Sunday, September 2, 2007

Increasing Network Value II: Transaction Rate

Even if the value of each transaction doesn't change, another way to increase total value of some or all connections, and therefore total network value, is to increase the transaction rate. Rather than buying a more expensive item, there may be an increase in value (in the sense of net present value of the revenue stream) if a customer buys a less expensive item more frequently.

And, certainly if they buy the same item more frequently, that will also enhance the total value of the transaction stream.

Planned obsolescence, whether a result of engineering (or the lack thereof), or fashion trends, is a way to incent us to increase our consumption rate. But also, eliminating physical and societal barriers to consumption is another way to increase the transaction rate. This may mean having a coffee shop or hamburger joint on every street corner, to reduce the time and energy barrier or walking an extra 100 feet. Of course, social forces are a tricky thing: whether it is 2 button vs. 3 button suits, or SUVs vs. hybrids, trends may shift causing changes in the transaction rate.

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