Companies that experience rapid expansion and growth usually focus on retaining the traditional customer base while at the same time implementing other strategies to attract new clients. New marketing tactics aim at promoting profitability and enabling the company to stay ahead of the competition.
With increasing technology, marketing strategies focus on expansion of its productivity, increasing its product range and expanding into new markets.
In the case study, e-Bay’s new marketing strategy of diversifying its product offerings and services to suit new customers produced unintended results as the traditional customers were not receptive of the new changes. The company, after 15 years of successful business, introduced a new strategy to expand its customer base and increase its profits.
However, the new strategy failed to take into account the needs of its traditional customers. While it is important for a company to implement new marketing strategies, implementing the strategies within the existing systems is more useful to retain the traditional customers and enhance profitability.
The idea of creating an online open auction market by a software developer, Pierre Omidyar led to e-Bay’s establishment in 1995 with an aim of providing fair and open marketplace for sellers and buyers of treasured items. e-Bay’s rapid growth over a short time is attributed to the novel nature of the idea, which attracted many potential buyers in search of treasures and sellers wishing to dispose off old items.
In addition, the company also focused on generating profits by charging a fee from sellers of items. Other strategies that contributed to e-Bay’s rapid expansion include expansion of its product offerings to cover many categories of items. e-Bay also expanded to include international markets in different countries.
The company also acquired new sub-sites such as shopping.com, Skype, and Paypal, which helped to e-bay to diversify its products to suit consumer needs.
Another strategy that contributed to e-Bay’s early success is the introduction of fixed selling option whereby, sellers put a designated retail price for their products. This trend was different from the earlier auction method whereby the highest bidder purchased the item. The idea was revolutionary in the sense that it allowed sellers to sell their items more quickly and in large volumes.
The new CEO, John Donahoe, introduced a new strategy that focused on selling new products at a fixed price to suit the changing consumer needs, a strategy that produced successful results for the other competitor e-commerce companies like Amazon.com.
However, the new strategy was not welcome by the traditional sellers who formed the bulk of the e-bay customers thus affecting e-bay’s growth.
Donahoe’s new strategy entailed promoting fixed price options for items as opposed to auctions. The strategy reviewed the cost of listing an item, which shifted to effecting charges after the item has been sold.
The strategy also aimed at rewarding the sellers who sold a large volume of items by reducing the charges. Additionally, the new strategy aimed at promoting sales of highly rated items and products in high demand besides providing other after sale services like free shipping.
The new fixed pricing option favored large merchants as the traditional items listed lacked standard pricing, which forced small merchants to seek alternative means of selling their wares affecting e-bay’s growth in profits and expansion to new markets.
The marketplace is dynamic and is affected by many forces requiring new strategies for a business to remain competitive. In the case study, the marketing environment is defined by technology. e-bay pioneered the online marketplace, which allowed buyers and potential buyers to transact business.
Donahoe’s new strategy also focuses on developing a new technology that gives billing to items based on customer satisfaction rating and their prices.
Globalization also is evident in this case study as e-Bay and its competitors including Amazon.com offer a wide range of products and aim to expand into new international markets. Competition also shapes the marketing environment in this case study. The new strategy proposed by Donahoe aims at providing better services than what e-Bays competitors like Amazon.com provide.
The introduction of a fixed price listing of the items sold through e-Bay provided greater customer value than the traditional auction method. The new strategy introduced favored sellers dealing in new products and in large quantities as opposed to traditional sellers who listed old merchandise.
The customers could buy new products at a specified price rather than auctioning. In addition, the new strategy provided for the free delivery of the item sold by the seller, which was an added advantage to the seller. The new approach also allowed customers to search items that are highly rated and in high demand by customers.
Despite the noble nature of the new strategy of diversifying the products and attracting new customers, I disagree with CEO Donahoe’s assertion that all sellers will benefit from the strategy. The strategy aims at promoting transactions involving new products, therefore, traditional sellers dealing with use products are likely to lose.
In addition, small-scale sellers are likely to lose as they get poor ratings thus affecting their businesses. e-Bay’s strategy will fail to realize the intended goals if it is not corrected at least in part. I would recommend that the rating of sellers be removed to favor small-scale and traditional sellers.