German University in Cairo Date: 04/12/2022 Faculty of Management TechnologyMBA DepartmentProf. Tamer Awad
Digital Marketing MRKT 703Fall Semester 2022Assignment 1Submitted by: Lilian Michel Youssef Melek ID: W2017545
Airbnb, Etsy, Uber: Growing from One Thousand to One MillionCustomers
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Airbnb, Etsy, Uber: Growing from One Thousand to One Million Customers case study is a Harvard Business School (HBR) case study written by Thales S. Teixeira, Morgan Brown. The Airbnb, Etsy, Uber: Growing from One Thousand to One Million Customers case study provides evaluation & decision scenario in field of Strategy & Execution. It also touches upon business topics such as - Value proposition, Marketing, Strategy, Supply chain.
Case Summary
By 2016, two-sided online platforms (or marketplaces) were pervasive among the highest growing internet startups around. These marketplaces sought to match suppliers of assets for rent, physical products or services with customers demanding them. Among the most notable two-sided platforms in terms of their tremendous early growth were Airbnb, Etsy and Uber. They offered short-term property rentals, handcrafted goods, and car rides, respectively. As two-sided markets grew to scale, network effects kicked in as more consumers bred more suppliers and vice versa. But how did these platforms ride the second wave of growth? How did they grow from one thousand to one million customers?In each case the strategies are different because of the company's situation at that time. Thanks to early adopters Airbnb, Etsy and Uber has started thinking about how to expand their customer base with better marketing methods. Digital marketing will help out, enabling different companies to get targeted customers through different search ads or social media at the affordable rate.
Introduction
Startup companies usually compete against each other in order to increase their customers’ base. Over here,the issue is significantly more difficult with new businesses in the sharing economy, which have been launchedas platforms in order to connect for providing independent services to customers. Airbnb, Etsy and Uber have acquired thousands of customers in a very short period of time by using two-sidedonline platforms, which were determined among the most noteworthy developing web or online startupseverywhere. These commercial centers tried to match the suppliers and demands of assets for rent, physicalproducts or online services with clients. Among the most well-known two-sided platform shaving rapid growth were Airbnb, Etsy and Uber. Theyoffered short-lived property rentals, assembled merchandise, and auto rides, separately. As two-sided onlinemarkets developed to expand, there was a significant impact on the system, which attracted more customers,resulting in an increase in the suppliers for the company as they had to meet the demands of the customers.If we consider Uber, then it could be said that its platform is two-sided, comparing people who need rides withpeople who have rides to offer and same idea for Airbnb, which associates people requiring rooms withproperty owners. In order to launch the platform services, these organizations need to discover clients on boththe supply side as well as the demand side.
Therefore, the objective is to determine the platform and marketing strategies of each company, whichwould increase the number of customers so as to increase the demand. Along with this, it is alsoimportant to know the risks and opportunities faced in two-sided platform and therefore, strategiesshould be recommended for further growth to attract the customers by having as strong relationshipfor a long period.1.Airbnb
Airbnb was a two-sided marketplace to match people that owned real estate properties with people interestedin renting short-term lodging. Airbnb was founded in August 2008 and based in San Francisco, California, thecompany was privately owned. By 2009, Airbnb had more than one thousand customers and by 2011 morethan one million. One of the major advantages of Airbnb was that it tended to be substantially cheaper,generally 30% to 80% lower than hotels in the same location. In the summer of 2011 the company introduced Airbnb Social Connections, which leveraged users’ social graphs via Facebook Connect. Social Connections. It
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also allowed guests to search for hosts based on other characteristics, like school of graduation. In 2012 Airbnb received $112M in a Series B funding round from Andreessen Horowitz, Digital Sky Technologies,General Catalyst Partners, Jeff Bezos, Ashton Kutcher who also joined the company’s advisory board andCrunch Fund. At 22th June, just three days after funding which valued Airbnb at over $1 billion. Another important point is that; on August 1st, Brian Chesky issued an unconditional apology via the company blog,announcing Airbnb’s updated guarantee to cover up to $50,000 in damages from vandalism or theft. Then inMay of 2012, Airbnb partnered with Lloyds of London to expand their guarantee even further, covering everybooking with their $1,000,000 Host Guarantee. $1,000,000 Host Guarantee was an example of the company’scommitment to trust. By moving quickly to address these concerns, Airbnb was able to continue growing,despite these incidents, on an even sharper growth curve.From the beginning, it was clear to the founders of apartment-sharing site Airbnb that they would need to findpeople willing to list their homes before finding people interesting in staying in them. The entrepreneurs figuredthey could do a better job of making apartments appealing than the online classified site, but first they had toaway its customers. In order to do that, Chesky and Gebbia created software to hack Craigslist to extract thecontact info of property owners, then sent them a pitch to list on Airbnb as well. The strategy worked well. Withnothing to lose, property owners doubled their chances of finding a potential renter, and Airbnb had a readysupply of homes with which it could attract customers. Chesky and Gebbia hired professional photographers togo to property owners’ homes to take inviting pictures. The plan worked, making the site more attractive thanthe competition, and setting a standard for photography that later property owners rose to match in order tocompete.
