deals per
month.
47
Figure 12. The mechanism of vending business model
3.2.
Survey
A survey is aimed to identify possible directions of platform development as well as
services that can be provided through it. A list of questions is presented in the Appendix 1. This
study suggests investigated whether people would like to see an online platform in the format
of social network with certain features and additional functions. First, a description of Housing
Social Network (HSN) with its possible functions was introduced to respondents. Basing on the
answers, only 6% of respondents would not like to use such online platform. The amount of
people interested in Housing Social Network among people of different age is presented below
(Figure 13).
Figure 13. Interest in HSN basing on age
48
To identify desired social networking functional, the list of functions was developed
first and respondents were asked to choose what functions they find important. The functions
included in the initial list: communication with neighbours, communication with housing
company, sending applications to housing company, getting news about housing estate,
receiving special offers from partners, creation of communities of interests, order of additional
services. In addition, respondents could add functions they need if there were no such in the
list. However, they made no suggestions. The interest in functions among respondents is
presented on Figure 14; functions are presented on horizontal axis and the percentage of
respondents who are interested in the particular function on vertical axis.
Housing Social Network Functions
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
CommunicationCommunication
Sending
Getting news
Receiving
Creation of
with neighbors with housing applications to about housing special offers communities of
company
housing
estate
from YIT
interests
company
partners
Order of
additional
services
Figure 14. Housing Social Network Functions
To investigate the pattern of correlations within a set of social networking functions a
factor analysis was conducted. After the first iteration, one of the functions (receiving special
offers) received same loadings for both factors. Moreover, these loadings barely matched the
cut-off threshold of 0.4. As such offers are supposed to be provided by third-party companies
and are not generated directly by service company or by other users, it is reasonable that it
should be excluded from factor analysis. A second iteration of factor analysis was conducted
after the exclusion of receiving special offers function. The similarity of pattern loadings and
structure loadings among all variables indicate that two factors are not correlated with each
other [Finch, 2006]. Distribution of functions among two factors as well as pattern loadings are
presented in pattern matrix (Table 4). The first factor refers to company-related services such
as receiving news, communicating with service company, sending applications and ordering
additional services. The second factor refers to fully social features such as communication with
49
other users (neighbours in this case) and creation of communities of interest. Referring to factor
loadings among variables, all services met the cut-off threshold of 0.4 described in methodology
part.
Table 4. Pattern Matrix for factor analysis of social networking functions
To estimate whether the factors identified are reliable, a reliability analysis was
conducted. Cronbach's alphas were calculated as measures of internal consistency among
variables attributed to each of the factors. As it has been already described in methodology
chapter, an alpha value bigger than 0.7 is considered sufficient. Tables 6 and 7 represent the
results of reliability analysis of company-related services included in the first factor (Table 5)
and fully social services included in the second factor (Table 6).
Table 5. Reliability analysis of company-related services
50
Table 6. Reliability analysis of fully social services
Basing on cross-tabulations of people’s interest to different functions, it was found out
that the percentage of people interested in receiving special offers increases with the age and
has no correlation with the income level (Figure 15). The correlation proved to be significant
by chi-square tests, as the p-value is less than 0.05 (Table 7).
Table 7. Significance of correlation between age and interest in special offers
Figure 15. Interest in special offers according to age
However, the situation is contrary with the interest in order of additional services: it
grows with income level and has no correlation with the age (Figure 16). The correlation proved
51
to be significant by chi-square tests, as the p-value is less than 0.05 (Table 8). This needs to be
taken into consideration by companies implementing such services on their online platform.
Depending on the price segment of housing estates companies can make emphasis on different
services.
Figure 16. Interest in additional services according to income
Table 8. Significance of correlation between income and interest in additional services
However, the interest in Housing Social Network does not necessarily mean that
customers would prefer private platform to governmental one. To investigate this issue deeply
and identify possible ways of co-existence with State Information System, additional analyses
were conducted. The one way of platform development is to supplement governmental project,
another is to compete with it, offering the same functions and adding new ones. To define,
should the platform compete or supplement the governmental one, respondents were asked
about the key functions of State Information System – meter readings submission and
communal payment. There were two types of questions. First type was supposed to identify,
52
how people are reporting meter readings and paying for communal services now; if there is a
popularity in use of online services or not. Second type of questions was designed to find out if
there is a need in providing such services through the online platform. The majority (almost
90%) of respondents report meter reading online, most of them (66%) use YIT website for that.
