How online platforms change the mediation process between production and consumption

Today’s economy’s production, distribution, and consumption processes have been drastically changed by the internet and its subsequent developments. At their fingertips, consumers have access to a vast range of offers, while producers are able to sell their products around the clock. To describe the interrelations of supply and demand in the twentieth century, Shot and Bruheze introduced the theory of a mediation junction [1].

This essay will discuss how the mediation junction and, thus, the mediation process have evolved through recent technology, especially online platforms and what impact this has on both the producer and the consumer side.

Considering that “consumption is the sole end and purpose of all production” [2], the product’s characteristics have to align with the requirements of the user [1]. Therefore, producers have to be aware of their consumers’ needs and how they interact with the product. Only then the producer can iteratively redesign and finally improve the product.

In this “process of mutual articulation and alignment of demand and supply” [1], users become co-designers and co-makers, often inspiring new innovations [1]. To negotiate each one’s needs, mediators, such as design agencies, consumer organizations or online platforms are crucial by offering a “place at which consumers, mediators and producers meet” [1]. Shot and Bruheze call this place the mediation junction. Furthermore, they argue that “the nature of the mediation junction – whether it is fully controlled by the producer or not – influences the mediation process between production and consumption” [1].

Regarding the digital transformation, the mediation junction is moving into an online environment, more precisely onto online platforms. “Platform firms are transforming industries by connecting “producers” with customers in new ways” [3]. These new relations make it more and more difficult to clearly differentiate between producers, mediators, and consumers.

First, consumers can also be producers as it is the case with the user generated platforms YouTube and Instagram. Second, mediators can also be producers, such as Google or Netflix, and finally, consumers can also be mediators such as influencers on Instagram. As a result, the mediation process between production and consumption is changing.

Although the mediation junction is being increasingly incorporated into companies, it is shifting more and more from producers to the mediators, especially to major online platforms. This can be attributed to the network effect, which increases the value of a product or service according to the number of people using it [4].

Through today’s technological advances mediators have new capabilities to better understand the consumer side. When it comes to goods and services offered via an online platform, analysing user interaction has never been as sophisticated and easy as it is today. This is compounded by theinteraction of users across multiple devices such as smartphones, wearables or Internet of Things devices, each revealing different information about the consumer. As a result, companies are collecting and analysing vast amounts of data on user behaviour acquiring differentiated user profiles. Sociologist Shoshana Zuboff even introduced the notion of a “Surveillance Capitalism” [5].

Based on that information companies can create recommendations and even predict demand with the help of big data analytics and machine learning. Although producers have more information than ever to improve and create new goods or services, this does not automatically result in the production of perfect products. However, mediators and producers now have the necessary data to make critical decisions, thus, making them more powerful.

On the one hand, online platforms such as Google or Facebook control as gatekeepers which information is displayed to and therefore consumed by the user. Through generated personalized profiles based on previous user behaviour this information is intended to match with the interests of the user, meaning that information that does not directly concern them remains invisible.

It could be argued that this is a helpful feature. However, this change in consumption has far-reaching implications for our perception of the world as people continue to “live/interact online in an echo chamber of their own beliefs and viewpoints, never receiving different or opposing ideas, and never even realizing it” [6].

In addition, online platforms try to grab the attention of their consumers by recommending content they will most likely enjoy, which results in a loop of consumption. The online streaming platform Netflix for example, is known for using the user’s watching habits and interests to recommend and even produce new series [7].

On the other hand, online platforms regulate which producers receive access to the ecosystem in order to be mediated to consumers at all. So platforms like Facebook, Google or Amazon, have a great influence on which goods or services are produced. Moreover, greater market transparency on the consumer side also increases competition on the producer side.

To design better products and accurately target their audience, producers benefit from user engagement, such as comments, shares, and likes. The customer relationship continues to be influenced by new ways of direct contact between customer and producer. So-called influencers, a new actor at the mediation junction, can even make clients more loyal to the producer’s brand.

Consequently, production and consumption are becoming more and more personal and personalized. This seems to be a favourable trend, but it has to be considered at what price it comes. Since online platforms heavily rely on data on user behaviour, they have to take more responsibility to protect the privacy of the consumer. People from which the data is being collected do not have a say in how it is being used. Therefore, to give back consumers a say, people have to reclaim sovereignty over their data.

To create more awareness, platforms could inform users about the data collected about them and how it is used. Users should also be able to decide which information can be stored and be used by the platforms and which not. Companies are slowly beginning to implement such features [8]. Still, online platforms have to be more regulated by politics and other companies. The General Data Protection Regulation (GDPR), for example, is a step in this direction.

In conclusion, the mediation process and with it production and consumption change through online platforms. Mediators and producers gain new insights based on the massive amount of available data on user behaviour gathered at the mediation junction. This allows producers to design products that align to the customer requirements, while customers receive the right products for them. Since the mediation junction is shifting from producers to mediators, especially to online platforms, mediators are becoming more and more powerful, leading to social and political responsibility. It could be argued that many companies know their customers and their needs better than themselves, therefore, the expression of free personal choice seems to be at risk.

References

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