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Why Ebay is Successful

1-INTRODUCTION

The company that I’ve chosen is Ebay .com, this company is the biggest auction company on line in the world, recently its trying to expand to Europe; with the take over of Ibazar (the bigest auction business in Europe), and to south America with the co-operation with Mercadolibre.com

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Despite of its only six years of live, Ebay is the biggest auction business in the world. But why? Which are the factors that have helped this enterprise to be the number one? What is its strategy? What are their expectations for the future?

These are some of the question that I expect to answer in the next pages.

TASK 1

2- WHY AUCTION ON-LINE

There are many different profits brought by being on the line, this is well known for the company and each year more and more companies, start their business in the net.

The nature of the business is very different, in the net we can find insurance companies, banks, travel agencies, book shops etc… But what is the reason for being on line?

First of all the Internet allows the penetration in the market, that means that with the same product the enterprises can increase their customers in their current market. By the publicity customers services, marketing communications etc.

Secondly we can see how the Internet allows the enterprise to go abroad, thanks to the Internet, the enterprises can commerce everywhere in the world.

Thirdly we find the product development, Internet is helping the creation of new products and services, most of them concentrated in the information industry, as Tom Knight states in Virtual Business magazine “enterprises have to move from selling products to selling know-how”. And the Internet is one of the best media to sell knowledge.

Fourthly, the Internet allows the diversification; the enterprises can move to new markets and new products.

These are the reasons that explain why most of the enterprises want to be in the Internet, and between them the most important to Ebay is the market development. If there is a factor that makes a big difference between the real auction and the on line, is that the on line is international, while the real auction is usually local. The size of the market is the biggest benefit to Ebay due to the fact that is a pure virtual player

At the beginning of the year Ebay market was mainly USA, but now it has it presence also in Europe and in South America. The more markets they have the most different customers and the more different products, the more purchasing so the more benefits for Ebay.

3- TRADITIONAL AUCTION VS ON LINE AUCTION

Before going inside the issue of real or on-line auction, we should know that the auction is to sell a product between the public and the person who offers more money is the one who is going to get the product.

TRADITIONAL ON-LINE

1 SPECIALISED LUXURY PRODUCTS ALL PRODUCTS

2 LOCALY BASED WORLD WIDE

3 HIGH SOCIETY ALL SOCIAL GROUPS

4 SMALL GROUPS ALL PEOPLE

5 SEEK VALUE SEEK CHEEPEST PRICES

6 PHYSICAL PRODUCT VIRTUAL PRODUCT

7 KNOWN SELLERS NOT KNOWN SELLER

8 BASED IN REPUTATION BASED IN CONFIANCE

9 AUCTION HAUSE BIG PART OF THE SALE FEW BENEFITS OF THE SALE

10 PAYMENT DIRECT INTERNMEDIARIES

11 ONE DAYS AUCTION NINE DAYS AUCTION

Looking into the table we find two types of differences, the first five are differences in the nature of the business. The next six are changes brought by being on line.

In the first five elements of the table we can see that Ebay has change the business, but the reason is because they find another profitable market. This change makes these services totally different from the traditional auction house.

From the marketing view its amazing, how they have redefined the auction from the high society to normal people, but why did they do? The main reason is that the people who go into the internet are trying to buy goods in a cheaper price, and they usually buy books, computers and so on. Only a few of them are looking for high value things.

But how did they do? The firs thing to get this target is to offer different kinds of products, and in its page we can see how there are all kind of products, from socks to cars. Even if they sale cars or jewellery these aren’t the most bought. The main business is in the computer software.

If these view change hadn’t been done, I’m sure that the success of the business wouldn’t have been that much.

3.1 DISADVANTAGES AND ADVANTAGES

There are many advantages and disadvantages on being in the Internet, some of them I’ve already mentioned. These ones are the principal negatives and positives factors that affect to Ebay.

3.1.1 TRUST SECURITY QUALITY

The security is the principal reason for not purchasing in the net as it was found in the CyberAtlas survey in 1998, 52% of users put off buying goods on-line because of the lack of security. But if it is important the security, in auction it’s the question of the trust, these are second hand items.

