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COLOGNE BUSINESS SCHOOL (CBS)

eBay Plus- Loyalty Program

Term paper for

"Customer Relationship Management"

Winter Semester 2015

Lecturer:

Prof. Dr. Mike Schallehn

Student's Name:

Christine Heitmann

Master of Arts in

International Business / Consulting

Student-No.

1155500

Table of Contents
Table of Figures................................................................................................. 2
1.

Introduction................................................................................................ 3

2.

Strategic Customer Relationship Management................................................4

3.

2.1.

Definition and Importance of Strategic Customer Relationship Management. .4

2.2.

Loyalty................................................................................................ 4

2.3.

Loyalty and strategic CRM.....................................................................4

Concept of Loyalty Concepts........................................................................5


3.1.

3.1.1.

True Loyalty...................................................................................5

3.1.2.

Efficiency Profits.............................................................................5

3.1.3.

Effectiveness Profits:.......................................................................5

3.1.4.

Value Alignment..............................................................................5

3.2.
4.

5.

6.

General Concept of Loyalty Programs......................................................5

Design Characteristics...........................................................................6

eBay Plus.................................................................................................. 9
4.1.

eBay................................................................................................... 9

4.2.

eBay Customer and Customer Segments...............................................10

4.3.

Loyalty Program eBay Plus..................................................................11

4.4.

Customer segment of eBay Plus?.........................................................12

4.5.

Who will benefit the most of eBay plus?.................................................12

4.6.

Effectiveness and Efficiency of the eBay P Design...................................13

4.7.

Potential Improvements.......................................................................15

Competitive Advantage of eBay Plus............................................................16


5.1.

Defining the term competitive advantage..............................................16

5.2.

Competitive Advantage of eBay and eBay Plus.......................................16

5.3.

Describing relevant competitors of eBay.................................................17

5.4.

Applying the VRIO concept...................................................................18

Conclusion............................................................................................... 19

Reference List................................................................................................. 20
Ethics Statement............................................................................................. 25

Table of Figures
Figure 1- Constant Cumulative Spending7
Figure 2- Cyclical Cumulative Spending................................................................7
Figure 3- Relationship Management...................................................................14

1. Introduction
Global changes as well as major improvements of the technology allow organizations
nowadays to collect and analyze customer data in a way that is easier than it has been
ever before. These modern systems do not only allow these investigations, they also
allow a simultaneously interaction with the customer. Consequently, these changes
require that the behavior of the companies is adapted to the environment. This
concludes in a change of the business strategy, meaning a shift from a product focus
toward a customer-centric offer. (Kumar & Reinartz, 2012, p.19).
Customer relationship management (hereinafter CRM) as a business strategy aimes to
develop

longlasting-term,

mutually

profitable,

individual

customer-supplier

relationships. (Peelen, 2005, p.6) CRM includes different programs to attract the,
analyze and satisfy the customer. As the name already says, building up a relation to
the customer is the key project. As in every funcitioing relationhsip, trust and loyalty are
crucial. So called loyaltiy programs (hereinafter LP) are a poplular tool for reaching and
retaining this loyality.
The

upcoming

question

is

now,

in

how

far

are

these

loyalty

programs

useful/meaningful? Do they effeciently improve the competitive advantage of the


organization? Exemplified on the recent launching of the loyalty program eBay plus,
this paper will analyse the different impacts of loyalty programs.