2.Etsy
Etsy was a two-sided e-commerce platform specialized in handmade or vintage items and supplies including art, photography, clothing, jewelry, food, and toys. Etsy grew from one thousand to one million customers from approximately 2005 to late 2008. Since 2011, organic channels have represented 87% to 91% of Etsy’s traffic, while paid ads have been responsible for between just 2% to 7% of traffic. Etsy’s early support of artisans at craft fairs helped bring buyers and sellers to the fledgling marketplace. As the company grew, it continued to provide support for sellers, who marketed their wares and, in turn, marketed the Etsy platform to their own loyalcustomers. In 2013 CEO Chad Dickerson, who took over after founder Rob Kalin stepped down in 2011, attributed Etsy’s remarkable user growth, in part, to sellers promoting their own shops on social media. By late 2008, Etsy was growing faster than ever, racing past the one million customer mark.Etsy also followed a decidedly non-scalable strategy. The platform, which serves as an online marketplace for craft vendors, started its business with an offline strategy: scouring craft fairs across the country to identify the best vendors at each, and pitching them on opening up an online store on the site. The company's strategy was same like Airbnb and Uber: They first brought their customers, and then they brought sellers who followed the customers.” Once Etsy had the first artisans on the site, the next tier naturally followed them.
3.Uber
Uber was an online two-sided transportation platform based in San Francisco, California. Uber developed, marketed, and operated the Uber mobile app, which allowed consumers with smartphones to submit a trip request which was then routed to independent drivers who used their own cars. Uber grew from one thousand to one million users from approximately 2010 to 2012, using a very deliberate city by city approach. The reasonUber expanded so quickly was because they acknowledged that growth was not one size-fits-all. Because of local politics, regulations, and interests in each city, Uber needed to adapt their launch plans to suit the unique characteristics of each new market. It was this ability to go into a market, understand who the suppliers were, who the special interests were, and account for those dynamics that made Uber successful immediately in newcities. Special events and holidays provided as an opportunity to showcase Uber’s model. These events created intense demand and pressure to get new users to take their first Uber ride, driving spikes in new riders and total rides.Uber followed similar strategy. The company started with black cars driven by professional drivers. That way,they could ensure that customers would have a great experience virtually every time they used the service.
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They could then rely on customers to spread the news of that experience by word of mouth. The importantpoint was to get the supply side first. If you get the right suppliers, the customers will experience their high-quality service. Uber ran promotions during large concerts or sporting events, when big crowds of people allneeded cabs at the same time. Uber company acquired a large group of customers in one move.
Airbnb, Etsy, and Uber’s strategy of short-term property rentals, handcrafted goods, and car rides arerespectively likely to be profitable? Why?Airbnb strategy for renting the properties:
It is observed in the case that Airbnb, Etsy and Uber are making profits from their respective strategies, whichinclude renting homes, handcrafted goods and car rides. It allows renting the properties and the businesses asthe hosts allow the people to have extra time to use their income to payback their mortgages or loans or rents. Along with this, in 2012, the apartments San Francisco used the renting option to make payment for expenses.In 2009, when Airbnb was at its initial growth stage, it started analyzing the factors, which did not increase their initial growth. The founders stayed at Airbnb’s flats in order to analyze the reason for less booking rates. Theyrecognized the low-quality photos as the main reason and chose to put time and cash in taking better photographs. This support led to the development and growth of renting apartments. Along with this, in order toincrease the supply of the renting business, the company used email marketing and started to contact peoplewho were listed on the craigslist, which better explains the features and benefits of renting the apartments.
