Managerial Practice 2.1 Customer Involvement at eBay Most manufacturers do not h

Question

Managerial Practice 2.1 Customer Involvement at eBay

Most manufacturers do not have to contend with customers waltzing around their shop floors, showing up intermittently and unannounced. Such customer contact can introduce considerable variability, disrupting carefully designed production processes. Costs and quality can be adversely affected. While customer contact is an issue even with manufacturers (each process does have at least one customer), extensive customer contact and involvement are business as usual for many processes of service providers. Customers at restaurants or rental car agencies are directly involved in performing the processes. The area where the sales person interacts with the customer is the shop floor.

How much should customers be involved in a process, so as to provide timely delivery and consistent quality, and at sustainable cost? Various ways are available—some accommodate customer-introduced variability and some reduce it. eBay provides two services: It provides sellers a platform for selling their goods or services, and it provides buyers a platform to find the goods and services they want. From a business perspective, providing these two services generates a high degree of variability in the demands for the company’s resources. eBay illustrates one way to accommodate that kind of variability—provide an online auction house. As an online auction house, eBay accommodates high volumes as well as service order variability from customers seeking to buy and sell an endless number of items. eBay customers also have variability in technological capability, some with considerable Internet experience and some needing more handholding. Such variability would greatly complicate workforce scheduling if eBay’s customers were not involved in many of its processes. eBay’s process strategy utilizing customer involvement has been successful. Founded in 1995 in California, it now has 145 million active buyers globally buying and selling more than 650 million listed items with revenue of about $16.5 billion per year. It connects hundreds of millions of people around the world every day with only 31,800 employees. This relatively small workforce is possible in the face of customer-induced variability because its customers perform virtually all of the selling and buying processes through the e-commerce platform eBay.com and other vertical shopping sites. When the customer is responsible for much of the work, the right labor is provided at the right moment.

Managerial Practice 2.1: “Customer Involvement at eBay” [MO2.1, MO2.2, MO2.3, MO2.4]

a. How does customer involvement at eBay compare to customer involvement at Amazon and Craigslist? What are the major similarities and differences? What would you change about customer involvement in these companies, and why?

b. What are some of the challenges eBay may encounter by deeply involving customers in its process strategy? How can these challenges be effectively mitigated?

c. As a senior consultant for eBay, Amazon, and Craigslist, what strategic process improvements would you recommend to their boards of directors? What are some possible organizational barriers to implementing these valuable competitive processes?

Managerial Practe .1 Customer Involvement at eBay Most manufacturers do not have to contend with customers waltzing around their shop "loors, showing up intermitently and unannounced. Such customer contact can Introduce considerable vanabllity, disrupting carefully designed production processes. Costs and quality can be adversely affected. While customer contac: is an issue even wnh manufacturers (each process does have at least one customer), extensive customer contact and involivement are busness as usual for many processes of service providers Customers at reslauranls or rental car agecies are directly involved in performing the processes. The area where the sales person interacts with the custoier is the shop floo I tor many proces How much should customers be Involved in a process, so as to provide timety delivery and consistent quality, and at sustainable cost? Vanious ways are avallable-some accommodate customer-introduced variability and some reduce it. eBay provides two scrvices: It provides sellers a platform for sclling their goods or scrvices, and it provides buyers a platform to find the goods and services they want. From a business perspective, providing these two services gencrates a high degrec of variability in the demands for the company's resources eBay ilustrates one way to accommodate that kind of variability-provide an online auction house As an online auction house, eBay accommodates high volumes as well as service order variability from customers seeking to buy and sell an endless number of items. eBay customers also have varlability in technological capabllity, some wth consderable Internet experience and some needing more handholding. Such varlabllity would greatly complicate workforce scheduling I eBay's customers were not involved in many ot its processes. eBay's process strategy utilizing customer involvement has been successful. Founded n 1995 in California n now has 145 million active buyers globally buying and selling more than 650 million listed tems with revenue of aboul $16.5 bilion per year. It connects hundreds of mllions of people around the world every day with only 31,800 empkoyees. This re atively small workforce is possible in the face of customer-induced variability because its customers perforn virtualily all of the selling and buying processes through the e-commerce platform eBay.com and other vertical shopping sites When the customer is responsible for much of the work, the right labor is provided at the right moment sses. eBay's process Al any given rne e ay has pro mate 650 m on sungs world de an et its workforce consists o ust 3, 80 employees. The explanation ust r ers d sto e work n avs ng n se n rocesses

Explanation / Answer

Remember when eBay used to be a great place for small sellers to become big sellers? Unfortunately, recent changes at eBay have made online auctions less reliable and profitable. So where can you sell when you can't sell on eBay? online auctions are the past; fixed-price selling is the future. it's time to move beyond eBay and first-generation online selling and start selling online Second generation online selling means migrating from ebay to other online marketplaces, including craigslist, Amazon, and your own e-commerce website. you'll need to make some new plans, learn some new skills, and change some of the things you do--but you'll find that there's more money to be made on your own than relying on traditional ebay online auction sales.

