Segmenting the On-line Market: eBay

TEAM 6

Case Study

Group Members Cheung Kit Yan, Alice 02415378GChan Wing Lan, Christine 02402531GChan Tse Ping, Tony 02703002GMan Oi Ling, Irene 02703161GNg Hon Yin, Alec 02730827G

Outline 1. Introduction of eBay2. Types of Segmentation used3. The tool eBay uses for usage-rate

segmentation4. eBay’s target market5. Tactics eBay uses for its target market6. How eBay makes profit7. Strategy for tackling marketing challenges8. Comparison with Yahoo! Auction9. eBay’s future

Introduction of eBay

Foundation of eBay Founded in Sept’95 by Mr. Pierre Omidyar, trading Pez candy dispensers over the Internet. “eBay” = “electronic Bay”, an expression of respect for Bay Area location in San Francisco.

eBay Today A global on-line auction & fixed-price trading site. ~49.7 million registered users. Millions of items across thousands of categories are listed, e.g., autos, jewelry, musical instruments, cameras, computers,…etc. Company Mission To help practically anyone trade practically anything on earth. eBay is free to grow & expand into whatever product categories are available.

Types of Segmentation Used

• Geographic Segmentation

1. North America2. Central America3. South America4. Europe5. Australia & South Pacific6. Far East

20 global sites in:

=> Users on eBay represent countries all over the world.=> eBay continues to expand its service and brand abroad.

eBay’s 12 Vertical Markets

Demographic Segmentation E.g., Collecting Toys & Bean Bag Plush

Family Life Cycles involved:

• Young married/divorced with children

• Middle-aged married/divorced with children.

Products: non-violent for children + not expensive.

Use as teaching aids.

Other examples: Collecting Dolls.

Psychographic Segmentation E.g., Collecting Sports Memorabilia

Enthusiastic sports fans or players.

Sentimental reasons.

Other examples: Collecting Antiques, Stamps, Pottery, Coins, ….etc.

Geodemographic Segmentation

60 local sites in the US, e.g., eBay Chicago.

Advantage of closer location.

Easy inspection, save shipping time & cost.

Pick-up option available for sellers.

Convenience of purchasing bulky items, e.g., automobiles, furnitures, appliances, …etc.

Benefit Segmentation• Buyers & sellers enter the site infrequently to unload a piece of unused merchandise, or conversely, to acquire the same at a bargain price.

Person-to-Person (P2P) Transaction

• Users who have turned their hobbies into viable home businesses, affording them opportunities to earn livelihoods & to more effectively balance work & home life.

Business-to-Consumer (B2C) Transaction

• Dealers & other small-business operators who use the site as a new & profitable channel of distribution.

Business-to-Business (B2B) Transaction

Usage-Rate Segmentation

Serious collectors & small dealers are identified as the

heaviest site users.

Though they represent only 20% of registered users,

they account for 80% of total eBay revenues.

80/20 principle

The tool eBay use for usage-rate segmentation – “my eBay”

Bidding/Watching tab: Track your bids, purchases, and items you're interested in

Selling tab: Keep track of your listings, sales, and unsold items

Favorites tab: Track your favorite categories, searches, and eBay sellers

Accounts tab: all your eBay-related accounts in one place

Feedback tab: a handy catalog of the feedback you've received from other members, and a link to see what feedback you still need to leave

Preferences tab: Choose how you want My eBay to look and how you prefer to sign in

The tool eBay use for usage-rate segmentation – “my eBay” (Con’t)

Easy to develop usage-rate segmentation by the

accounts records in my ebay

Easy to analyze the segments

Easy to formulate strategies to reach the target segments

“My eBay” – a useful tools for segmentation

eBay’s Target Market

1. Person – to – person (P2P) online auction market

Users include:

Collectors, hobbyists, internet surfers, bargain hunters, individual sellers

eBay’s Target Market

2. Business – to – consumer (B2C) online auction market

Users include:

Small business merchants, mid-sized business,

individual buyers

eBay’s Target Market

3. Business – to – business (B2B) online auction market

Users include:Small to mid-sized business, global corporations

(Source: Annual report of eBay 1999 -2001)