Etsy Strategy for hand crafted goods:
At the point when customers are searching for one of a kind or uniquely crafted products, the Etsy providestrendy website for a business, which allows the customers to make and sell hand crafted or antique goods.With sellers making their own unique products and building their brands on the site, more than 75% of themconsider Etsy shop a business.Etsy, which was established in 2005 and now has 1.5 million active sellers and 21.7 million active buyers ascompared to its peers in the same economy. As indicated by the organization's late report, 86% of Etsy’ssellers are ladies, and numerous sellers are custodians with kids at home as most of the sellers work at homeand run the business successfully. Airbnb, etsy and uber definitely took advantage of a market opportunity. Two sided platforms had been makinga huge wave with things like uber, grub hub, Instacart and Airbnb. This method of sale has become a newtrusted and more convenient for consumers who are comfortable with technology and looking to cut out thehassle of hotels or travel intricacies. Despite early controversy, they built a loyal customer bas and modifiedtheir business model to accommodate safety concerns and bumps along the way. An interesting aspect of Airbnb is how applicable the two-sided platform can be in multiple industries. Thesecompanies are all similar in the sense that they don’t follow a normal business model and in the long run, thiscontributes to lowering their bottom line. The article explains how Etsy was spending “next to nothing” oncustomer acquisition. This model differentiates them from other online retailers because the responsibility fallson other to make the sales. Those selling will usually do their own personal marketing or promotions which willultimately drive people to the site. Being able to successfully enter the market is almost as important as beingable to maintain market success. Getting your name out there is the first step in building the brand.
Airbnb market entry strategies
Airbnb was able to utilize many strategies which allowed the business to grow from 1000 to 1000000customers in just 3 years (2009-2011). The primary advantage that Airbnb has over competitors such as hotelchains that already have established markets is that Airbnb offers a much cheaper compared to hotels in thearea. By offering their rentals at substantially lower rates than hotels, Airbnb created large demand for their product right off the bat. However, there were many concerns regarding the safety and security of the Airbnbbusiness model. Some concerns included customers not knowing the hosts, hosts not knowing who was goingto be living in their house, property damage and customers were often not given the best pictures of the housetherefore not knowing exactly what they were renting. To combat these concerns, Airbnb utilized unique
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strategies that give both the customer and the host a very engaged experience. Poor picture quality of rentalhouses on Airbnb’s website led to slow start in New York. Most of the pictureBy using the above frameworks for Airbnb, Etsy, Uber: Growing from One Thousand to One Million Customers case study solutions, I can clearly draw conclusions on the following areas:
What are the strength and weaknesses of Sided Etsy (SWOT Analysis)
What are external factors that are impacting the business environment (PESTEL Analysis)
Should Sided Etsy enter new market or launch new product (Opportunities & Threats from SWOT Analysis)
What will be the expected profitability of the new products or services (Porter Five Forces Analysis)
How it can improve the profitability in a given industry (Porter Value Chain Analysis)
What are the resources needed to increase profitability (VRIO Analysis)?
Finally, which business to continue, where to invest further and from which to get out (BCG Growth Share Analysis)
SWOT analysis stands for – Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses are result of Sided Etsy internal factors, while opportunities and threats arise from developments in external environment in which Sided Etsy operates. SWOT analysis will help in not only getting a better insight into Sided Etsy present competitive advantage but also help in how things have to evolve to maintain and consolidate the competitive advantage.
Strengths
-High customer loyalty & repeat purchase among existing customers – Etsy old customers are still loyal to the firm even though it has limited success with millennial. I believe that Sided Etsy can make a transition even by keeping these people on board.-Streamlined processes and efficient operation management – Sided Etsy is one of the most efficient firms in its segment. The credit for the performance goes to successful execution and efficient operations management.-Experienced and successful leadership team – Sided Etsy management team has been a success over last decade by successfully predicting trends in the industry.-Strong Balance Sheet – The financial statement of Sided Etsy looks strong and will help the company going forward.
Weakness
-Low profitability which can hamper new project investment – Even though Sided Etsy financial statement is stable, but going forward Sided Etsy 5-7% profitability can lead to shortage of funds to invest into new projects.-Little experience of international market – Even though it is a major player in local market, Sided Etsy has little experience in international market. According to Thales S. Teixeira, Morgan Brown, Sided Etsyneeds international talent to penetrate into developing markets.-
Sided Etsy business model can be easily replicated by competitors – According to Thales S. Teixeira, Morgan Brown, the business model of Sided Etsy can be easily replicated by players in the industry.
Opportunities
-Increase in Consumer Disposable Income – Sided Etsy can use the increasing disposable income to build a new business model where customers start paying progressively for using its products. According to Thales S. Teixeira, Morgan Brown of Airbnb, Etsy, Uber: Growing from One Thousand to One Million Customers case study, Sided Etsy can use this trend to expand in adjacent areas Marketing, Strategy, Supply chain.-E-Commerce and Social Media Oriented Business Models – E-commerce business model can help Sided Etsy to tie up with local suppliers and logistics provider in international market. Social media
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growth can help Sided Etsy to reduce the cost of entering new market and reaching to customers at a significantly lower marketing budget.-Lucrative Opportunities in International Markets – Globalization has led to opportunities in the international market. Sided Etsy is in prime position to tap on those opportunities and grow the market share.