2. Strategic Customer Relationship Management

This chapter will give some explanation


2.1. Definition and Importance of Strategic Customer Relationship
Management
Customer relationship management is a complex and holistic concept, organized
around business processes and the integration of information technologies (Bull, 2003,
p.592). It is the use of customer related information or knowledge to deliver relevant
products or services to customers (Levine, 2000, p.34)
CRM ist the strongest and most efficient approach in attracting, creating and retainig
relationships with customers. Particularly in challenging times or highly competitive
markets, efficient and effective customer bonding can improve organizational
profitability (Bull, 2003, p.601).
2.2. Loyalty
Loyalty can be defined as a state of mind (Dick & Basu, 1994, p.99). Loyalty and trust
are usually associated with human-to-human relationships, but in this sense, they are
also applicable to companies or brands. Much more, nowadays, loyalty and trust can
be stated as the marketplace currency of the twenty-first century. Loyalty can be
become a significant tool referring customer relationships (Dooley, 2012, p.97).
Implemented and apllied correctly, loalty can ensure an important basis for developing
sustainable competitive advantage (Dick & Basu, 1994, p.99).
2.3. Loyalty and strategic CRM
Researches have shown that customer retention affects the companys profit:
maintaining an already existing customer relationship is more efficient and also more
cost effective than acquiring new customers. Existing customers are already familiar
with products and services, require far less persuasion to buy the companys products
or services (Bull, 2003) and at best, loyal customers may act as brand advocates and
thereby further enhance the marketing of the company (Dooley, 2012, p. 97). Therefore
CRM invented programs that reward loyalty of existing but also new acquired
customers, with certain, specific rewards. The ulterior motive hereby is to privilege
more loyal and frequent buyers.

3. Concept of Loyalty Concepts


In the following section, the general concept of loyalty programs and their key design
characteristics are explained.
3.1. General Concept of Loyalty Programs
Companies implement loyalty programs to further develop and enhance the
relationship to their customers. According to Kumar and Reinartz, a loyalty program
comprises a marketing process that generates rewards for customers based on their
repeat purchases. (2012, p.184) These programs have been introduced to various
organizations in the past years, intending to build a more intensive customer
commitment to the product or service of the company. As already mentioned in the
introduction, LPs are acting in this context as a crucial instrument in order to identify,
award and retain profitable clients.
Besides attracting and binding customer, companies intention of introducing LPs, are:
building true loyalty (behavioral as well as attitudinal), increasing efficiency and
effectiveness profit as well as value alignment (Kumar & Reinartz, 2012, p.185).
3.1.1. True Loyalty
True loyalty is expressed in an intense commitment to the product or service; it is
achieved by excellent product/service and represented in the degree of involvement in
the product category. It is an aspect that cannot be steered or controlled by the
organization.
3.1.2. Efficiency Profits
Efficiency profit is the positive change in the customers buying behavior: quantity or
frequency of the purchase. Efficiency profit can be measured as the net cost of LPs.
(Kumar & Reinartz, 2012, p.185).
3.1.3. Effectiveness Profits:
Effectiveness profits are medium-to long-term profit that result from the intense
knowledge of the customers purchasing behavior and preferences. Effectiveness
profits are likely to generate sustainable competitive advantage and normally achieve
the highest long-term (Kumar & Reinartz, 2012, p.186)
3.1.4. Value Alignment
Value alignemnt intends to match the cost to serve a customer with the value that the
persons brings to the firm. It helps the company to adapt the level of service to the level
of custmers loyalty. (Kumar & Reinartz, 2012, p.186-187)

3.2. Design Characteristics


Loyalty programs are a very popular, widespread tool for customer relationship
management. Consequently the programs vary within and across the different
industries. Some main design characteristics are described in the following part.
For understanding the difference loyalty programs, it is important to understand the
difference between behavioral and attitudinal loyalty: Behavioral loyalty refers the
observed actions that customers have shown towards a certain product or service.
Attitudinal loyalty instead refers to a customers perceptions and to the attitudes toward
a particular product or service. In the best case there should be a correlation between
customers attitudes and behaviors, but it some cases, for example, dissatisfaction, it
can also differ. (Kumar & Reinartz, 2012, p.184)
The design of loyalty programs can be adapted to different needs. Hereby, key
dimensions as the reward structure, participation requirements, payment function,
sponsorships and the cost and revenues of LPs, play an important role.
3.2.1. Reward Structure
In general, customers are motivated to enroll in LPs because the programs promise
certain rewards, as far as a certain loyalty in terms of purchase frequency for example,
is provided. Rewards that customer can receive, can be delivered as hard or as soft
bonuses. Hard rewards are tangible or financial goods, as free gifts or price reductions.
Soft rewards are psychological or emotional benefits; a free airline ticket would be an
appropriate example. These kinds of rewards cause often a special recognition of the
customer, because they enjoy the special treatment/status. (Kumar & Reinartz, 2012,
p.192). Furthermore the reward itself does not always need to be linked to the
company. They are opportunities to receive rewards which are completely unrelated to
the focal firmsoffering. Another point that organisations have to consider when
developing the loyaltiy program, ist the aspirational value of reward. Researches have
shown that customer tend to prefer hedonic rewards rather than utilitarian ones.
Therefore companies attempt to differentiate thei LPs by emohasizing the hedonic
value of their rewads (Kumar & Reinartz, 2012, p.193)
When promising reward, companies need to determine carefully the rate of the rewardvalue in comparison to the rate of the transaction volume. Namely, reward redemptions
are a key cost factor for firms that run LPs. But the rate of rewards is simultaneously
one of the primary drivers of LP enrollment and active usage. The release of