So the principal problems of the Ebay are:

– The consumer is not able to see physically the product, can’t prove the quality of the product. That as we see in the table 15

– Nobody knows who is really the seller

– Not possible direct payment

3.1.2. SOLUTION TO THE PROBLEMS

These are the most negative issues of doing auction on line, but Ebay has generated it’s own solution for each problem

-For the first point even if the customer can’t see directly the product, Ebay has created a special nomenclature to know how the product is, for example:

NIB: New in the box.

MINT: Perfect

LN+: Like New +

LN-: Like New –

Ex++: Excellent ++

Ex+: Excellent +

EX: Excellent

This enables the customer to have an idea of how is the quality of the product, but as they says that one image is more than one thousands words, the seller can adjoint a picture of the product

-The second negative point was referred to the trust, because if the buyer doesn’t know the seller it’s very difficult to have trust. So Ebay has created a historycal of the seller in which the buyer can see all the products that he has sold and the reactions of the buyers, and also Ebay give a score based in the feedback of the customers

-The third problem is the security, to solve this problem, Ebay has a contract with e_trust. This is the company who is responsible of the payments, this company will look after any problem in the payment, products etc.

3.1.3. ADVANTAGES

Being on-line has as well, big advantages, from my point of view these are the two main advantages:

Technological differences, buyers of one country can afford to buy high technology products at cheaper price than in their own country. This is due to the different developments of the markets.

Difference of currencies, people from the U.K. or U.S.A. are allowed to buy a cheaper price than in their own country due to the strengthens of their currency.

4. INTERNET SEGMENTATION (EBAY)

The segmentation of Ebay is to broad, the offer of the product is the same as the different user of the internet, even if they are not targeting specific groups the result is that their users are the same as those who use internet. To analyse the Internet users, I have used the results of Graphic, Visualisation & Usability Centres.

Table 1 AGE the majority of the users are between 21 and 45 years old.

Table 2 MALE/FEMALE 70%of the users are males.

Table 3 AREA only the 15% lives in rural areas.

Table 4 INCOME most of them between (50-74)$.

Table 5 OCUPATION the majority are trained professionals, students and self-employers.

4.1 FROM SEGMENTATION TO COMUNITIES

As Chaffey states in the book Internet Marketing, “aggregations of like minded consumers rather then arbitrarily defined target segment”. The Internet is a pull media, people are concerned to search the useful information and to maintain relationship with the people or home pages that they have searched by themselves. I think that the enterprises mustn’t find segmentation, they should offer a product or service and customers with different ages, sex, location etc. But with a common interest will come. As we can see in the Table 6 only the 15% of the Internet users are not inside a community.

TASK 2

5 BUILDING BRANDS IN THE INTERNET

From my point of view, the brand is the main difference between the traditional and the marketing on line. Before we had the choice to try the product physically, or interact with the services face to face and make ourselves an idea.

In this on line era, everything is about the brand because there are some companies as Ebay that are pure virtual player, so the only interaction with them is on the net.

In this new era as David Aacker says, the companies must achieve the goal that the customer “smell with the eye, taste with the eye, and feel with the eye”.

5.1 DIFFERENCES BETWEEN REAL AND VIRTUAL BRANDING

The principal differences in Chaffey et al terms are:

TRADITIONAL ON LINE

1 One to many communication One to one many to many

2 Mass marketing Individualised

3 Monologue Dialogue

4 Branding Communication

5 Push media Pull media

6 Segmentation Communities

These are the six main differences, as we can see the Internet provide the opportunity to personalise the information, in the base of the marketing we can see that each customer is different, and the internet give the opportunity to provide different services for the different consumers.

Another main difference for the enterprise is that n the Internet they are able to listen to their customers easily this provides a fast feedback that can be use to reformulate the branding or the product of the company.

The Internet is a pull media, so even the publicity in the net is going to be very important the contents and the design of the home page are going to be as important as the publicity. Maybe the publicity is going to provide us the first visit to our web page but It cannot make the consumer feel that they are purchasing a quality product, maybe they will not comeback.