Threats
-Home market marketing technique won’t work in new markets such as India and China where scale is prized over profitability.-Age and life-cycle segmentation of Sided Etsy shows that the company still hasn’t able to penetrate the millennial market.-Customers are moving toward mobile first environment which can hamper the growth as Sided Etsy stillhasn’t got a comprehensive mobile strategy.
Once all the factors are organized based on SWOT analysis, just remove the non-essential factors. This will help in building a weighted SWOT analysis which reflects the real importance of factors rather than just tabulation of all the factors.
PESTEL Analysis
PESTEL stands for – Political, Economic, Social, Technological, Environmental, and Legal factors that impact the macro environment in which Sided Etsy operates in.
Political Factors
-Political consensus among various parties regarding taxation rate and investment policies. Over the years the country has progressively worked to lower the entry of barrier and streamline the tax structure.-Little dangers of armed conflict – Based on the research done by international foreign policy institutions,it is safe to conclude that there is very little probability of country entering into an armed conflict with another state.-
Political and Legal Structure – The political system seems stable and there is consistency in both economic policies and foreign policies.
Economic Factors
-Foreign Exchange movement is also an indicator of economic stability. Sided Etsy should closely consider the forex inflow and outflow. A number of Sided Etsy competitors have lost money in countriessuch as Brazil, Argentina, and Venezuela due to volatile forex market.-According to Thales S. Teixeira, Morgan Brown. Sided Etsy should closely monitor consumer disposable income level, household debt level, and level of efficiency of local financial markets.
Social Factors
-Leisure activities, social attitudes & power structures in society - are needed to be analyzed by Sided Etsy before launching any new products as they will impact the demand of the products.-Demographic shifts in the economy are also a good social indicator for Sided Etsy to predict not only overall trend in market but also demand for Sided Etsy product among its core customer segments.-Consumer buying behavior and consumer buying process – Sided Etsy should closely follow the dynamics of why and how the consumers are buying the products both in existing categories and in segments that Sided Etsy wants to enter.
Technological Factors
-Artificial intelligence and machine learning will give rise to importance of speed over planning. Sided Etsy needs to build strategies to operate in such an environment.-Proliferation of mobile phones has created a generation whose primary tool of entertainment and information consumption is mobile phone. Sided Etsy needs to adjust its marketing strategy accordingly.
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Environmental Factors
-Consumer activism is significantly impacting Sided Etsy branding, marketing and corporate social responsibility (CSR) initiatives.-Environmental regulations can impact the cost structure of Sided Etsy. It can further impact the cost of doing business in certain markets.
Legal Factors
-Property rights are also an area of concern for Sided Etsy as it needs to make significant Marketing, Strategy, Supply chain infrastructure investment just to enter new market.-Intellectual property rights are one area where Sided Etsy can face legal threats in some of the marketsit is operating in.
Porter Five Forces
Porter Five Forces are used to analyze the industry in which Sided Etsy operates in and what are the levers of profitability in those segments – differentiation, Marketing, Strategy, Supply chain.
Competition among existing players,
Bargaining power of suppliers,
Bargaining power of buyers,
Threat of new entrants, and
Threat of substitutes
Porter Five Forces can help in answering following questions:
How attractive is the industry described in the Airbnb, Etsy, Uber: Growing from One Thousand to One Million Customers?
Are some segments more attractive than others? Why? Identify, analyze, and evaluate the strategy of the Sided Etsy featured in the Airbnb, Etsy, Uber: Growing from One Thousand to One Million Customers case study.
What are the pros and Cons of each strategy? What impact Sided Etsy actions will have on industry and economy on whole?
VRIO Analysis
VRIO stands for – Value of the resource that Sided Etsy possess, Rareness of those resource, Imitation Risk that competitors pose, and Organizational Competence of Sided Etsy. VRIO and VRIN analysis can help the firm.ResourcesValueRareImitationOrganizationCompetitive Advantage Access to Critical Raw Material for Successful ExecutionYesYes, as other competitors have tocome to terms with firm's dominant market positionCan be imitatedby competitorsYesProviding Sustainable Competitive AdvantageGlobal and Local PresenceYes, as it diversifies the revenue streams and isolate company's balance sheet from economic cyclesYesCan be imitatedby competitorsYes, it is one of the most diversified companies in its industryProviding Strong Competitive AdvantageMarketing Expertise withinthe Sided EtsyYes, firms are competing based on differentiation in the industryNo, as most of the competitors also have decent marketing know howPricing strategies are often matched by competitorsYes, firm is leveraging its inhouse expertiseTemporary Competitive Advantage
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Porter Value Chain
It is primarily used for analyzing Sided Etsy relative cost and value structure i.e. disaggregate various processes and their relative costs – the related costs and various sources of competitive advantages of Sided Etsy in the markets it operates in. The process can also be done to competitors to understand their competitiveadvantages and competitive strategies.