Rewards tieing is based on asset accumulation response function. This function


describes how assets or rewards get accumulated as a function of spending behavior.
(Kumar & Reinartz, 2012, p.193)
Figure 1-Constant Cumulative Spending

Figure 2- Cyclical Cumulative Spending

Source:
Kumar & Reinartz,
2012, p.193
Source:
Kumar
&programs
Reinartz,
2012,
p.193
Tiered rewards
can
be either
described with a constant, hierarchical, offrelated, or cyclical function. (Kumar & Reinartz, 2012, p. 193)
In Figure 1-Constant Cumulative Spending, the buyer receives the same amount of
rewards per $ spent, regardless of the spending level.

In

Figure 2- Cyclical

Cumulative Spending, the buyer receives a larger amount of rewards per $ spent, with
increasing spending level. Here, the program is relatively more attractive for buyers
who are high spenders. Many airline programs follow this pattern. (Prof. Dr. Schallehn,
2015, p.16)
Regarding the timing of rewards, companies should be aware of the fact that
customers favor immediate rewards or short accumulation periods. Even if the so
called lock-in effect, retenting customers for a long time by creating redemption rules
that favor long accumulatoin periods, is much more attractive for companies. (Kumar &
Reinartz, 2012, p.194)
Last but not least, rewards can be adapted to fit certain paramters. With this adaption,
companies pursue two main objectives: they want to generate additional revneue or to
increase sales during weak sales periods. (Kumar & Reinartz, 2012, p.194)
3.2.2. Participation Requirements
Regarding the requirements of participation and the different ways how to collect
points, there are different issues that need to be considered:
The LP may be constructed in a way that customers are automatically enrolled, but
then without differentiation. Another way is the common voluntary enrollment, when

customers decide whether they want to enroll or not. Furthermore, it can be


differentiated between open and closed LPs. Open LPs are available for every
customer, and bring the benefit of simplified acquisition and a probably higher number
of members. Whereas closed LPs are designed for only a particular group of customer.
They reach a concentrated target group with mainly high interested customers. (Kumar
& Reinartz, 2012, p.195)
3.2.3. Partnership Structure
The partnership structure of LPs can be differentiated in single and multi-firm loyalty
programs. Companies can implement LPs that are developed only for their own
customers, or they can merge this LP with other companies, as many frequent flyer
programs are organized. This brings the benefit of attracting more members, also from
other partners. On the other side, the focal firm risks the loss of the proper LP because
of too many other partners. (Kumar & Reinartz, 2012, p.195)
3.2.4. Extra Services
Some loyalty program providers use the opportunity to endow loyalty programs with a
payment function. This additional service may increase the brand image, but it also
enables the company to create much faster and easier purchase statistics at the
individual customer level. (Kumar & Reinartz, 2012, p.195)
Other companies add a gaming function to their loyalty programs. Games are
challenging the customer and encourage him or her to repeat the purchases.
Additional, certain games may also increase the brand image of the company. (Prof.
Dr. Schallehn, 2015, p.30) -1746-