Talking about communal services payments more than a half of respondents (62%) are already
paying online and more than 80% of respondents would like to have an ability pay through
online platform. Basing on these, we can make a conclusion that people are ready to use internet
for such activity and would like to have such functions on Housing Social Network. However,
this does not mean that they will prefer it to governmental platform; therefore, an analysis of
cross-tabulations was conducted. It was found out that people who want to pay for communal
services through online platform are also willing to report meter readings the same way (Figure
17). This correlation was found significant by chi-square tests, as the p-value is less than 0.05
(Table 9).
Figure 17. Desire to pay for communal services compared to meter readings reporting
Table 9. Significance test of desires correlation
53
There was no correlation identified between ways people pay for communal services
and report meter readings. Moreover, even the correlation between how people report meter
readings (and pay for communal services) now their desire to do it through online platform was
found insignificant. At the same time, the existence of strong relationship between desires to
use online platform for meter readings submission and communal services payments means that
people would like use one website consolidating various features instead of many specialised
platforms. This supports the idea of competition with State Information System through
provision of many functions.
The final list of survey-based value added services with their description is presented in
the Table 10.
Table 10. Value added services created with the help of survey
Value added service
Description
Social network services
Communication with
Communication with other users is an integral part of any social
neighbours
network. As the main users of the platform are inhabitants –
communication with neighbours is essential function. Users can
send personal messages to other users of the platform or create
group chats.
Communication with
Users can send messages and receive replies from housing
housing company
company in their personal account.
Sending applications to
Users can send applications to housing company through the
housing company
platform. Additionally, they can check the status of application
processing.
Getting news about
The news feed contains important news related to the housing
housing estate
estate. Additionally, users can see news from communities they
participate in.
Creation of communities
Users can create communities of interests. Posts of such
of interests
communities will be shown in the news feed.
54
State Information System replication (Compulsory functions)
Online payment for the
Users can pay for the communal services from their personal
communal services
accounts.
Send meter readings
Users can report meter readings from their personal accounts.
Additionally, they receive notification during the period if they
have not reported readings yet.
Check the arrears
Users can check their history of payments. Additionally, they
receive notifications if they have arrears.
Send applications
This have been already described in social net functions
Learn about future
This should be presented in the news section, that have been
repairs
already described in social net functions
55
Chapter 4. Discussion
4.1
Theoretical contribution
This study contributes to the topic of value added services in housing estate market that
can be provided online. This research suggests the list of 19 different value added services that
can be provided through the housing company’s online portal.
Firstly, in this study value added services are divided into three main groups: social
networking services, compulsory services (replicating functional of State Information System)
and additional services (replicated from other industries). This division can be considered as
classification of value added services provided through online platforms in housing estate
market (Appendix 2) by the nature of services. Thus this study complements theoretical field
of value added services categorization also studied by such researchers as Youngdahl and
Loomba (2000), Backhaus et al. (2010), Riedl et al. (2011) with a new classification of value
added services.
Also, talking about social networking functions, basing on factor analysis two major
groups of services were identified: company related and fully social services. Company related
group implies communication between customer and company and includes such services as
ordering additional services and sending applications to service company. Fully social services
group intends communication among inhabitants and includes such services as communication
with neighbours and creation of communities of interest. This division also refers to value added
services classification and appears as the second level of suggested classification.
Secondly, this research contributes to the field of online earnings logics. In this study
new online revenue models classification was suggested. This categorisation is more pervasive
than previously developed because it unites different online earnings logics suggested by other
researchers: Clemons (2009), Dasgupta (2013), Laudon and Traver (2007), Anderson (2009),
Mounier (2011) and Lyons (2012). Therefore, this study complements theoretical field of online
earnings logics classifications with new categorization of Internet revenue models.
The third contribution of this study is the conclusion that people are interested in
consolidation of different online services on one website. This outcome was found significant
due to chi-square tests basing on the analysis of cross tabulations of respondents’ desire to pay
for communal services and report meter readings through online platforms. This consolidation
trend with respect to value added services is new for the studied field. Previous researchers
56
studied value added services separately; therefore this new trend addresses a new topic of
different value added services coexistence for further researches.
Finally, this study also contributes to the theoretical field of online business models.
Besides the justification of advertisement model use in housing estate industry, this research
also suggests two newly developed business models particularly for housing estate industry:
construction and vending business models.
