Beruflich Dokumente
Kultur Dokumente
Lecturer:
Student's Name:
Christine Heitmann
Master of Arts in
Student-No.
1155500
Table of Contents
Table of Figures................................................................................................. 2
1.
Introduction................................................................................................ 3
2.
3.
2.1.
2.2.
Loyalty................................................................................................ 4
2.3.
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.
Design Characteristics...........................................................................6
eBay Plus.................................................................................................. 9
4.1.
eBay................................................................................................... 9
4.2.
4.3.
4.4.
4.5.
4.6.
4.7.
Potential Improvements.......................................................................15
5.2.
5.3.
5.4.
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
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
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 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!
4.6.
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
Surprise
Activate
purchasing
processes
are
some
Appreciateat
Source: Alberts and Buitendijk (1995)
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.
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:
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.
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Ethics Statement
I herewith declare that the following work I/we have prepared is my/our own
without the use of materials other than those cited.
27.11.2015
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