4. eBay Plus
In this chapter, eBay and the recently launched loyalty program eBay Plus will be
described and analyzed.
4.1. eBay
eBay Inc. is an American multinational corporation and e-commerce company, based in
San Jose, California, providing consumer to consumer as well as business to
consumer sales services via the internet.eBay counts 159 million active buyers that
have a choice of 800 million listings in more than 190 countries (eBay, About US,
2015). eBay is one of the industry leader for only retailing, counting to the top ten
global retail brands.
eBay was founded 1995 by Pierre Omidyar, who realized at that point of time, that the
internet is an optimal platform to allow million buyers and sellers to view products and
conduct transactions. Within a few years, eBay has grown to one of the largest online
retailers worldwide. (Ahmed, et al., 2011)
The company is mainly an online auction and shopping website which people and
businesses use to buy or sell new as well second hand belongings.
eBay employees 34.600 people and made revenue of 17.9 billion US dollar in 2014,
with a profit of 3.51 billion US dollar (Statista, 2015).
Over a third of eBays revenue came from transaction fees which were generated by
PayPal. However, eBay and PayPal has been split into two independent public
companies in July 2015. The website is basically free (eBay, Seller Fees& Invoices,
2015). As already mentioned, eBay serves as a marketplace, where everybody has the
possibility to buy or sell items or services. After purchasing PayPal, these buyers and
sellers are now the biggest moneymaker for eBay. eBay charges a set amount,
depending on what item it is. These fees on the sales, as well as fees for extra services
as a better or longer listening, generate the biggest part of the revenue. (Loeb, 2014)

4.2.

eBay Customer and Customer Segments

eBay serves a broad market place for thousand different products, offered in many
formats, as auction, fixed-priced or classified. They products can be either in a new
condition or used. eBay's key customers segments are therefore the closely related
buyers and sellers groups. Closely related, because a seller might be a buyer and vice
versa. Since eBay was one of the first online auction sites they have a significant
market share which is a strong advantage for any multi-sided platform. A large part of
what makes eBay attractive to both segments is the fact that the other segment
simultaneously is there. This means that eBay needs to balance the needs and desires
of one segment against another. (Delorme, 2011)
eBay tries to focus aggressively on where it can compete and win and deliver
sustainable growth. But eBay still needs to classify more intense a main target group.
On the question of who are ebays target customer, Donahoe mentioned, that eBay
needs to focus on a target group that forms the bulk of the customer base and a large
part of the market. Thereby they want to achieve more clarity and a more focused eBay
(Steiner, 2014).

Gewerbliche verkufergruppe!

4.3. Loyalty Program eBay Plus


According to eBay Inc.(2015), eBay focusses on empowering sellers, empowering the
connection between buyers and sellers. Their purpose is to pioneer new communities
around the world built on commerce, sustained by trust and inspired by opportunity.
eBay Plus is loyalty program, eBay introduced in the third quarter 2015, referring
mainly sellers. Against an annual fee of 19,99, payable by the sellers, eBay Plus
promises a faster delivery, free redemption of one moth and special offers. For the
launching phase, only 10% of the product range of commercial providers is available.
Requirements for participating sellers are clearly defined. They need to display very
good ratings, their article for sale must include an eBay guarantee and the shipping
must be ensued on the day of ordering, assumed receipt of payment up to a certain
time. Furthermore the shipping fees do not arise for the buyers and sellers need to
guarantee a free redemption of articles up to 1 month, but eBay will pay part of the cost
of redemptions. (eBay, 2015)
With this program, eBay wants to bind existing customers (sellers) stronger to the eBay
marketplace, but also attracting and acquiring new customers. They guarantee, that
thank to this new loyalty program, the sellers service will be highly emphasized.
Especially their listening of the products will be very obvious and simple accessible to
customers. Through this additional marketing, existing customers (buyers) as well as
new clients are more attracted. This should conclude in a higher purchasing power and
an increased frequency of purchases. In addition, eBay promises 15% discount on the
sales commission. (Kannenberg, 2015)

4.4. Customer segment of eBay Plus


The customer segment of the eBay plus loyalty program is rather limited through the
requirements that are given by eBay. As already described in the previous chapter,
Loyalty Program eBay Plus, only eBay customer that sell products or services and that
mentioned requirements, are qualified for this program and are allowed to enroll for it.
In principle, all customers (buyers) are targeted with eBay Plus. But referring to the
terms and conditions of the program, eBay seems to prefer mainly already existing
customers. Maike Fuest, eBay Germanys director of communication comments on
these submission: through this new program, sellers will have the opportunity to
commit existing customers even more strongly to themselves []. (Fuest, 2015). In
general, maintaining an already existing customer relationship is more efficient and
also more cost effective than acquiring new customers. (Bull, 2003).

