EBay Auctions as the Online Version of Traditional Auctions - Case Study Example

Online Market 18 May, 2009 Contents Online Market 18 May, 2009 Contents 2 About eBay 3 Online Communication 4 Online Distribution 6 Application of Hoffman and Novak’s Marketing Theory to eBay 8 References About eBay eBay is a subsidiary of eBay Inc. which includes marketplaces, payment and communications solutions to businesses and individuals around the world. It includes brands such as eBay, Skype, PayPal and StubHub among many others. eBay is an online auction site created in 1995 by a computer programmer, Pierre Omidyar . Since its creation it has expanded to over 39 countries and has become known as the world’s most popular online marketplace. The company boasts of 84 million active users from around the world, with the total value of sales reaching $60 billion. It is estimated that $1,900 worth of goods are traded per second worldwide from the eBay platform. eBay auctions are the online version of traditional auctions. The marketplace provides online commerce platforms to buyers and sellers, providing individuals and businesses from around the world the opportunity to interact and trade online. Buying and selling takes place in a variety of ways on eBay. On the auction platform, sellers establish a starting price for a good or service they want to sell. Using the bidding format the interested buyers bid higher prices till the end of the auction after which the seller sells to the highest bidders. Another option available for individuals is the fixed price option called Buy It Now. In this case a fixed price is established by the seller, and the sale is made to the first person who offers to pay the fixed price. The website also offers a Want It Now feature, which allows interested buyers to create a wish list of the things they want to buy, based on which interested sellers can contact them and arrange transactions. Any item can be sold online as long as it is not illegal or does not violate eBay’s Prohibited and Restricted Items policy. eBay generates revenue by charging various fees for its service. The auction service charges the seller per listing and a percentage of the final sale price. Online Communication E-marketing is the heart of e-business. It involves getting close to customers, adding value to products, expanding distribution channels and increasing sales and offering after sales services (Chaffey & Smith, 2005). According to Ellis and Korper (2001) e-commerce companies just like all others face the challenge of having to define themselves in the global market. Through marketing and branding they need to identify what makes them unique and how this unique selling point can be used to attract customers. Ellis and Korper (2001) explain that the aim of marketing online businesses is to attract customers, get them to try their products or services and make them return for purchases. Branding works towards establishing brand recognition, customer loyalty and word-of-mouth advertising. Online marketing is quite similar to that used by bricks-and-mortar businesses, with a heavy emphasis on marketing their website. The use of traditional advertising channels such as newspapers, magazines, radio, TV and electronic media such as banner ads, emails and search engines (Ellis & Korper, 2001). According to Sinclair (2003) an e-commerce website cannot sell anything without an aggressive web marketing campaign and without appropriate marketing no one will come to an e-commerce website. He also states that e-commerce websites require regular maintenance to keep them going and no such site can be successful without extensive advertising. eBay uses numerous promotional techniques which include Radio, TV, Print, online advertising, Search Engine Optimization (SEO), affiliation with various websites and public relations. SEO is the process of designing, writing, HTML coding, programming and scripting of the website to increase the chances of the webpage being displayed at the top of the search engine queries for the selected keywords (Thurow, 2003). Using SEO as an Internet marketing strategy eBay is able to determine what people are searching for. This information is then used to optimize the eBay website so that it appears higher up in the list of results. The purpose of print, radio and TV advertisements is to attract attention and encourage the flow of visitors to a website. Many advertisements have been conducted for eBay with different campaigns for the purpose of branding and promoting eBay, to attract more buyers and sellers to visit and use the website. Apart from eBay also uses banners placed on numerous popular websites, and in some case advertisements are placed on seller websites. eBay listings can also be found on various sites for online shopping such as Froogle. By using such sites, eBay is able to directly reach customers who are planning to buy and sell. Pay Per Click is also used by eBay. These programs eBay pays websites for the advertisements displayed on their webpage based on the number of clicks on the company advertisement. Public and press relations are essential for managing information between the public and the business. With a huge customer base it is critical for eBay to maintain a good image with the public. eBay posts press releases to keep customers informed about activities, milestones and to maintain positive image among the public as well as to counter any negative issues which may arise. Online Distribution Distribution is an area of the marketing strategy concerned with delivering the product to the customers. Armstrong & Kotler (2001) define distribution as “a set of independent organizations involved in the process of making a product or service available for use by the consumers or business buyer.” Marketing channel generally refers to the path a good or service takes as it moves from the manufacturer to the customer (Rolnicki, 1998). The demand for goods and services often extends beyond the locations where they are produced, and making products available to customers when they require them has always been a challenge. Limited distribution provides customers limited a range of goods and services, whereas developed distribution systems production efficiencies, better availability of products, rapid exchange and enhanced standard of living (Ross, 2004). Effective distribution is the availability and accessibility of a product or service to its target customers. Distribution channels are interdependent despite their particular set of functions; they rely on each other (Bygrave & Zacharakis, 2003). Channel decisions affect every other marketing decision and are a source of competitive advantage (Armstrong & Kotler, 2001). Partnership with channel members is important for all businesses. Good channel member relations can transfer risks, speed up growth and preserve resources. Relations with all channel members need to me monitored and managed (Bygrave & Zacharakis, 2003). In today’s world supply chain management allows marketers to get their