PayPal Merchant Services (Final version)

Q1

One can see PayPal’s early success from 3 different angles:

1. The entry time: As the transaction quantity and amount of e-tailing increased during early Y2K (year two thousand), incumbent methods of money transferring (checks and money orders; even eBay was fuelled by payments made by regular land mail) were being outdated. Whoever introduced secure, fast, easy funds exchange model on the internet was going to hit the jackpot big time. Although there were some participants in the internet money transfer sector, trouble was that people did not trust these payment systems because they were new and were flawed because they were not trusted as real currencies. PayPal had a few vital differences: 1. It used the dollar as its medium of exchange, rather than trying to create a new currency for online payments, 2. It used email for faster, less troublesome communications; and 3.It used the existing bank networks for making the payment, guaranteeing less fraud, more safety.

2. The viral or network effect of PayPal: As you gain new user, each user becomes a viral marketer for PayPal. To increase their customer base, PayPal began aggressively marketing the firm through special promotions, such as offering $10 to new sign-ups for PayPal accounts. The result was that PayPal surged from just 12,000 accounts in January 2000 to over 2.7 million by August 2000.

3. Minimization of the cost of transactions and authentication: They paid close attention and to the existing credit, debit card payment system and found out a meticulous way of keeping transaction cost to the minimal point. On the other hand, they enabled smaller scale merchants to accept credit card payments made from buyers to the merchants’ accounts through PayPal system. Buyers, on the other hand, were relatively safe to do business online owing to the fact that PayPal payments didn’t show private information (card number, credit history…) to merchants. The bonds created between buyers and PayPal, sellers and PayPal ultimately meant the ever increasing online purchases.

There are more reasons as following: First, PayPal discover the needs before competitors came in the market. First-mover takes all at that time. Second, PayPal seized the appropriate entry time. Not too fast or too slow. If PayPal entered the market too early, people probably not used to purchase online; and if it came in too slow, there might be several company competed for the market. Third, PayPal provided easy access and a safe payment method then. That was important when starting a new online business which builds trust with customers. This is three factors that PayPal made early successes.

This was also attractive for the small businesses or even individuals who can not use credit cards . Moreover than this PayPal offered for the auction sellers a better service for receiving the payments. (a quicker and convenient service by which the sellers do not have to wait before they ship the goods)So basically the reason for Pay Pal costumer-centered business model, which was developed to focus on any consumer problem or need to make their life easier .

Q2

70% of all e-commerce is initiated through web search, and Google is the largest search engine. What’s more, as Google is targeting customers through keyword advertising, content network advertising (needless to mention that YouTube and other most visited sites on the internet are of Google’s). Google has strengths for so many reasons: like the brand, service quality, the potential of users, search engine advantage and of course the technical experience and excellence. Google can offer all these service for free of charge and by the time they can be charged through advertisements. Or maybe they can charge the costumers as soon as they can sell their products through Google. This will be the efficient way for both Google and the online sellers. Because it is clear that besides earning money and increasing revenue the main competition is for the number of costumers which is an important factor to generate revenue from advertisements.

For Google to succeed, it should first acquire large enough customer base that use Google IDs. Although Google search engine is the most used engine, e-mail accounts base is not one of its core competencies. The current 2% of the sales amount and 20 cents on each transaction is a bit more expensive than that of PayPal’s, but compared to direct credit card sales, that is cheap. Google has three aspects as follows: Firstly, Google has much more resources to support the service. Those resources not only tangible, such as technical support and staffing but also intangible, like brand name effect. As a household brand name, people trust Google and it could alleviate the feeling of uncertainty when approaching its new services. Secondly, those who had Google’s account might get more easy access to its payment service. Most of people in the world have Google’s account or at least YouTube one. This will accelerate the growth of users and will be more likely to get in touch with its payment service. Thirdly, Google’s payment service is free to buyers and it costs less to sellers. The pricing creates more bargaining power comparing to PayPal.

The only way for PayPal to stay on the same business would be increase the amount on sites that allow PayPal transactions. Already they have expanded through different modes of transactions – mobile… If that doesn’t work, perhaps it is time for PayPal to invest in new technology, rather than in new business. They might work on RFID + online payment model. Cell-phones fitted with RFID chips are increasing in number. Why can’t PayPal come up with a system that combines the internet payment with daily cash payments? That way, PayPal might become the universal currency of tomorrow.