4.5. Who will benefit the most of eBay plus?


As eBay Plus is predominantly designed for loyal, already existing customers (buyers),
they are the ones who primarily most from the program. Thanks to the numerous
requirements that sellers need to meet, a certain degree of security is provided to the
buyer. Fast and free delivery, free returns of the items as well as products and services
from only certified sellers are some of the numerous advantages that are buyer profit
from.
On the other side, also sellers have the opportunity to benefit from this loyalty program.
The membership of eBay Plus will enable an increased awareness of their products
and services. This enhanced prominence of the products and services will conclude in
a competitive advantage and will generate financial benefits. (Levine, 2000, p.34)
As eBay is a huge, publicly visible market, with millions of transactions the day (eBay,
About US, 2015), eBay itself, may also profit from the data that they gain through this
loyalty program. With this data they can develop more precise marketing strategies. It
is much more efficient to target certain groups, instead of a wide range of diverse
customers (Fahad & Bach, 2014, p.279). Last but not least, the annual fees of 19,99
is an additional steady revenue, eBay is benefiting from.

4.6.

Effectiveness and Efficiency of the eBay Plus Design

According to Dooley (2012, p.101), there are several factors that need to be
considered, in order to get a loyalty program work. First of all the product/service must
be at least comparable to the competition in the eyes of the customer. The competitors
of eBay and eBay Plus are mentioned in the next chapter, but the concept of online
auctions, as well as selling and buying new and used products is nowadays popular
and the concept of eBay is definitely comparable to other online retailers. But not only
the concept, also the type of loyalty program is comparable to loyalty programs that
other big organizations have implemented.
The reward offers should be attractive to the customer: The rewards, offered to the
buyer as well as to the seller are definitive attractive. Besides the ensured security of
the purchase process, also financial benefits are returned to buyers and sellers.
Brand preferences and other factors may trump loyalty programs: eBay is an iconic
brand that people know and love. According to Forbes (2015), eBay is the 50 th worlds
most

valuable

brand.

Customers

appreciate

the

simple,

inexpensive

and

uncomplicated way to sell their products/services as well as buyers value the access to
an enormous offer of millions of product.
Purchase frequency must be high enough in order to keep customers engaged in the
loyalty program. The prices of products and services that are sold via the eBay
marketplace varies. The online auctions reach from products <5 euro to luxury items
that are worth several thousand euros. But in general, the purchase frequency is high
enough, because the range of the products is immense. The eBay Plus loyalty program
is therefore only for those sellers economically reasonable, who are offering products
that are affordable or products that customer need constantly.
Peelen (2005, pp. 178-179) explains that the effectiveness of loyalty programs
depends also on the degree to which the company able to surprise, appreciate,
activate and inform the customer. By surprising, Peelen means the ability to surprise
the customer in a unique way meeting his or her wishes and experiences.
In order to appreciate a customer, the company, in this case eBay, needs to invite the
customer to special events or propose special, individual offers. The financial support
that eBay Plus gives the seller is one example. Furthermore an effective LP needs to
inform and activate the participants regularly. Sending regularly newsletter, inviting

Figure 3- Relationship Management

them to workshop or letting them know

Surprise

about ongoing changes or supporting


them with tips and advices on their
Inform

Activate

purchasing

processes

are

some

procedures how eBay Plus builds


effective and efficient relationship to

Appreciateat
Source: Alberts and Buitendijk (1995)

the customer. As it is demonstrated in


Error: Reference source not found,
successful relationship management

concentrates on all four of these dimensions.