BCG Growth Share Matrix
BCG Growth Share Matrix is very valuable tool to analyze Sided Etsy strategic positioning in various sectors that it operates in and strategic options that are available to it.Product Market segmentation in BCG Growth Share matrix should be done with great care as there can be a scenario where Sided Etsy can be market leader in the industry without being a dominant player or segment leader in any of the segment. BCG analysis should comprise not only growth share of industry & Sided Etsy business unit but also Sided Etsy - overall profitability, level of debt, debt paying capacity, growth potential, expansion expertise, dividend requirements from shareholders, and overall competitive strength.
5C Analysis
5C Analysis is a marketing tool to do a situational analysis in which Sided Etsy operates in. It inculcates both the macro and micro environment factors that impacts Sided Etsy. The 5C analysis allows marketing managersto put probabilities to different types of risk exposure Sided Etsy is facing in the marketplace and design marketing strategies accordingly. Marketing strategy is about making marketing decisions in the face of macro environment uncertainty, competitive pressures & strategies, and other economic factors. The 5Cs of Marketing Analysis are -1 - Company,2 - Customers,3 - Competitors,4 - Collaborators,5 - Context.Sided Etsy faces 4 major types of risk exposures – risk corresponding to technological innovations, demand risks, production or delivery risks, and international risks.
Company Analysis - 5C of Marketing
Key Question Answered – What are the strengths and weaknesses of the company and how marketing can improve the effectiveness of its core strength and alleviate the impact of its weaknesses.Marketing managers at Sided Etsy needs to analyze the internal strengths and weaknesses of the company before making marketing decisions. Each organization has different marketing budget, different skill sets to execute marketing strategies and promotional campaigns. The company analysis will help the Sided Etsy to optimize the use of the marketing resources. In terms of the four risks mentioned above –Marketing managers at Sided Etsy needs to focus on risks corresponding to production and delivery risks. If the company fails to match the consumer expectations then no amount of smart marketing can build a sustainable competitive advantage.Company FactorsCulture of the Sided Etsy – As the Airbnb, Etsy, Uber: Growing from One Thousand to One Million Customers explains the firm has a strong culture of product and process innovations.Quality of human resources to create and manage effective campaigns – Sided Etsy attracts some of the best talent in its industry and the skill level of Sided Etsy existing workforce is very high. Sided Etsy has strong marketing department which helps it to design effective and successful marketing campaigns.
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Financial position and availability of resources for marketing – The financial position of Sided Etsy is strong and it can afford to spend significant amount of resources on marketing for – launching new products and to better position existing brands.Research and Development spending – As a leader in various product segments, Sided Etsy spends significant amount of resources on research and innovation in field of – product design, process optimization, marketing strategies, and building IT network to support all the promotion and distribution strategies.
Customers - 5C Marketing Analysis
Key question answered - How Sided Etsy can identify attractive market segments and choose a market targeting strategy.Marketing strategy of Sided Etsy needs to meet two broad objectives – carefully selecting target market and designing marketing activities to achieve desired positioning in hearts and minds of the target market. Customer analysis by marketing managers of Sided Etsy can include – growth rate of the industry, potential market size of both the overall market and target segment, tangible and intangible product features desired by consumers in the industry, core purpose of buying the products, frequency of purchase, recent purchases, industry trends, income levels etc.Based on our 4 broad risk framework for 5C analysis – marketing managers should focus on demand risk and technology risk in customer analysis section.Customers FactorsWho the target customer is – Should Sided Etsy go for a broader segment or position its product in niche segment. My suggestion is that it should focus on the niche segment as it is highly profitable.How to grow share of customers purchase basket – The decision marketing department at Sided Etsy needs totake – How it can grow the customer purchase basket share with Sided Etsy products.What is the Customer Life Time value – Rather than focusing marketing efforts around single purchase, Sided Etsy should develop marketing strategy that can maximize customer life time value.What is the level of brand awareness among target segment and general population – The brand awareness among the target segment and among wider population is high. Sided Etsy can leverage on it to build sub brands for niche segments within the target market and adjacent segments.What is market size of the segment that Sided Etsy wants to target – I believe the market size will grow at a steady pace and it will present various opportunities to expand into adjacent segments.