Mary Kay Case Final Writeup

Q1. Was embarking on a totally new, unproven strategy the answer, or should the company stick to what had always worked in the past?

It is obvious that Mary Kay has to do something to not only catch up with competitors, but to address its internal challenges. Installing a greater IT structure is the first step which needs to be met before it can improve any part of the business. Embarking in a totally new business strategy of e-commerce wouldn’t align with Mary Kay’s Golden Rule philosophy or direct selling business model. On the other hand, with the demographic changes, the company has to find the best way to offer efficiency and convenience for consultants. Given the fact that consumers of cosmetics are well educated and informed about health/beauty products, active involvement and close interaction with existing and potential customers is crucial for Mary Kay. This is the attribute of Mary Kay’s sales method, network marketing organization (NMO). For Mary Kay, besides the products, its sales force is the main business driver and key component of its success. Mary Kay’s pricing strategy is of great importance. Although switching to internet based sales will enable the company to vertically integrate the value chain, hence maximize efficiency, and increase sales revenue, but doing so will have cannibalization effect on consultants’ businesses.

Although the executives in the company believe it’s not easy to adapt consultants to technology (due to generation gaps) on pg9, at the end of the first paragraph, it says: “sales force was finding the new technology valuable.” We think once the consultants feel the value of technology, they will most likely adopt it. If company sales and revenue increase with complementing the internet and direct contact, consultants due to their gain, as well, will push themselves to adapt to new technology. By saying this, we don’t imply online sales but rather online communication and relationship building. So we think the company should stick to its business model but with a few developments.

Q2. What approach should it pursue?

The demographic change of customers has already been projected as a declining sales figure of Mary Kay. Technological "laggardness" (phone, mail based order, non-relational database) combined with new-generation female salespeople have produced increasing back-orders, unmet sales orders, inaccurate forecast, inefficient inventory control, decreasing retention rate. Mary Kay should develop their operation quality by investing more in IT. In a postmodernist era where people are trying to keep in touch with other people for socialization, it is strength to keep in direct contact with customers. Considering the emerging problems and socialization era, we believe Mary Kay needs to combine their direct sales method with e-commerce.

Management of the company should refer to e-commerce as a leverage point, or a booster for independent consultants. Since maintaining healthy relationship with sales force is so vital for the existence of the whole organization, Mary Kay should direct sales leads generated online to independent consultants. General information of new arrivals, new research results, company history, membership procedures should be put on the main website. Orders will be made, and recorded online. This coupled with relational database management will enable the company to accurately forecast demand, better plan production, precisely control inventory, decrease stock out and back-order, increase transaction efficiency/customer satisfaction, and reinvigorate sales figures.

Direct selling will still be an option for those who choose it but we will also have a blog for customers and consultants to stay connected. The blog in addition to the current consultant’s web-pages will provide a way for consultants to keep in touch and obtain feedback. To better monitor demand, consultants’ websites should be connected to Mary Kay’s mainframe. If consultants receive sales leads from the main website, then the company can charge a miniature percentage off the sales. Above all, there is a way for Mary Kay to overcome its current challenges and at the same time continue to meet its current consultants and customers’ needs. They should keep their business model but can add in e-commerce and adapt themselves to the current changes in society. (since the company’s goal in the very beginning was to increase the quality of the lives so they should stick to this idea)

MySpace Case Review

Question 1 Does Facebook pose a substantial threat to MySpace?

Facebook has been posing threat on MySpace from the first day it entered the competition battleground of social networking. Although MySpace founded a year earlier than Facebook but lack of innovation makes it change from a market leader to a market follower for several reasons. Although MySpace users have reached to almost 100 million users worldwide, but only 45% of the IDs are reported active within a month. Besides this the unique visitor s number of Facebook is incrsing steadily since it has launched as we can see from the graph :( “Unique visitor” is a metric to measure no matter how many times people visit a site in a given month that only count once.)

