Designing a Marketspace Matrix
1. What is a buyer-seller relationship? How can it vary?
• A relationship is a bond or connection between the firm and its customers.
• This may be strong, weak or nonexistent.
• It can be based on logic or emotion
• Buyer-seller relationships are based on exchange, where each party expects, or perhaps even demands value for what is given (i.e. money for products).
• Customers who have a relationship with the firm tend to feel good about remaining loyal, are not as likely to seek out competitive offerings, actively promote the firm to others and are willing to pay higher prices.
• Over time, some customers will cease to be profitable and firms should take steps to dissolve the unprofitable relationships.
2. Why is integrated lever selection important in a marketing plan?
o The 2Is allow firms to choose levers that can move customers through the relationship phases faster and more effectively than ever possible.
o The 2Is affect each category of levers differently, but the end results remain consistent across all levers.
o Product, Pricing, Communications, Community and Distribution.
• The potential of the 2Is demands that firms leverage the 2Is across the matrix design as much as possible in order to advance customers to the commitment stage.
• Product – Individualization of user pages (Yahoo!) sustains commitment and increases switching costs. Individualization also spurs users to move from awareness to exploration.
• Pricing – Targeted price promotions, which can be both individualize and interactive in the form of a permission email, can advance users from exploration/ expansion to commitment by giving them a price incentive to make the purchase.
• Communications – Interactive targeted banner ads are a classic example of the 2Is influence on communications levers. Banner ads can be targeted at particular segments, and the interactivity of a banner ad allows a user to move from awareness to exploration just by clicking on it.
• Community – In the case of eBay, the strong vibrant community sustains buyers’ commitment by ensuring a constant supply of a wide range of goods. In turn, the large number of shoppers benefits sellers by driving up auction prices.
• Distribution – Interactivity allows for tight linkages between suppliers and buyers, which can facilitate a collaborative relationship that results in benefits in logistics, inventory planning and responsiveness, especially just-in-time production.
3. How did eBay’s application of the Marketspace Matrix change over time?
Ebay 95-98:
• eBay provides a logical first example of Marketspace Matrix in action.
• Since the product – an online auction service – was completely new, its brand had little value.
• Thus branding levers were inapplicable at the start.
• Yet, eBay, even in its nascent phases, developed levers in nearly every category.
Awareness
• Novelty of internet based, dynamic, auction-based pricing system
• Benefits to both buyers and sellers
• Low cost
• Viral marketing and word-of-mouth
• Strong presence at trade shows
Exploration/ Expansion
• Focus in one key area: website itself
• Easy-to-use search engine and easy-to-explore community converted visitors to customers.
• With more converted customers, eBay fostered exploration and expansion by the community equity that arose.
Commitment
• Relied primarily upon the enabling community product lever to advance users into the commitment phase.
EBay 98-99
• Once eBay had advanced a significant number of users into the exploration/ expansion phase, the firm needed to focus on sustaining commitment.
• As the firm’s needs changed, so did its Marketspace Matrix.
Awareness
• Began first major advertising campaign in late 1998.
• Radio and print campaign with “You might just find it on eBay” slogan
• Strategic alliances with AOL.com and the now defunct Go.com
• Sponsored auction of famous memorabilia for free media exposure
Exploration/ Expansion
• Added new attributes and features
• Offered complementary services
• Improved existing services
• Enhanced community offerings
• Forums where veteran eBay users will answer questions of new users
Commitment
• Community enabling remains a constant product lever to advance user to and sustain commitment.
• Loyalty program where seller can earn “Power Seller” status.
Dissolution
• Needed to dissolve relationships with customers who damaged the community.
• These were sellers who accepted bids and money and then never delivered the goods as well as buyers who bid and never paid.
• Relied on community and feedback forum to dissuade users from dealing with these miscreants.
EBay 2000-Present:
Awareness
• Offering price promotions to sellers to encourage them to list items for the first time – for free, provided they sign up for and accept Billpoint.
