How has eBay differentiated itself from the competitors?

Answer 1

Organizations normally reformulate their marketing strategy several times during a product’s life cycle. Economic conditions change, competitors launch new assaults and the product passes through new stages of buyer interest and requirements (Kotler, 2001, p. 484). Consequently a company must plan strategies that address any changes in the market. ebay Inc. is the world’s largest and most popular person-to-person trading community on the internet (Bradley, 2001, p. 1). From its inception eBay was unchallenged however with Amazon.com’s (Amazon) entrance into the online person-to-person auction arena and other competition from Yahoo! Auctions, Auction Universe, and OnSale, eBay was faced with the issue of how to separate themselves from competitors and maintain market leadership in an increasingly crowded marketplace.

Michael Porter stated that value is what buyers are willing to pay, and superior value stems from providing unique benefits that more than offset a higher price. There are two basic types of competitive advantage: cost leadership and differentiation (Porter, 1985, p. 3). Attempting to compete based on cost would be a poor move for eBay. Their competitors already offer both lower costs and many offer similar services at no cost at all. Therefore, eBay must be able to differentiate themselves from their competitors in order to maintain market leadership. Differentiation is the act of designing a set of meaningful differences to distinguish the company’s offerings from competitor’s offerings (Kotler, 2001, p. 90). eBay needs to focus on creating a product or service that is perceived as being unique throughout the industry.

Services are extremely difficult to differentiate themselves however Kotler (2001, p. 90) notes that services are able to differentiate themselves by developing a differentiated offer, deliver or image. eBay will continue to be a market leader if they are able to continue differentiating themselves by focusing on their brand image, continuing to offer innovative features, and supplying a delivery service with proprietary technology. This uniqueness should translate into higher profit margins and keep them above the competition.

Service companies are able to differentiate their image through symbols and branding. A recognizable brand name is extremely important to the continued success of eBay. eBay was the first mover in the online person-to-person auction industry and because of it they have a competitive advantage which will help differentiate themselves from their competitors. By focusing on their brand image eBay will be able to attain brand recognition, brand preference and brand loyalty. With a strong brand image consumers are able to recognize the eBay name and instantly know what it stands for and the service they provide. Amazon with an already strong brand name has used advertising in an attempt to make their brand more recognizable. eBay should continue to use television and internet advertising to differentiate their product and add value. Proper branding creates loyalty. In order to achieve brand loyalty, eBay must continue to focus on their main strength, online auctions. The image that needs to come to mind when consumers think of online auction needs to be eBay. Consumer perception is a result of branding strategy and eBay needs to remain focused on making sure their brand is instantly

recognizable.

Services are also able to differentiate themselves by what they are able to offer consumers. Internet businesses require more than a storefront to be successful. One major concern that prevents consumers from using online purchasing sites are concerns about data privacy, protection of personal information, and a confidence that they will receive goods purchased. eBay should focus on continuing to provide innovative features in order to separate themselves from their competitors. The biggest concern for online consumers is trust and safety. eBay has introduced a number of trust and safety initiatives, such as a verified user program, insurance for items and enhanced feedback forums (Bradley, 2001, p. 6). eBay has been able to stiffen anti-fraud measures and has instituted some of the most innovative and consumer friendly programs in the industry to protect its users from fraud, deception and misuse. Yahoo! failed to make a dent in the online market because of trust and safety issues (Bradley, p.10). Amazon has followed in eBay’s insurance footsteps and borrowed and improved upon a number of features on eBay’s site. eBay must continue to address consumer protection challenges through innovative programs. Consumers will recognize their continued effort in providing innovative features and will be rewarded with brand loyalty. eBay has also used the innovative feedback forum as a way for customers to evaluate one another in order to ensure customer confidence. As a service company, eBay needs to continually seek innovative ways to improve the customer experience. eBay needs to continue to focus on making its shopping place as safe and secure as possible, otherwise consumers with turn to other competitors. eBay must continue to meet the challenge by developing creative programs that respond directly to consumer concerns. They also need to continuously review their capabilities, approach and structure in order to ensure that they meet and exceed customer needs and expectations.

Finally, services are able to differentiate themselves by designing a superior delivery process. A service firm may win by delivering consistently higher quality service than competitors and exceeding customers’ expectations. If the perceived service meets or exceeds their expectations, they are apt to use the provider again (Kotler, 2001, p. 428). One of eBay’s biggest strengths and should remain superior service. They have been able to achieve superior service because of the variety of products offered and the strength of the eBay community. Consumers are able to search eBay for almost any product and eBay has a category variety that is unmatched by any of its competitors. Also, eBay has been able to create a sense of community. eBay provided more than a venue for selling items, they created an online community which gave buyers and sellers a place to socialize, discuss topics and provide feedback. These seem to be designed in order to foster a large community which would ensure repeat customers.eBay should remain focused on the needs of consumers and make sure they remain the main priority. eBay should continually come up with new ways to reach out to their customers. They need to be an active listener and learn and responds to customer needs. Companies that listen to their customers turn casual customers into loyal customers. By continuing to offer a wide variety of products, expanding globally to ensure a bigger trading marketplace, and fostering a sense of community eBay will be able to have a distinctive value advantage over its competitors, including Amazon.

eBay’s main competitors, including Amazon, have tried to use cost leadership as a means to differentiate themselves from eBay. Despite the increased role of non price factors, price does remain an important element and is challenging in markets such as the internet where other companies are able to offer similar products at no cost. eBay however, has used listing and special placement fees to generate revenue. Before eBay considers initiating a price change, they must consider customers’ needs. They are already having success in their current pricing model and should continue with their pricing strategy. Companies that own the largest market share will enjoy the highest profit. eBay should remain focused as a product quality leader rather than a price leader. Higher prices are justified by quality improvements and if a company can offer a better product. Consumers today have a vast array of brand choices and consumers today are focused more on value than on price. eBay should remain focused on their differentiation strategy rather than cutting costs.

eBay has become a leader of the online person-to-person auction industry. In order to retain their market leadership they need to focus on differentiating their company. To accomplish this, they must remain focused on their strong brand image, continue to offer new improvements, and supply a superior service. Through their unique service they will continue to appeal to large corporations, independent entrepreneurs, and individual buyers and sellers.