Ebay’s Loyalty Program - Ebay Plus

COLOGNE BUSINESS SCHOOL (CBS)

eBay’s Loyalty Program: eBay Plus

Term paper for “Costumer Relationship Management”

Winter Semester 2015

Lecturer: Prof. Dr. Mike Schallehn

Desiree Wittmann

MA 15 in Programme Financial Management

Student-No. 1155500038

Table of Content

1        Introduction        

2        Loyalty Programs        

2.1        Key Objectives of an LP        

3        Design Characteristics        

4        Predicted Loyalty Program for eBay Plus        

4.1        eBay’s Costumers        

4.2        How eBay earns money        

4.3        Target Costumer Segment of eBay plus        

4.4        Efficient and Effective LP Design?        

4.5        Drivers of Efficiency        

4.6        Drivers of Effectiveness        

5        Competitive Advantage        

6        VRIO Concept        

7        Conclusion        

Reference list        

List of abbreviations

CRM                 Costumer Relationship Management

LP                Loyalty Program

SCR                Share of Category Requirements

List of Figures

Figure 1                 Classification of strategic CRM

Figure 2                Porter’s Competitive Advantage Model

Figure 3                 Own Illustration of the Competitive Market

Figure 4                 Model of perfect Competitive Advantage                

Figure 5                VRIO Concept for eBay Plus        

1. Introduction

Strategic CRM is an important Marketing concept, where a company directs all interactions on their costumers’ needs. This costumer-centric philosophy leads to a company’s priorized goal: maximize costumers’ lifetime value.

CRM in general focuses on three perspectives: the functional level, the costumer-facing level and the company-wide level.

While the functional level is more about executive marketing functions, the costumer-facing level contributes on a “single view of the costumer across all contact channels”. But if you see CRM in a company-wide level, we are talking about strategic CRM.

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Figure 1: Classification of strategic CRM

Many companies just use a software for successful CRM. This software should analyse automatically the costumer and search for the perfect formula leading to a high costumer lifetime value. But this is why they fail.

As Kumar and Reinartz (2012, p. 35) already said: “Just as building a house requires an architectural plan, implementing CRM must be preceded by a sound strategy”.

Due to the fact that every costumer has individual expectations to a firm and the economical value of every costumer differs, they are not treated equally. If a company manages to engage its costumers into a long term relationship by a set of activities, it has a sustainable and hard-to imitate, competitive advantage. (Kumar & Reinartz, 2012, pp. 35-36)/ (Janko et al., 2007, p. 17, own translation).

This is a very effective way to get loyal costumers. It is the basis of well working strategic CRM.

Loyalty means a costumer’s identification with a company’s service or product. Loyal costumers are more profitable to a firm because of repeat business and thus develop a higher tolerance to price increases. (Kumar & Reinhartz, 2012, p. 184)

Having in mind that competition is growing globally with rapid market entry, costumer’s loyalty has become a focal managerial challenge (Dick & Basu,1994, p.99).

But there is an important differentiation between Attitudinal Loyalty and Behavioural Loyalty.

Behavioural Loyalty is the simple task of buying a product or invoke a service from any company. Usually costumers with pure behavioural buying behaviour can easily be caught by a competitor’s offer. For instance, if someone is dependent on public traffic and usually takes “Deutsche Bahn” for 100€, this person will change to “Flixbus” if they offer the same distance with the same duration for 30€.

Attitudinal Loyalty therefore describes the awareness to a specific product or service from a specific supplier, which the costumer chose himself for personal reasons. This might be a good intention to a brand. For example, the costumer knows his washing powder already from his mother and will go on using it in his own household (Kumar & Reinhartz, 2012, p. 184).