• Television ad campaign.
Exploration/ Expansion
• Expansion of product categories to include real estate and cars.
• Added “buy it now” option.
• Augment offerings, e.g. deal to provide discounted UPS shipping to all eBay users through Mail Boxes Etc.
4. What are the four categories of principles for lever selection?
• Which levers are customers most responsive to?
• Which levers are least likely to generate a competitive response?
• Which levers work best together?
• Which levers are consistent with strategy?
5. What the key principles for lever selection within the Marketspace Matrix?
Choose Levers to Effect a Change
➢ Firms must understand the behavioral change they are trying to create.
➢ After establishing the desired outcome, the optimal levers will be easier to pick.
➢ E.g. Amazon.com 1-click ordering capability allows users to make quick impulse purchases and its collaborative filtering suggests products likely to appeal to the customer based on prior purchases and purchases made by other similar patrons.
Determine Which Levers Have the Most Leverage
➢ Firms must understand which levers are decisive in moving customers from one stage to another.
➢ While one lever may help generate awareness or exploration, another may prove to be the tipping point from one stage to another.
➢ E.g.: Offline sale of cosmetics
➢ Magazine ads generate awareness, but decisive point is at the cosmetic counter. Firms thus need to move customers to the counter since that is the commitment or dissolution point.
Consider Barriers to Advancement
➢ Need to understand what prevents people from moving from one stage to another.
➢ The obstacle that stands in the way of advancement should be the target of a lever.
➢ E.g.Handspring adopted Palm operating system for its devices so that Handspring users could use existing Palm applications (product lever) and was able to compete and build awareness using the price lever.
Consider the Medium’s Effect on Desired Behavior
➢ To advance from one stage to another, the medium used for the awareness stage may be quite different from the one for the commitment stage.
➢ E.g.MSN CarPoint – To enable commitment behavior, CarPoint refers customers to local dealers who have the customer’s car of choice, a unique distribution lever.
Level of Involvement Matters
➢ High-involvement purchases will have different marketing levers than low-involvement purchases.
➢ To know which lever to use, firms need to understand where the product falls on the involvement spectrum.
➢ E.g. High-involvement decision is a consumer’s choice of bank.
➢ At the exploration stage, the levers must help consumers learn about the advantages of Internet banks in general, and this Internet bank in particular.
➢ The levers need to build confidence and trust in both the product and brand.
Understand Consumer Learning Trends
➢ Firms need to understand how consumers learn about products.
➢ Often different segments learn in different ways. Elderly customers usually do so through offline channels whereas younger consumers usually do so through the Internet.
➢ For firms to effectively reach their target customers, they must use marketing levers that are consistent with the preferred learning processes of that particular segment, especially during the awareness and exploration stages.
Credibility of the Channel Matters
➢ The credibility of the channel matters more than the literal message.
➢ A message can be ignored when delivered via one medium, but completely absorbed when delivered by another.
➢ E.g. The Blair Witch Project
➢ By choosing to initially promote the movie almost exclusively via the Internet, promoters were able to create a hype and anticipation around the movie and its release that would not have been possible through conventional channels.
The Choice of Levers Must be Consistent with Positioning Choice
➢ The firm’s marketing levers must support the choice of position the firm takes in a certain segment of the market.
➢ This would mean that certain levers would be ruled out and others will be more attractive.
➢ E.g. American Express Platinum Card
➢ Personal invitations are sent to potential members which is consistent with the positioning of prestige, exclusivity and unique services for the frequent spender.
The Medium can be the Message – or the Product
➢ By choosing the channel, the firm is already making a choice about what it is saying.
➢ E.g. By advertising in Town and Country, the firm is perceived as targeting an affluent audience with fairly conservative values, even if it sells eggs.
Matrix Design Must be Adaptive
➢ A firm must be able to adapt its matrix to respond to evaluation of the campaign and changes in the market.
➢ As levers prove ineffective or extremely effective, resources must be allocated in response to these discoveries.