As a conclusion, it can be said that the design of the loyalty program eBay Plus if
effective and efficient.
Besides the wide range of offers and the mainly reasonable prices, eBay customers
appreciate an on-time and a reliable delivery. Customers buy products via the eBay
marketplace because of the convenient ordering process and the excellent prices, not
because of the fast delivery (Fuchs, 2015). Due to the fact that a high percentage of
customers on the eBay platform operate as private sellers, the on-time and reliable
delivery has been a problem that eBay faced in the past. eBay has a reputation
problem in this area. To introduce and design a loyalty program that concerns exactly
this challenging problem was the right decision. Especially the now launched
marketing, concentrated on this topic was very thought-out. Exactly this strategic
relationship management could change a certain customer group of eBay. The given
certainty of reliable and fast delivery could open the way for a more demanding
clientele, where shipping quality is important. Compared to the competitor Amazon and
their loyalty program Amazon Prime, it has been proved that Amazon Prime members
have a higher basket value than non-Prime members. (Fuchs, 2015) A similar effect
could be expected for eBay - Plus members.
eBay Plus has been introduced in the past month and it will need some time to work
out. But the upcoming moths will show whether the loyalty program is accepted by the
customers or not. Nevertheless, the determining factors for a successful operation are
given.

4.7. Potential Improvements

Loyalty is earned over time, that is also a factor that counts for the loyalty program
eBay Plus. Only introducing a CRM system on its own is not a sufficient condition for
the implementation of a CRM strategy. In order to let the CRM system work, the
house, the entire organization, must be in order, the brand must be recognizable and
distinctive, as well as the quality of the products needs to be good and the system of
logistics must be reliable (Peelen, 2005, p.60).
eBay has definitely faced better times, and especially now, after the splitting of PayPal,
eBay needs to find more targeted customer groups and focus on them. eBay serves as
a mixture of online-retail and a platform for selling used items that either can be
purchased by auction or for a fixed price. New, different platforms have been
developed. They are more specified on single product groups. eBay is still searching
for these certain, specific profiles. As soon as eBay has found and identified them, it
will make it much easier to attract new customers as well as retaining already existing
customers. This identification process needs primarily done for the entire eBay
organization, but also loyalty programs as eBay Plus will benefit from this
segmentation. Addressing certain groups with more specific programs could be an
improvement for eBay plus.

5. Competitive Advantage of eBay Plus


5.1. Defining the term competitive advantage
According to Volbergda, et al.(2011, p.847) a firm has a competitive advantage when it
implements a strategy competitors are unable to duplicate or find too costly to try to
imitate. Competitive advantage can also be seen as any activity that creates superior
value above its rivals.(Waggoner, n.d.) Customer relationship management as a
strategy can fundamentally change the operation of a company and therefore it can be
aslo responsible for gaining a significant competitive advantage. (Lesy, n.d.)
5.2. Competitive Advantage of eBay and eBay Plus
The main competitive advantage of eBay is the very positive reputation and the strong
brand name. As already mentioned in the previous chapter, eBay is the world 50th most
valuable brand. Another huge competitive advantage results from eBays network
effect. Due to the possibility to buy and sell products and services as individuals all
over the world, eBays customer base attracts sellers, which attracts more buyers,
which in turn establish a dominant market share. eBay refers to an immense network
that only a few other online retailers can compete with. A third competitive advantage is
the interactive technologies such as the feedback system. It provides eBay the big
advantage over traditional retailers who do not have consumer interaction readily
available to them. (Knapp, 2011)
Concerning the loyalty program eBay Plus, it is difficult to define a competitive
advantage. It is definitely a LP that will generate financial benefit for the company. And
it will also attract new customer and retain existing customers, but the LP has too
strong competitors as for example Amazon Prime, to act as leader in this sector.