4.2
Managerial implications
Firstly, this study suggests that the format of private online platforms in housing estate
business should be a social network with additional features. However, despite the
implementation of social network format, companies should spend enough resources on support
and communication with inhabitants. This recommendation is supported by the results of
interviews with experts: they highlight that high quality of support and fast response rate can
help to attract inhabitants from State Information System to private platforms. Moreover,
simple and user-friendly registration procedure can be very strong competitive advantages for
commercial online platforms in housing estate business.
Secondly, as users are interested in consolidation of different online services on one
platform, private online platforms should include all governmental functions. However, such
functions as find on map, check service company license and learn about subsidies and
privileges, can be excluded as they relate to pure governmental information support. Overall,
in this research a list of 19 value added services was developed (Appendix 2). Referring to the
previous analysis of value added services development, the implementation of value added
services brings benefits only to pioneers in this field: after some time all companies in the
market will have to develop them to stay competitive. Russian housing estate market is just
starting to develop value added services, therefore using this study as a guideline for
development of value added services can help companies to save time and money on the
research and focus on the implementation. However, on the other hand this means that during
time some of the developed services will become obsolete. Therefore, the value of pure
implementation of mentioned services will be decreasing over time. Nevertheless, services
developed in this study still can be used as a benchmark for creation of new services.
Finally, 3 business models were suggested in this research: promotional, construction
and vending models. Suggested business models can be utilized by construction companies to
gain revenues from private online platforms.
57
Promotional business model is based on getting revenues from advertisers for providing
access to inhabitants. In housing estate industry this model is attractive because it provides a
very high level of advertisement targeting as every user is assigned to particular housing estate.
As geographical location is defined, many local advertisers will be interested in placing
advertisements among particular users, for example laundry operating nearby. Also social
networking element of the online platform – communities of interest can be another targeting
filter. As the advertisement price is highly correlated with the ability of a company to sustain
high conversion rate, precise targeting of online platforms in housing estate business will make
this earnings model very profitable. This model mostly fits companies with big amount of users
on the platform with high attendance rate. Promotional business model is not recommended to
single houses with small amount of inhabitants especially in the beginning of platform
utilization as the number of users is very low to attract advertisers despite good targeting.
The second (construction) business model based on selling additional construction
services, so this model is tightly connected to such value added services as finishing or layout
change. This model can help to attract new customers to shared construction; however, it is
suitable only for companies with well-known reliable brand and high quality of construction.
For small construction companies with low position on the market this business model is not
beneficial as such additional services don’t matter if customers don’t trust the company and
don’t want to participate in shared construction. Thus, construction business model helps to
increase attractiveness of the company, but not to create it.
The last business model suggested in this study is vending model. This model is based
on group deals when third companies offer their products through the platform with a discount.
The main point is that certain amount of products should be purchased in order to make the
deal. This business model can be used from the very beginning of online platform utilisation as
it can help to attract people to the platform. Users would share information about such deals
among neighbours and invite them to the platform. However, if there are not so many users
there is a possibility that some group deals will not be realized because of lack of buyers. So
the platform provider should pay attention to the amount of purchases necessary for the deal.
Also vending business model can be used on popular online platforms with many active users
to participate in groups deals.
58
4.3
Limitations and future research
Firstly, in this study sample for customer survey was created by cluster sampling
technique, and included only inhabitants of YIT housing estates. Such sample was used in the
survey because these people were familiar with online platforms as such system was already
implemented in their housing estates. In terms of this research, respondents’ knowledge of the
platform was significant for reaching the research goals of creating value added services for
housing estate industry, as these people are aware of online portal, have better understanding
of its potential and can provide more information. However, used sample is not representative
regarding the issue of new users’ adoption of online platform.
Secondly, all the respondents of the customer survey are citizens of Saint-Petersburg,
so the results are relevant only for big cities. Therefore consumers’ interest in utilisation of
online portal might be different in smaller cities of Russia. Additionally, differences in the lifestyle of people from big and small cities can lead to lower interest in some value added services
provided through online platform in the latter.
Future studies can observe the issue of new users’ adoption by enlarging the customer
survey sample and including respondents from different housing estates who might be
absolutely unfamiliar with online platforms. Customers from smaller (compared to SaintPetersburg) cities of Russia can be surveyed in order to identify their interests in value added
services and to compare the outcomes with the results of this research. This will help to
generalize conclusions for the whole Russian market of housing estate.
Also, only 7 experts from 2 construction companies were interviewed and qualitative
analysis of the results of these interviews was conducted. Future researches can conduct surveys
among construction companies and use quantitative analysis in order to understand general
attitude to value added services issue on the housing estate market.