0

5

10

15

20

25

1998 1999 2000 2001 2002 2003Year

On

line

Co

ns

um

er

Au

cti

on

Ma

rke

t,$

Bill

ion

s

B2B

B2C

P2P

eBay’s Target Market

Loyal customers

eBay’s Target Market

Core Group ---Core Group --- CollectorsCollectors

Characteristics:

Collecting Enthusiasm

Visit trade shows frequently

Read collectors’ magazines

Like to share their passion form communities

Have gatherings and clubs with similar interests

eBay’s Target Market

Core Group ---Core Group --- Small Business MerchantsSmall Business Merchants

Characteristics:

Develop their own brand identity & goodwill with customers

Find cost effective way to make their livelihood

Expand regional / global market

Want to liquidate unwanted inventory with higher values

Loyal customers

eBay’s Target Market

High Volume SellersHigh Volume Sellers

Characteristic:

People who auction 200 or more items per week

Regional Buyers in the USRegional Buyers in the US

Characteristics:

Want to save shipping time & expense by picking up the item

Have regional flavours

Positioning

PositionPosition

The place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings.

Position of eBayPosition of eBay

A folksy and friendly facilitator of an on-line community that caters to traders with varying tastes and preferences.

BCG Matrix of Auction Market

Market g

row

th rate

B2C online auction

P2P online auction

Market share dominance

Low

B2B onlineauction

Traditional auction + online auction market

High

Low

Traditional P2P auction market

eBay adopts Multiple Targeting Strategy

Multiple Target Strategy:

A strategy that choose two or more well-defined market segments and develops a distinct marketing mix for each.

Tactics eBay use for collectors- To establish trusting relationship with potential and loyal collectors -

Sponsored and spoke in >70 trade shows for collectors in 2002 (U.S.)

Extensive offline advertising in 75 specialty magazines aimed at the 12 vertical markets (U.S.)

“Community Chatter” & “Feedback Forum” enable members to discuss topics of mutual interest and exchange information on online trading

Tactics eBay use for small business merchants- To provide safe and efficient platform to identify, interact and trade with prospective buyers -

“eBay Seller Services” and “Seller’s Assistant” helps locate professionals and freelancers for homepage building, accounting, technical support, etc.

“My eBay”and “Feedback Rating System” helps track trading record of potential customers while revealing sellers’ own profile

Tactics eBay use for small business merchants- To provide safe and efficient platform to identify, interact and trade with prospective buyers -

“PayPal”(launched 3 Oct 02) gives sellers the convenience of credit card acceptance, particularly helpful in attracting overseas buyers

“Escrow Services” manage risk involved in online transactions by appointing a third party

“eBay Education” delivers topical workshops on product enhancement, products marketing on eBay, etc

Tactics eBay use for small business merchants- To provide safe and efficient platform to identify, interact and trade with prospective buyers -

“Business,Office & Industrial” provides a dedicated B2B trading platform for office equipment & industrial products

Tactics eBay use for regional buyers in the US- To help buyers locate desired items in nearby locations

“eBay Local Trading” features local sites of 60 markets in the US, through which buyers can better identify sellers nearby and save shipping costs.

Tactics eBay uses for high volume sellers- To encourage existing sellers to trade more frequently -

Turbo Lister – can bulk list hundreds or even thousands of items to eBay efficiently

– ability to schedule listings to start automatically at a future time

– Save the listings you create in the program and use them again and again

Tactics eBay uses for high volume sellers- To encourage existing sellers to trade more frequently -

Selling Manager – Greatly reduce the time you spend on buyer emails by using customizable email templates

– Store and send your favorite feedback comments - without having to retype them over and over

– Track all of your sales and bidding activities.

– Reschedule and manage your pending listings

Tactics eBay uses for high volume sellers- To encourage existing sellers to trade more frequently -

Power Seller – members who are held to the highest standards of professionalism, having achieved and maintained a 98% positive feedback rating and an excellent sales performance record

– symbol of recognition for qualified sellers, gain more trust from buyers, increase sales

Tactics eBay uses for high volume sellers- To encourage existing sellers to trade more frequently -

By providing the selling tools, sellers can list more items on eBay

Attract more buyers to bid in eBay

eBay can make more and more profit

How eBay make profit?