5.3. Describing relevant competitors of eBay


Marketplaces competitors in general include retailers, distributors, liquidators, import
and export companies, online and offline auctioneers, catalog and mail-order
companies, classifieds, directories, search engines, virtually all online and offline
commerce participants (consumer-to-consumer, business-to-consumer and businessto-business), online and offline shopping channels and networks. (Chaffey, 2007, p. 33)
For eBay, the main relevant competitors are Amazon.com Inc., Overstock.com, Inc.
and Google Inc.. (Haselden, 2015) Because of its success and international reach,
however, eBay regularly faces new competitors.
Amazon.com Inc. was founded in 1994 in Seattle, U.S. as an online bookstore. Over
the years it expanded, the product portfolio includes articles ranging from books and
CDs to clothing and electronics. Amazon sells products from other companies on its
website and uses but uses its distribution network to guarantee a fast and reliable
delivery. (Ahmed, et al., 2011) Amazon Prime is the loyalty program of Amazon Inc. and
the biggest competitor to eBay Plus. Amazon Prime gives customers access to
streaming video, music, e-books, free shipping and a variety of other Amazon-specific
services and deals against an annual fee of 99 (Honorof, 2015).
Overstock.com is an American online retailer, was founded 1999 and is headquartered
in Utah. Overstock.com is an online retailer that sells a broad range of products at low
prices, including furniture, rugs, bedding, electronics, clothing, and jewelry. Overstock
has additional community-focused initiatives such as a Farmers Market and pet
adoptions. (Overstock.com, n.d.)
Google Inc. is a search engine site that was founded in 1998. Google offers targeted
search results from billions of web pages. The firm generates revenue through ad
sales. Advertisers deliver relevant ads targeted to search queries or web content. In
October 2015, Google formally became part -- and by far the biggest part -- of the
Alphabet Inc. holding company. (Forbes, n.d.)
Alibaba Group Holding Limited is Chineses biggest online commerce company,
founded in 1999. Alibaba provides consumer-to consumer, business-to-consumer and
business-to-business sales services via web portals. Alibaba has hundreds of millions
of users and controls more than 80% of the Chinese e-commerce market. Transactions
on its online sites totaled $295 billion in 2014, more than those of eBay and
Amazon.com combined. (Lajoie & Shearman, 2014)

5.4. Applying the VRIO concept

VRIO framework is the tool used to analyze firms internal resources and capabilities
to find out if they can be a source of sustained competitive advantage (Barney, 1991,
p.102)
Barney iditified four key attributes that firms resources must have in order to idetify a
competitive advantage. The four key attributes are valuable, rare, imperfectly imitable
and non-substiutable. In order to value these attributes in an organization or a product,
following questions need to be answered:

Is the organization/product/service Valuable?


Is the organization/product/service Rare?
Is the organization/product/service Imitate?
Is the organization/firm Organized to capture the value of the resources?

An organization, product or service that fulfills all of these four criteria can bring a
competitive advantage for the company. (Rothaermel, 2013, p.91)
Combining the results from the chapter 5.2 Competitive Advantage of eBay and eBay
Plus with the VRIO analysis, eBay Plus can not demonstrate a competitive advantage.
The program itself is valuable and eBay will profit from the outcomes, but is neither
rare, nor difficult to imitate. Global competitors as Amazon.com or Overstock.com have
a similar database available and they have the ability as well to design similar loyalty
programs. Nevertheless eBay is organized in a way to capture the value of these
resources. For the future it would be advisable to set the focus on specific target
groups and to further develop loyalty programs which address exactly those groups.

6. Conclusion
CRM as a strategy and as a technology has gone through an evolutionary journey. To
CRM represents a strategy, a set of tactics, and a technology that have become
indispensable in the modern economy ( (Kumar & Reinartz, 2012).
Loyalty programs s may also fail or simply do not fulfill the expectations. The problem is
that sometimes, just implementing a LP into the running business does not succeed.
Often the entire corporate strategy needs to be reconsidered in order to see where the
impact of LPs may achieve improvements (Kumar & Reinartz, 2012, p.191) And CRM
requires effective leadership, sourcing, targeting and evaluation strategies. (Bull, 2003,
p.601) Targeting, or better said not targeting, is the keyword for the loyalty program
eBay Plus which has been recently launched. eBay suffers from not clearly defined
customer segmentation. This makes it difficult to develop and design an effective and
efficient loyalty program. Nevertheless eBay Plus will help eBay to attract and to
acquire new customers and even more important to retain already existing customers.
In the long-run, this stronger relationship will cause various benefits for eBay, not only
in financial matters.

Reference List
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