Competitors - 5C Marketing Analysis
Key Question Answered – Who the competitors are, what their marketing strategy is, and how Sided Etsy can design its marketing strategy in view of competitive pressures and limited marketing resources.The core function of marketing strategists and marketing managers is to design marketing activities that can help Sided Etsy to thwart competitive pressures from established players as well as potential entrants. Marketing managers of Sided Etsy has to make decisions regarding –Where to position the brands respective to Sided Etsy own brands portfolio and competing brandsWhat are the marketing strategies of competitors.Should Sided Etsy competes directly with the competitors or find niche positions within the segments.What type of competition there is in the industry that Sided Etsy operates in.Based on our four risks exposure framework – In competitors analysis marketing managers of Sided Etsy should closely analyze – demand risks and technology innovation risks.Competitors FactorsThreats of new entrants to profits of Sided Etsy – Marketing efforts are often barriers to entry in the industry and new entrants not only have to have huge marketing resources to compete with the incumbents but also need high level of marketing know-how.
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Intensity of rivalry among existing players – if the intensity is high then the profitability is usually low in any industry. Thus, it requires Sided Etsy to spend higher resources on marketing efforts.Product Line Depth Decisions for Sided Etsy – Depth involves targeting different segments within the same product range. Higher the depth, the more the company needs to spend on individual brands without putting too much focus on the parent company.Countering Marketing Campaigns of Competitors – Often one competitor campaign has to be matched with a counter campaign to stop the product trial of the competitor’s product by the firm loyal customers. It has to be done to control the churn of customers.Threats of substitutes to Sided Etsy – The threats of substitutes often arise either from economic cycle or technological innovation. It may require repositioning of certain brands on part of Sided Etsy in certain markets.What will drive future growth and how competitors will try to take share of that future growth – technology innovations can result in making present positioning less profitable so Sided Etsy needs to continuously innovate and look for new opportunities.Positioning strategy vis a vis competitor – The critical marketing decisions for managers at Sided Etsy is what strategic position to choose which at same time is – different from competitors and relevant to the customers.Product Line Breath Decisions – This not only pertains to Sided Etsy product strategy but also its distribution and supply chain management strategy. Broader line requires more positioning strategies and higher marketing spending.
Collaborators - 5C Marketing Analysis
Key Question Answered – How flexible & robust Sided Etsy supply chain is and how much bargaining power the collaborators in the value chain have.Collaborators include the supply chain partners both upstream and downstream of the value chain. For doing Collaborators analysis Sided Etsy needs to critically evaluate the supply chain based on numerous factors such as – bargaining power, what suppliers bring to table, flexibility & agility of supply chain, revenue sharing at each step of the value chain.Based on risk exposure parameters under the collaborators analysis Sided Etsy marketing managers should focus on risk exposure to international risks (because Sided Etsy has international operations), and production and delivery risks. For example, if the collaborators effectively able to meet the demand increased by effective advertising of Sided Etsy marketing department then it will go a long way in enabling the company to thwart new competition and devise premium pricing strategy.Collaborators FactorsPosition and bargaining power in the value chain – If the collaborators have strong bargaining power then Sided Etsy will not able to sustain higher margins even with higher marketing expenditure.Risks to intellectual property rights and patents – Operating in international markets can expose Sided Etsy to theft of Patents, Copyrights and other Intellectual Property Rights. Any marketing and diversification decision should be taken after evaluating these risks.Number of suppliers and abilities of the suppliers – If there are too many suppliers then it will become expensive for Sided Etsy to manage them but if the number of suppliers is too few then it will expose the company to supply chain disruption risks.Managing delivery and services in times of uncertainty – Most global organizations such as Sided Etsy are diversifying rapidly to reduce delivery and supply chain risks. Sided Etsy should also focus on it.Flexibility of supply chain and international risks – In international markets the critical question in front of Sided Etsy is how much localize based on local preferences. Rest of the decisions from production to marketing is based on this critical decision. Opportunities to localize the production and other processes to reduce risk of organization wide supply chain risk in international market.