But how a brand can do it in the Internet? On line as it’s been said in “brand aesthetics 2000” the customer will value the brand in three different ways

Benefits – Added value

Customer satisfaction

Security

Dependability

These are the minimum benefits that a customer searches when he is using the Internet, if we only satisfy this points we are not wining our competitors, but if we don’t satisfy them, no consumer will came to our page.

For Ebay may be the most difficult benefit to fulfil here is the security, the security is one of the biggest problems for not purchasing in auction pages, the customer must feel himself secure of purchasing in the net.

John Alcock in Virtual Business states that “it is important that security is perceived as an integral part of any e business”, that earns that is not only important to be secure, but we must make the customer feel comfortable, so we shouldn’t use multiple complex password.

Usability – Ergonomic navigation

Download times

Reponse times

These points that refer to the usability, are the keys elements for the branding. If we want our brand being perceived as a good quality brand, the customer should be able to go through with only three clicks, the downloads ties should be very short, and the reponse to our clients enquires quickness.

Feeling – Dimension of the perception

The better way that we response to the benefits and to the usability, the better perception that the customer will have of our brand.

But how the customer can have a good final perception of our brand, for Willcocks and Sauer, is clear that this perception is divided in two different areas, one expectation and the other experience, and they explain with this Branding Framework.

Adaptation

We can find as well these two different areas in the traditional branding, but the principal difference is that on-line they are much closer one of the other.

The other difference is that the traditional branding uses to focus more into create expectations, by advertising or sponsoring. But on line branding are taking much more care in the experience, the reason is because Internet is a pull media, and also it’s too easy for the customer to pass from the expectation to the experience.

If the experience of customer is bad, probably they will ever try again, that’s why in the actual branding must be closer to build good experience rather than only expectations. To show this difference between the classical and the E branding, Willcoks and Sauer use this framework.

1.)Thinking

2.)Feeling

3.)Doing

As we can see the traditional branding is more focused in the cognition (thinking) and in the affection (feeling). Despite e branding is much more focus in action.

So what should a good brand do in the Internet? In order to achieve this goal, the brand should concentrate it’s branding on experience. A brand that attempts to be a leader in the Internet should try to fix the 4Cs model. (choice, change, complexity and community). The principal differences in the Internet are the complexity and the community. If our web is too complex it will give a bad brand image. Is vital for a good web page to try to create a community, this will give to the brand the feedback to reformulate the brand, and from my point of view it’s the best way to create a brand loyalty (so difficult to acquire in the Internet).

5.2 C.R.M.

As I have said already one of the principal problems of the Ebranding is the customer loyalty. If it is really difficult to achieve this goal in the real branding, it’s even more difficult to achieve in the virtual world, where the competence is harder and normally the customers are very price conscientious. That’s why now most of the enterprises are concentrated in the CRM that “refers to any strategy used to manage a company’s relation with its customers” Razia Ahamed (virtual business). In that purpose the companies are building strong databases, to know better to them customers. Also they have got the static to know who are them principal clients “The top 20% of the consumers provide 80% of the profits” Razia Ahamed (virtual business)

5.3 LINKS

In the auction sector there are no differences in the way to manage the web, QXL the principal competitor of Ebay has the same strategy and even the design, is very similar, but the biggest differences are the links. The links for the auction hoses are very important that’s why Ebay has very different links, but the most important are, IBM and AOL. The first one provides to Ebay higher reputation, and the second provides 22 million of users as we can see in the table 7. Internet access providers like AOL are gradually wining more powerful positions through their portal can control where the consumer goes sopping. Recently Ebay wanted to start a collaboration with yahoo, but this relation with AOL avoids it.

6. RESULTS FOR ES TEST.

Ebay is already selling all kind of products, so each of them will have different scores, as we can see in the table 12 the top items will be software, hardware, books and electronics. These are the articles that will have the best score in the Es test.

Also we can evaluate the Auction, as a service on line, the right score to this services will be 23.

Service characteristics 10

The auction house in my opinion is or could be better on line that in a real business, because the characteristics of the services will run better as much consumers.

Familiarity and confidence 5

As I have been saying before this is the principal problem for the auction in the net, first of all as we can see in the tables people are very concerned about security, and they don’t like to use their credits cards. Another problem is like a Mori survey into customers attitudes to information on the internet, revelled that the trust of the customers on the information available in the internet is very low, so if they don’t trust information less they are going to trust a seller of second hand products.