This research was focused on value added services and does not take into account any
companies’ features. Therefore, further researches can concentrate on this issue and define if
any characteristics of the construction company influence value added services issue.
Finally, the list of value added services developed for online platforms in housing estate
industry can be used as a base for further researches regarding new value added services
development for other industries. Additionally, as value added services are getting obsolete
after a big number of companies implement them, the results of this research can be used as a
background for further development of new services in housing estate business.
59
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Appendix 1. Survey form
1. What is your age?
less than 25
25-35
35-45
more than 45
2. What is your income level per family member?
less than 15,000 rub/month
15,000-30,000 rub/month
30,000-45,000 rub/month
more than 45,000 rub/month
3. How do you report meter readings?
Paper-based
YIT website
Other on-line services
4. How do you pay for communal services?
With cash in bank or ATM
By credit card in ATM or terminal
From bank account
Online services (by credit card)
Housing Social Network is an online portal where you can chat with your neighbours, discuss
interesting topics in special communities, receive actual news, contact the service company and
get access to other interesting features.
5. Would you like to use Housing Social Network?
Yes
Would like to try
No
6. Do you want to report meter readings through HSN?
Yes
It's desirable
No
7. Do you want to pay for communal services on HSN?
Yes
66
It's desirable
No
The next section is aimed to identify the preferable functions of Housing Social Network.
8. Is communication with neighbours important for you on HSN?
Yes
No
9. Would you like to participate in creation of communities of interest on HSN?
Yes
No
10. Are you interested in communication with housing company on HSN?
Yes
No
11. Would you like to send applications to housing company and check their status
through HSN?
Yes
No
12. Are you interested in receiving actual news about housing estate on HSN?
Yes
No
13. Would you like to receive special offers from company partners on HSN?
Yes
No
14. Are you interested in order of additional services through HSN?
Yes
No
15. What else would you like to see on Housing Social Network?
67
Appendix 2. Final list of value added services
Value added service
Description
Social network services
Communication with
Communication with other users is an integral part of
neighbours
any social network. As the main users of the platform
are inhabitants – communication with neighbours is
essential function. Users can send personal messages to
other users of the platform or create group chats.
Communication with housing
Users can send messages and receive replies from
company
housing company in their personal account.
Sending applications to
Users can send applications to housing company
housing company
through the platform. Additionally, they can check the
status of application processing.
Getting news about housing
The news feed contains important news related to the
estate
housing estate. Additionally, users can see news from
communities they participate in.
Creation of communities of
Users can create communities of interests. Posts of such
interests
communities will be shown in the news feed.
Group decision making
Users can participate in decision making through voting.
(voting)
Housing company places the voting in the network,
available for users for certain period of time. The results
of voting are available for all voted users.
State Information System replication (Compulsory functions)
Online payment for the
Users can pay for the communal services from their
communal services
personal accounts.
Send meter readings
Users can report meter readings from their personal
accounts. Additionally, they receive notification during
the period if they haven’t reported readings yet.
68
Check the arrears
Users can check their history of payments. Additionally,
they receive notifications if they have arrears.
Send applications
This have been already described in social net functions
Learn about future repairs
This should be presented in the news section, that have
been already described in social net functions
Additional services
Housing estate acquisition
Users can register for the webinar. Before the beginning,
webinar
they will receive the notification with the link to the
webinar. All users can view the video in real time and
ask questions in chat.
Remote consultation (online
Online chat is organised for consultations with sales
chat)
department of construction company.
“Call-back” feature
“Call back” feature is available for all users to request a
call from the sales department of construction company.
Access to low-cost supplies
This service can include different ways of providing
access to low-cost supplies. It can be advertisement
about special offers or fully working online mall for
users.
On-site application for plumber Users can request a visit of plumber or locksmith from
or locksmith
their personal account. They can choose appropriate
date and time of visit from available.
Online video from cameras in
Users can view the video from video intercom, elevator
personal account
cameras and outdoor cameras.
Customisable design for the
Users can customize the interface of the online platform.
users
This can include change of buttons places, colours and
themes.
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Finishing of apartments for
Buyers can use the online application to choose
shared construction
finishing from the options available. Additionally, the
can view, how this finishing will look like.
Layout change for shared
Buyers can use the online application to choose possible
construction
layout changes.
Construction status online
Buyers, participating in shared construction can view
the status of construction processing. Additionally, they
can view photos of construction and receive news about
it.
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