Facebook differentiate itself from Myspace for several aspects which caused this severe threat to Myspace. For one Facebook provides more security and privacy for user’s personal information. An employee of Facebooks security team said, “if we get a report of a bug or a hole from a user, a security researcher, a reporter, blogger, or anyone, we check it out and fix it as quickly as possible.” Facebook allows members to restrict who they want to have access to their profile. MySpace has put itself in risking situations by not restricting access to profiles. Moreover than that , the filtering process of adults from teenagers is weak, which has lead to several incidences of sex-maniacs' attack on youngsters.
Since Facebook has a good at filtering the users ‘the quality of the web site also built up successfully which attracted many "on campus" (the most creative and active demographics on the internet in terms of content creativity and speed)students who had access to the internet. Parents of those cyber bully victims favored to facebook as it is the role model accumulation of schools they would like to send their kids to. Facebook guaranteed their user identity by adding features like identifying a person on photos spread over different profile photo folders.
Unlike MySpace, facebook uses easily recognizable, "eye friendly", standard profile layout without customization option of the profile cosmetics. This is also related to quality of the web site as well as the web site users. MySpace attracted youngsters through the ability of high customization of the profile interface. Since facebook was in business of more "mature" social gathering, google like interface attracted majority of the internet surfers. However although Facebook sound like to be ordinary, the team of management come over this problem through attractive applications written by those who are interested in software development, but lack large audience with standard platform for the application to be tested. On the other hand, MySpace needs to find a way to compete with Facebooks Platform that has introduced thousands of different applications. Since launching its application platform, Facebook attention has grown over 50%.
To sum up; Facebook deserve where it’s today for several reasons mentioned above and furthermore : easy entry, exit, all you can eat application revenue generation through ads, sponsorships, or even selling merchandise, quick response rate, feedbacks enabled by up to date metrics by facebook attracted more and more developers. As a result of all these basis on April 19, 2008, Facebook overtook MySpace as a social networking site leader. And Facebook now ranks number five, being ahead of MySpace, which ranks number six. Overall, Facebook not only pose threats to MySpace but successfully overpass.

Question 2. Should MySpace join operations or invest in its own developer platform?

It is obvious that Myspace has to find a way to reserve its current status and quantities’ data. Although join Google’s developer platform, OpenSocial, may bring more traffic and match Facebook functions quickly without investing in more resources, as it is mentioned in the case that developing its own proprietary software platform would enable MySpace to differentiate itself from competing websites like Hi5, Friendster. If MySpace launches its own developer platform it can control all the operations to be launched in a timely way and to directly obtain profits. With its own platform MySpace could also apply its own unique strategy and continue updating and adding additional value to its users.So Myspace can accelerate it s popularity and quality by new services, only by those who offer completely different value creation, and proposition on social networking.As an update in February 2008 MySpace launched a developer platform utilizing OpenSocial and opened up its platform to third-party application developers.

Mid-Term project - Google AdWords

Client Overview:
Client Profile:
http://snowfactory.pixnet.net/blog; http://liyihui.myweb.hinet.net/newstore2.html; Yahoo.tw bid ID: snowfactory100

Snow Factory is a homemade yogurt producer located in downtown Taipei, Taiwan. It was founded in July 2007 by Li Yi-Hui and Su Li-Wen with joint investment of 300,000NT$. Three employees, including the founders, make hand-made yogurt and chewable fruit jam in a working environment much like one’s home. The inspiration of the business came from Li Yi-Hui’s participation in a yoga class taught by an Indian instructor. According to Su: “I couldn’t find a home made, chemical free, not sour yogurt in my local market, so I decided to make one for myself”. Snow factory offers both on/offline purchases. Online marketing and promotion are done through bid.yahoo.tw, personal blog of Li Yi-Hui’s, and a webpage on hinet.net. At the moment, Snow Factory is not using Google AdWords. Their on/offline combined monthly sales revenue averages around 400,000NT$.

Marketing Analysis:
Product, Price
Snow Factory defines its core product as “scoopable”, least sour, artificial chemical free yogurt. The company ensures quality in their products by not using milk powder and artificial additives. Taiwan’s most famous milk brand-Lin Feng Ying’s full-fat, pure cow milk is chosen as the main ingredient. The product is packaged in 168+-5% gram cups and placed in a dozen cup boxes. Each 168g cup of Snow Factory yogurt is priced at 36NT$. To add more flavors to the original taste of sugar-free yogurt, Snow Factory made chewable jams (with fruit flesh) of several flavors (Da Hu strawberry, apple, Tao Yuan mulberry, mango, papaya, litchi-honey, apple + passion fruit, pineapple) are offered. A cup of yogurt with a scoop of home-made jam is 45NT$.
Place, Promotion
Considering the size and scope of the organization, Snow Factory doesn’t offer shop display sales, and takes advantage of “free” marketing channels to promote its product. W.O.M is spread around through social-networking tools like famous local blogs. Yahoo bidding is chosen over other channels due to its reach on the local market. The main webpage is placed on webspace provided by hinet.net. Transaction is made through ATM transfer and land parcel delivery. Customers can receive the yogurt in person at Taipei Gu-Ting MRT station with prior contact.
Competition
We define Snow Factory’s industry as “fresh” food - dessert industry. Under this broad classification, all dessert and yogurt producers, Uni-President being the largest, would be its competitors, but Snow Factory is serving a niche market of home-made yogurt. At the moment, the competitors of the niche are Granny Sara, Osiana, Asenka, and Yoplait. They all make spoonable, home-made yogurt of different taste and package offered in-store. Considering the number of competitors, and their respective market share, this home-made yogurt niche has large segment to be conquered by the incumbents and new entrants, hence the market is competitive, and it is in its early majority position of the S-Curve.