products and services across to customers in distant markets separated by time and distance (Ross, 2004). Efficient channels of distribution help a business in achieving their cost saving goals (Rolnicki, 1998). Businesses vary in the number and type of distribution channels they require. The decisions regarding the channel designs depend on the nature of the product or services along with the market being served. Businesses need to identify the segments they want to serve and decide which channel is best to reach them. The purpose of distribution channels is to bring services to customers. eBay is service provider which offers buyers and sellers a platform to interact. It is an online service therefore the principle of distribution for the bricks-and- mortar services are not fully applicable. The eBay distribution function requires the company to make its services available to users. It does so online via Internet. In order to reach a huge number of customers eBay offers its services in many countries around the world. eBay reaches millions of customers through advertisements, search engines and affiliates. It has developed partnerships with search engines and has started an affiliate program, by which it pays websites for diverting genuine traffic to eBay. The eBay Partner Network requires members to register for the program. They then use advertising tools provided by eBay to promote it on their websites. The members get paid for the traffic sent to eBay via member website. eBay partners with other businesses, which make their products and services available on the eBay website. Through these partnerships, the selling parties get additional exposure, and eBay works to provide an excellent experience to the customers. The online auction house has also developed partnerships with search engines for the purpose of providing customers easy access to their services. eBay partnered with Yahoo! to develop a toolbar feature which can be added to the web browser. This gives users quick access to eBay and offers other features such as searching and desktop alerts. eBay also gained control over its electronic payments services by taking over PayPal. This facilitates the customers in engaging in safer transactions and has boosted eBay’s online payments for its auction services. Application of Hoffman and Novak’s Marketing Theory to eBay In a research titled “ A New Marketing Paradigm for Electronic Commerce” Hoffman and Novak (1996) argue that since the Web is has characteristics which distinguish it from the traditional commercial communications environments, it requires conventional marketing activities to be transformed for effective implementation. They term the Web as an alternative to the real-world environment and state that it is an important business medium and marketing environment and is a many-to-many hypermedia which incorporates interactivity with both people and computers, allowing firms, customers and mediums to interact with each other. The writers highlight the issue concerning flow as the “process of optimal experience “as being central when considering consumer websites. They state that the critical objective of a commercial website is to facilitate the flow experience so that customers remember the brand name, develop positive feelings about the brand and are most likely to return. They need to consider when the customers will get bored and opt for “site-jumping” if the website is too simple or too difficult to follow. Repeat visits and purchases will be made if the site increases the environment facilities for the flow. Thirdly, the write about “goal-directed and experiential navigation behaviors” which means that goal-directed customers are extrinsically motivated to find a particular piece of information on the website and in case of experiential behavior they are intrinsically motivated, corresponding to exploratory search mode. Understanding of both of these behaviors is essential since it determines the flow which will facilitate customers in getting comfortable with the website. Hoffman and Novak (1996) suggested that a new infrastructure should be created for e-commerce with secure transactions of sensitive information. Internet consumers have a better control over the search process. Thus the cost of information should be lower and the quality should be higher. eBay caters to this need with an information rich website and secure payment and transaction methods via PayPal which ensures secure and speedy payments. The theory presented by Hoffman and Novak can be applied to eBay. The “many-to-many” interactive hypermedia is clearly applied. Not only does the organization communicate and interact with the customers, it has provided a platform which allows customers to interact with each other to exchange information and conduct business online. Customers have the opportunity to set up their own profiles and communicate with each other, chose the products and services they want to buy and proceed with transactions. eBay facilitates the flow for customers with the design and features of its easy to use website. The site is user friendly with an easy layout for easy navigation for an enhanced customer experience. The products and services available are categorized and easy to find. In order to keep in touch with customers even when they are not logged into eBay, RSS feeds are available for customers , which periodically provide them information they might be interested in, and serve as a reminder to encourage revisiting the eBay website. eBay also utilizes the “goal-directed and experiential navigation behaviors” of the customers. In case of goal-directed individuals the website is designed in a manner which offers customers the option to search by keyword for any specific product or service they might be looking for. For the exploratory surfers the website is designed in a manner which makes it is rich in information about goods and services and provides information about products and services, the members along with images and purchasing options. References Armstrong, G & Kotler, P (2001), Principles of Marketing. 9th Edition. Published by Prentice-Hall. New Jersey. Bygrave, WD& Zacharakis, A(2003), The portable MBA in entrepreneurship. Published by John Wiley and Sons. Chaffey, D & Smith, PR (2005), Emarketing excellence: the heart of eBusiness. Published by Elsevier. eBay Inc. : A short history . Retrieved on 15 May, 2009 from Ellis J & Korper, S (2001), The E-commerce book: building the E-empire. Published by Morgan Kaufmann. Hoffman, DL & Novak, TP (1997), A New Marketing Paradigm for Electronic Commerce. Journal of Marketing, October. Rolnicki, K (1998), Managing channels of distribution. Published by AMACOM Div Ross, DF (2004), Distribution: planning and control: managing in the era of supply chain management. Published by Springer. Sinclair, JT (2003), eBay the smart way: selling, buying, and profiting on the Webs #1 auction site. Published by AMACOM Div. Thurow, S (2003), Search engine visibility. Published by New Riders Read More