Minimum Bid or Reserve Price Listing Fees$0.01 - $9.99 $0.30$10.00 - $24.99 $0.55$25.00 - $49.99 $1.10$50.00 - $199.99 $2.20$200.00 and up $3.30

Listing fees

How eBay make profit?

Special Categories Listing FeesPassenger Vechicles or Other Vechicles $40Motorcycles $25Real Estate Auction Format

3-10 days $5030 days $75

Real Estate Ad Format30 days $10090 days $200

Listing fees

How eBay makes profit?

Sale Price Final Value Fee$0 - $25 $5.25% of sale price$25.01 - $1000 Above plus 2.75% of amount over $25Over $1000 Above plus 1.5% of amount over $1000

Final Value Fees

Selling Tools FeesTools FeeSelling Manager $4.99 per monthSeller's Assistant Pro $15.99 per month

Strategy for Tackling Marketing Challenges

Expanding the user base

Strengthening the eBay brand

Broadening the trading platform

Fostering community affinity

Enhancing site features and functionality

Expanding the User Base

Bringing in the rest of the world

- Geographic segmentation

- Acquisition or partnership

Bringing in different user groups

- Start person-to-person, expand to

business-to-business

Strengthening the eBay Brand

eBay’s early growth relied strictly on word of mouth

Users could buy and sell almost anything

User community was analyzed in terms of user segments, e.g collectors & small dealers

The AOL connection

eBay meets Disney (eBay.go.com is a cobranded site promoted by the GO.com network)

Co-operate with IBM

Broadening the Platform

Category development - introduce higher-priced product categories such as autos.

Regional eBays

Improving the quality and range of services offered to eBay users

The business-to-business Bombshell

Enhancing Features and Functionality

Invested more than $20 million on product developments in 1998 & 1999

The various SafeHarbor features such as Feature Forum, the Turbo Lister bulk-listing tool, Help Boards and My eBay

Customer support & value-added services

Various new features and services were added during 2001 such as eBay Store

Foster eBay Community Affinity

Key components of eBay’s community philosophy are maintaining an honest and open marketplace and treating individual users with respect.

Intensive Competition

Wal-Mart

Kmart

Sears

Macy’s

Costco

Office Depot

Amazon.com

Buy.com

Yahoo! Auction

MSN

uBid.com

EGGHEAD.com

Offline Online

Comparison of the Segmentations between eBay

and Yahoo! Auctions

eBay Yahoo! Auctions

• Geographic:

20 global sites

• Psychographic: collectors

• Usage – rate: high volume users

• Geodemographic

• Benefit: higher price for sellers

easy to use for buyers

• Geographic:

10 global sites

• Psychographic: internet surfers

• Usage – rate: high volume users

• Benefit: higher price for sellers

easy to use for buyers

Auction Ratings of eBay and Yahoo! Auctions

Inventory BiddingActivity

Services &Fees

CustomerSupport

Design &Functinality

Community

eBay

Yahoo!

Excellent

Good

Average

Below Avg

Poor

Source: the eBay Phenomenon

Market Share of Online Auction Revenue

eBAY64%

Ubid15%

Egghead4%

Yahoo!2%

Amazon2%

Others13%

eBAY Ubid Egghead Yahoo! Amazon Others

Source: eBay leads surge in online auction spending – study, 2001

eBay’s Future

Will eBay merge with Yahoo! Auction?

Thank You ! Let’s Discuss ……

Bibliographies

- eBay official website (www.ebay.com)

- AuctionWatch.com

- auctions.shopping.yahoo.com

- Kipp Cheng. “eBay Best Virtual Marketing.” Adweek, June 28, 1999,p;. IQ42

-Claire Tristram. “Takin’ It to the Street.” MC Technology Marketing Intelligence, February 1999, pp. 22-28

-David Bunnell, The eBay phenomenon – Business Secrets Behind the World’s Hottest Internet Company, 2000

- Sandeen Junnarkar, “eBay Taps Business-to-Business Boom.”, CNET News.com, March 15, 2000

- Elaine X. Grant, “eBay Makes Bid for Chinese Market Power”, NewsFactor Network, February 26, 2002