Context - 5C Marketing Analysis
Key Question Answered – Which are the macro economic factors that will significantly impact both the business model and the marketing strategy.Context Analysis encompass the diligent analysis of macro environment factors such as – political and social environment, regulatory environment, economic conditions in the markets that the Sided Etsy operates in, rate
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of technology innovations in the industry, legal environment, environmental standards in the industry etc.Two main forms of risk exposure in the context analysis are – International risks, and technology & innovation risks exposure.Context FactorsEconomic – The consumer behavior during boom time and recession time is often totally different so marketingmanagers at Sided Etsy has to decide how the consumers will behave in the present economic situation.Employment – Given the employment crisis in Western Europe and emergence of Gig economy and employment in US and all the major western economies – employment has become a critical factor in designing marketing strategy. Employment not only impacts the purchasing power of the customer but also impacts the self-esteem and brands she can associate with.Foreign Exchange Exposure – International operations not only bring risks of marketing strategies that are not relevant to specific market but also risk of foreign exchange exposure. In last 10 years most, US organizations have lost money because of FX exposure in countries such as Venezuela, Argentina, Turkey, Russia & Indonesia.Regulatory Framework – It not only impacts the type of the advertising and marketing campaign a company can run but also the type of products Sided Etsy can sell. For example, the standards & regulations for Sided Etsy products in US and European Union are vastly different.Inflation & Diversification – Inflation impacts the pricing strategy of Sided Etsy as high inflation can result in lower income from the present sales.Political Risks to Sided Etsy – Geo-political risk have increased over the last three to four years with developments such as US-China trade situation, Brexit, and rise of yellow vests in France.
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To get from zero to 1,000 customers, the three startups faced a chicken-and-egg problem: How could they attract suppliers if they didn’t have any users? For example, how could Uber recruit drivers with only a few customers, and at the same time, attract customers if there were no drivers? How could Airbnb convince potential room renters to join its platform without a large catalog of potential places to stay?To overcome those challenges, the startups followed similar strategies, initially focusing more on the supply side than on the demand side.In addition, they worked hard to find early customers by matching them “by hand” with early suppliers (e.g., Etsy scoured craft fairs to sign up artisans); acquiring them in bulk (Uber ran promotions during concerts and events); and doing whatever it took to make their offerings attractive, even if it wasn’t scalable (Airbnb hired professional photographers to take inviting photos of hosts’ apartments).Following those guidelines, they were able to gradually improve their products and identify what made them resonate most with customers and suppliers. Only after that was scaling a possibility, requiring a gradual—not abrupt—shift from catering to the supply side toward catering to the demand side.Building on The Initial 1,000 After surpassing 1,000 customers, organic opportunities for the companies to acquire more customers and suppliers in bulk became increasingly rare. So, Uber and Airbnb turned to digital marketing as a targeted way to reach new people. Unlike traditional mass media advertising such as local TV commercials or print ads, which are expensive and time-consuming, paid digital media such as Google search ads, Facebook ads, and YouTube video ads offer many benefits that make them better suited for platform startups. Among them are low setup cost, allowing companies to start advertising for as little as $10 a day; precise targeting—to specific demographics, or based on life events such as birthdays or similarity to current customers; short creative development time and deployment of ads within minutes; and ease of experimentation.Taking all these factors into account, a startup can create dozens of ads within just a few days, and learn quickly and cheaply what is most effective to attract suppliers.Uber, for instance, made extensive use of online advertising in various social media platforms to recruit more drivers. It created a model to understand and identify factors that caused individuals to be interested in signing up to be an Uber driver. Were they part-time workers? Did they own a car? Were they in cities with low wages
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or in cities with high unemployment? (In fact, given its extensive data on drivers, Uber today is arguably as wellinformed about low-wage workers as the US Department of Labor.)By gathering this information, Uber was able to use the online ads to identify the right drivers.Etsy followed a different track. Rather than market through digital media, it let suppliers do the advertising. To do this, it provided support to the sellers to market their crafts and in turn, market the Etsy platform to their loyal customers. Etsy created a “Seller Handbook” and other internal management tools for sellers to better process orders and stay in touch with customers through integrated social media. Eventually, Etsy fostered an ecosystem of more than 150 third-party apps and tools to empower and support the sellers.Shifting from Supply to Demand As these platforms began acquiring new customers using digital marketing and social media, those customers started behaving differently from the early adopters who had been acquired in bulk or by word of mouth. In particular, they were not as forgiving of lower-quality products and services, and not as willing to pay premium prices for anything less than perfection.To retain these new customers, platform entrepreneurs needed to deeply understand their needs and wants—and how their offering was differentiated from others in the market. One obvious way to do that was to ask customers what they wanted. As Airbnb cofounder Joe Gebbia put it, “People