A similar age to eBay, Amazon is also a marketplace where buyers and sellers cross paths and exchange money for goods. Amazon’s model is a little more involved though.

With no auction model, Amazon sells mostly new products to buyers. Products must have a unique, universally recognized ID number (ASIN, ISBN or UPC) in order to be sold.

A buyer searches for a product and commits to the purchase. There are no (or, minimal) duplicate listings on Amazon. One product has multiple sellers.

If someone is selling the same product as you, Amazon’s complex algorithm will then weigh up who wins the sale – also called ‘winning the Buy Box

eBay has been offering social customer service in Europe since mid-2011. The company had been using social networks as a marketing platform for some time before then, but came to realise that staff from Marketing were not always the right people to respond to a lot of the queries they were receiving. Often they would require specific knowledge about company policies and processes, or they would need client data that they didn’t have access to. The result was that many conversations were being missed.

eBay does not consider same-day delivery service essential

In Part 3 of this series, we looked at the growth potential of the same-day delivery market. We also discussed how Amazon.com, Inc. (AMZN) and Google Inc (GOOG)(GOOGL) are trying to leverage this market growth with aggressive moves in this space. Read Must-know: Can Google Shopping Express challenge Amazon?

Interestingly, eBay Inc (EBAY) does not think coming up with same-day delivery schemes is essential.

Consumers avoid paying extra for same-day delivery service

It is indeed true that consumers hate paying extra for shipping. Same-day or overnight delivery costs more, which is why the majority of consumers avoid paying for it. According to a Harris Interactive survey of 2,241 U.S. adults, and as the chart above shows, 70% of consumers don’t want to pay extra for overnight or same-day delivery.

eBay devising innovative ways to cater to consumers demands for quick delivery

eBay’s management said the company has started to devise innovative ways to eliminate shipping costs for its customers, while still delivering the goods faster. eBay’s partnership with Argos in the United Kingdom is one example. Through this partnership, goods sold by eBay’s merchants online will be available for immediate pick-up by consumers at Argos stores

Customer expectations

It seems that eBay’s customers have very high expectations. Generally, they expect a response to social media enquiries in an hour or less. Although it’s not always possible to resolve their issues in such a short period of time, it’s important to make contact and let the customer know you’ve heard them and you’re working to resolve their problem. It shows you care and the customer will greatly appreciate it.

Influencers

A point of contention is whether or not you should prioritise responding to influential people. Social media analysis enables a brand to prioritise a complaint from someone with half a million Twitter followers over someone with ten, but for a major brand, there’s something deeply unsettling about doing that.

eBay has been in the financial news a lot lately and not in a good way. The company announced plans to cut 2,400 jobs, plans to spin off its heavily-hyped Enterprise segment, and plans to spin off its most rapidly growing unit PayPal. Despite the negative news, eBay’s stock price is actually up, even though its overall earnings are below investors’ expectations, as it has taken these actions that positively impact short-term profitability and helped successful units like PayPal cut weight from under-performing units.

RISK FACTORS

You should carefully review the following discussion of the risks that may affect our business, results of operations and financial condition, as well as our consolidated financial statements and notes thereto and the other information appearing in this report, for important information regarding risks that affect us.

Risk Factors That May Affect our Business, Results of Operations and Financial Condition

Our operating and financial results are subject to various risks and uncertainties that could adversely affect our business, financial condition, results of operations and cash flows, as well as the trading price of our common stock and debt securities.

The principal competitive factors for us include the following:

• Ability to attract, retain and engage buyers and sellers;

• Volume of transactions and price and selection of goods;

• Trust in the seller and the transaction;

• Customer service;

• Brand recognition;

• Community cohesion, interaction and size;

• Website, mobile platform and application ease-of-use and accessibility;

system reliability and security;

• Reliability of delivery and payment, including customer preference for fast delivery and free shipping and returns;

• Level of service fees; and

• Quality of search tools

Objectives and strategy of eBay

The overall eBay aims are to increase the gross merchandise volume and net revenues from the eBay marketplace. More detailed objectives are defined to achieve these aims, with strategies focusing on:

The focus on each of these three areas will vary according to strategic priorities in particular local markets. eBay marketplace growth was driven by defining approaches to improve performance in these areas.

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