Consumer attributes 12

The consumer attributes score is 12, because looking into the table 14 we can see that only a 35% of the internet users are likely to use an auction service.

6.1 Ebay strategy

“EBay’s mission is to help practically anyone trade practically anything on earth” Ebay mission statement. But to fix with this mission Ebay has stablised a strategy. In terms of the book the future of marketing there are three different strategies in the actual marketing.

Target group orientated

This orientation is based in search equals groups around the world and offer them an equal product, this is kind of strategy is implemented by the actual multinationals like Nike, Adidas, Marlboro etc… and is based in the advertisement.

Customers focus orientated

These strategies are based in finding the individual needs of each person and try to satisfy them. This could be the kind of marketing that Ebay uses, because even if its service is the same, the products that they provide are totally personalised.

Network focused orientation

Its the new orientation of the marketing, and its based on satisfying the customer collective associated needs. This means that a company will not stop after sale to the customer one product, they will offer related products that his client would need. An example could be if we book a hotel for the holidays, they could book for us a taxi that is going to pick us up from the airport. This is a simple example but working with databases there are too many possibilities. This kind of marketing needs a high level of specialisation and companies prepared to work together. Ebay for example could offer software IBM to a customer, which has already bought a PC in the web.

6.2 TEN STEPS IN THE NEW MARKETING

To evaluate how successfully Ebay’s strategy is, I’m going to use the ten steps proposed by Michael De Care Silver.

EBAY

1 Set overall electronic strategies 3.000 millions of dollars in 2005

2 Understand each customer Offer personalised

3 Design your presence Good design of the web (3 clicks)

4 Entertain Had create already a community

5 Make interactive Customer should give a note of the seller

6 Advertise your presence Had already advertise in TV

7 Network the net Had links with IBM or AOL

8 Deliver promise Not need

9 Manage loyalty Customer can chat and have an acount

10 Measure Has clear objectives, and strategies.

6.3 RECOMMENDATIONS FOR IMPROVEMENTS

Different brand for luxury products

In my opinion its very difficult to sell in the same web, socks and cars or jewellery, I think that they should create another brand with this kind of products.

Link with real auction houses

One of the problems in selling the products and especially high quality products is that the auction in the net is not truthfully. I think that if Ebay collaborates with prestigious real auction houses, the wins will be bigger.

Evolution to network focused orientation

As I have explained before this is the future of the marketing, Ebay is not far from this point.

Market development into Africa

Despite the people think that in Africa, there are not opportunities to make business, one of the biggest businesses in Africa is the second hand buying. African countries are more used to this kind of purchases that European countries, and they buy all kind of products, from clothes to car. The reason is because a first hand product is really expensive, but a second hand product from Europe is really accessible for them. A similar case to the African is the South American ones, and they have already their own one “MERCOSUR”. And it seems that it’s running very well.

6.4 THE FUTURE OF THE COMPANY

From my point of view this company will have a great future in the Internet, but they will have to keep innovating, because the enterprise must go at the same speed AS the market.

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9. BIBLIOGRAPHY

References:

Tom Knight “Practice makes better” Virtual Business Volume 5; 9 September 2001; page 8

Chaffey et Al 2000 International Marketing;FT Prentice Hall

David Aacke; Brands Aesthetics 2000

John Alcock “growing the e in security Virtual Business volume 5; 5 April 2001; page 5

Razia Ahamed “the trend traker –e- CRM Virtual Business volume 5; 7 june 2001; page 9

Books

Leslie Wilcoks and cristopher Sauer Moving to e business random house b.b.

Cor molenaar “The future of marketing” FT Prentice Hall

Brands aesthetics 2000

Chaffey et al Internet marketing 2000 FT Prentice Hall

De Kare Silver e-shock Mac Millan

David Campbell, George Stonehouse, Bill Houston “Business Strategy” BH 1999

Web sites

http://www.g.v.u.gatech.edu

http://www.cyberatlas.com

http://www.ebay.com

http://www.ibazar.es

http://www.qxl.com

http://www.aol.com

http://www.etrust.com[/i:ca4418fe1a]

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