told us what they wanted, so we set off to create it for them.” Airbnb maintained a culture of testing many features on its website and soliciting feedback from its most loyal and vocal customers. What the Airbnb team learned: If you provide a channel and listen, people will tell you what they want once. But to get that a second time, you need to quickly respond to their prior requests.Very quickly, they learned that cleanliness mattered, so a cleaning and laundry program was created to support the hosts. Trust, they realized, was another issue, so Airbnb Social Connections was introduced, whichleveraged customers’ social graphs via Facebook Connect so that hosts were no longer anonymous. Finally, they realized that price was important, so they concentrated on growing in cities with high priced hotel rooms, where hosts could charge from 30 percent to 80 percent lower prices than hotels in the same location.While that kind of direct feedback was helpful to Airbnb in shaping its offering, it wasn’t enough for Gebbia and cofounder Brian Chesky. In order to uncover more opportunities for improvement, they made the unusual moveof using their own services, envisioning a perfect experience and working backward to see what needed to be changed to meet that vision.Those two paths—asking customers what they wanted and building it forward, and envisioning the perfect experience and creating it backward—aren’t an either-or decision. As Airbnb’s experience shows, both approaches should be followed jointly.By first going after the supply side and then shifting to the demand side, all three platforms gained traction in the markets they initially entered. At that point, however, they faced a critical decision in the life of every platform business: where and how to expand. Few startups answered that question better than Uber, which ramped up its business incredibly fast.Having proven the original business model in San Francisco and New York City, Uber’s founders realized that in order to choose their next target cities, they needed to understand the “accelerants” that worked as tailwindsto catalyze adoption by customers in a particular locale. Analyzing their successes, they distilled the factors down to a few, among them density of restaurants and nightlife, destination for holidays and events, availabilityof strong sports franchises, and temporary bad weather.Together, all these factors ensured a steady stream of people who went out at night either to drink with friends or to attend concerts and sporting events and wanted to avoid the hassle of parking or looking for a cab on a rainy or snowy night. That was the case for Chicago—a city with a great nightlife, intense weather, and tons of sporting events—where Uber’s initial viral growth was double that observed in other cities.These accelerants became the basis of Uber’s market expansion playbook, and were some of the factors it looked at to drive its launch as it expanded into new locations. CEO Travis Kalanick explains: “After a platform finds a formula that works, it needs to distill the formula into principles, catalysts, and a to-do list to transfer the formula to managers it hires to expand in different regions or industry verticals.” His advice to startups: creates that playbook as quickly as possible.Going from zero customers to 1,000 customers can be a slow process for platforms because of the need to acquire both providers and customers of products and services in a balanced manner. By contrast, going from 1,000 to 1 million can be a fast ride—but only if companies are willing to shift their tactics to try something new.
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The strategies that incentivize early users to join are fundamentally different from those required to scale up the platform.The hardest decision faced by any growing startup is when to abandon the actions that made it successful in the first place in order to achieve more success in the future. Failure to do so at the right moment may result in a strong reduction in the momentum of the company. By contrast, having the courage to change in favor of new marketing strategies can help a company succeed in the long run, and position it for even greater growth going forward.
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https://www.forbes.com/sites/hbsworkingknowledge/2016/11/16/how-uber-airbnb-and-etsy-turned-one-thousand-customers-into-one-million/?sh=690dbe615da9
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https://www.studocu.com/en-us/document/bryant-university/business-policy/bus400-assignment-6/37898215
it. As explained in the case, two sided platforms had been making a huge wave with things like uber, grub hub, Instacart and Airbnb.This method of sale has become a new trusted and more convenient option for consumers who are comfortable with technologyand looking to cut out the
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hassle of hotels or travel intricacies. Despite early controversy, they built a loyal customer base and modified their business model toaccommodate safety concerns and bumps along the way. An interesting aspect of Airbnb is how applicable the two-sided platform can be in multiple industries. These companies are all similar in the sense that they don't follow a normal business model and in the long run, this contributes to lowering their bottom line. The article explains
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Airbnb, etsy and Uber definitely took advantage of a market opportunity when they saw it. As explained in the case, two sided platforms had been making a huge wave with things like uber, grub hub, Instacart and Airbnb.This method of sale has become a new trusted and more convenient option for consumers who are comfortable with technologyand looking to cut out thehassle of hotels or travel intricacies. Despite early controversy, they built a loyal customer base
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and modified their business model toaccommodate safety concerns and bumps along the way. An interesting aspect of Airbnb is how applicable the two-sided platform can be in multiple industries. These companies are all similar in the sense that they don't follow a normal business model and in the long run, this contributes to lowering their bottom line. The article explains
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