Once upon a time, long long ago, eBay had a feedback system which worked. It was flawed in that it could be, (and sometimes was) abused by sellers who used automated systems, but overall it was a two-way (def. #2) frame of reference which enabled both buyer and seller to gauge (def. #2) the character of the person they were contemplating doing business with.
Under CEO John Donahoe eBay has ‘improved’ the feedback experience to the point that buyers are expected to perform the equivalent of completing a marketing survey for each purchase. Surprise! Most of them don’t bother any more, but you can bet your reputation an unhappy customer will jump through all the hoops to leave bad feedback, and enjoy the experience, that is human nature.
There is no mechanism for eBay sellers to leave feedback for eBay, other than to leave. Cheerleaders aren’t cheering or even very cheery about eBay these days. Seller disillusionment and glitches are probably the second highest growth factor on eBay, advertising being the highest.
Folk wisdom says a happy customer will tell three friends but an unhappy one will tell ten. In today’s internet society that unhappy customer is more likely to tell hundreds if not thousands.
Connections, Harvard, Bain & Co and the Old School Tie
Meg Whitman, graduate of Harvard Business School, worked for Bain & Co., a consulting firm, as a senior Vice President before moving on to other challenges. Her chosen successor John Donahoe went to Bain straight out of Stanford and became a partner in 1992. President of eBay Marketplaces in February 2005 was his second job. He tells the story.
“Meg rang me. She needed a successor. She said ‘everyone is rich and tired’. They knew they needed to make a transition. I just fell in love with the values of the company.”
Other HBS graduates high up in eBay management include Lorrie Norrington and former senior vice president of eBay North America and Global Product Stephanie Tilenius, now at Google. Bill Cobb who was passed over in favor of Donahoe has no connection with Harvard or Bain.
Fred Reichheld is also a Harvard graduate & past Bain director, thus passing the old school tie presumptive credibility check for eBay. Reichheld wrote “The Ultimate Question: Driving Good Profits and True Growth” published by Harvard Business School (HBS) Press in 2006 which touted his (disputed) Net Promoter Score theory. Quoting from the publisher’s promotional text,
“CEOs regularly announce ambitious growth targets, then fail to achieve them. The reason? Their growing addiction to bad profits. These corporate steroids boost short-term earnings but alienate customers. They undermine growth by creating legions of detractors–customers who complain loudly about the company and switch to competitors at the earliest opportunity.”
Oh exquisite irony! eBay has been dedicated to ‘bad profits’ for years, viz. Meg Whitman’s lever pulling quarter to quarter management system. Did nobody notice?
Other marketing experts say that Net Promoter scores are seriously flawed using phrases like “… poison management practices and affect the bottom line”. For example in Loyalty Myths: Hyped Strategies That Will Put You Out of Business (see the ‘I am reading’ link in the right navigation bar)
“… the concept of net promoters is a bad idea that would not likely have seen the light of day had it not come from such a respected individual.”
A further quote from the same book, (bold-ing is mine):
“The difficult truth regarding customer loyalty is that how it links to growth and profitability is far more complex than we have been led to believe. An improperly directed program can result in keeping the wrong customers and ironically deflating an organization’s profitability. A blind pursuit of customer loyalty is at best a case of misallocated resources. But at worst it is a recipe for financial disaster.“
eBay CEO John Donahoe is a great believer in Fred Reichheld’s Net Promoter Score system referring to ‘net promoter’ more than once in his introduction to the analyst call for Q1-10. The entire NPS theory is predicated (def. #2a) on one single question “How likely is it that you would recommend _____ to a friend or colleague?”
For an eBay buyer this is on the level of asking a business rival to share their merchandise sources. I am sure as heck not going to tell you where I buy my good stuff!
Auntie May, (who did not attend Harvard Business School and has no association with Bain) says “Only a foolish man builds his house on sand.”
Has John Donahoe rebuilt eBay on sand? Or, is he just trying to remodel Meg Whitman’s work using the same defective foundation?
On the Street
Wall Street that is. The second financial quarter ends June 30th. eBay will announce results July 21st. Today eBay shares closed at $19.69, after dipping to $19.54 the share price reflects an 11% decline for the year.
On CNBC’s Options Action Carter Worth of Oppenheimer said eBay’s 150-day moving average has turned down, and the stock has gaps and drops. “eBay’s relative strength is a disaster. It is under performing retailers, tech and the market.” Mike Khouw of Cantor Fitzgerald added that the only area of real growth for EBAY is its advertising business, and this segment is not EBAY’s core business.
Jeetil Patel of Deutsche Bank repeats his Sell rating on the stock, trimming his target to $16, from $18. “We remain sellers of shares of eBay, as a combination of U.S. dollar strength, weak U.S. sales activity and discontinuation of the Microsoft Bing Cash Back program, which drove extra traffic to the site, will likely result in lowered earnings guidance for 2010,” he writes.
In the Marketplace
A quote from Scot Wingo, who, as CEO of ChannelAdvisor is uniquely better placed for access to raw data than any non eBay observer of the marketplace.
“eBay declined in May to -4% y/y vs. April which was flat at 0%.”
It is important to note that Scot is comparing CA seller’s data on eBay for April and May 2009; which was arguably the weakest year in eCommerce to date; to the same months in 2010, not to eBay as a whole.
I anticipate Q2-10 results with interest! Given eBay’s historical confusion as to who their customers are, (as opposed to the buyers who visit the site) I wonder if eBay are blindly pursuing and measuring loyalties of the wrong group of users. What do you think?
Y’all come back!
GigaOm.com :: eBay’s Crossroads: Turn Around or Break Up, Kevin Kelleher June 26th 2010
AuctionBytes.com :: eBay Survey Measures Perceptions about Top Rated Sellers, Ina Steiner June 28th 2010