Customers
According to the managers, the original target customers were 20-30 year old, health conscious office females, but along the journey, they observed that mid-age house wives were the largest buyers, and young teenagers through their mothers’ recommendations. We believe that the potential customers will still remain to be adult females, and teenagers, because men who don’t like sour are very common in Taiwan. Among the potential customers, environmentalists (one can get 10NT$ refund on reuse of a Snow Factory yogurt box), vegetarians, alternative therapy supporters (yogurt helps digestion), naturalists (the yogurt can be used as a natural skin whitener) might make up majority of the target segment.

Current Marketing:
Snow Factory’s main online content, all in Traditional Chinese, is placed on Li Yi Hui’s personal blog, a single web-page on hinet’s myweb, and on yahoo bidding platform. The whole information about the business inspiration, the product, complementary fruit jams, links to customers’ comments on different blogs, news reports about the business, product pricing, ordering method, preservation and use of the product are knitted on a single page.
One should download an order form (.xl file), fill it, and send it back to the company’s e-mail address along with money transfer over ATMs. Besides internet communication, telephone orders, fax orders are also acceptable. It's been noted that most of the repeat buyers were 30 years of age, economically stable, married females, who relied less on internet to buy yogurt. Hence, unless Snow Factory offer special and unique content that not only adds to the original value proposed, but also requires only internet to be access, offline promotion and sales seem to be generating most of the profit.

An online marketing for such a young company should focus both on increasing brand awareness and ROI. Snow Factory’s same information is scattered around several platforms (BBS, blogs, its webpage on hinet). From a strategic point of view, information with same images, similar slogans, long web-pages with ordering information on the lower part might serve as solid brand awareness builder, but it may come at higher risk of pushing away customers due to dullness, or “overcrowdedness” of information. We believe that Snow Factory’s web-page contains too much information on a single page (too many words). One should look over everything before reaching the ordering section. Also, payments are made over ATM transfers; hence it is difficult to measure sales dollars made “online”. On the other hand, the page contains several sections that tell the quality certification, comparison of the product to incumbents on several factors, refrigeration, different uses of yogurt, and clear photos of the product with whitish tone that have artistic, sanitary feel to it. Should Snow Factory change their webpage, we have already thought of several key measures to be addressed on the new site.
Incumbents of the niche mentioned above use local celebrities to endorse their products to the mass, but Snow Factory hasn’t engaged in any “real” advertisement campaigns yet. Their brand awareness has been established through PR. The page has several links to news reports about Snow Factory. Bloggers serve as the most effective, free advertisers for their product.
Because Snow Factory is mentioned on so many blogs, only the two Chinese characters for Snow Factory typed on Google search engine brings about 210,000 web results.

Conclusion
Our goal in this project is to increase sales dollars through more sales leads sent from Google AdWords. The timing of the project has aligned with a recent incidence of poisonous (tainted, melamine) milk powder sent all over Asia from mainland China, which pushed lots of customers away from dairy products in Taiwan. We will turn this threat into an opportunity by emphasizing the use of Taiwan produced pure cow milk, and all hand-made complementary jams. Also, as December approaches, we will utilize the name of the brand – “Snow” Factory in ads related with seasonal themes such as winter, snow, Christmas… In Taiwan, the top three portal sites are Yahoo.tw, Wretch.com, and Google.tw. Studies show that when Taiwanese people search for information on Google, they refer to the search results with informatory, academic, news report seeking mindsets that automatically block advertisements shown around the organic result. Ad agencies believe that banner ads work better than keyword text ads. Therefore, in order to attract more potential customers to the site, we will not only use keywords, but content network tied with most visited Taiwan sites (YouTube, Wretch…). Since customers refer to Google as a serious (academic) search engine, so we’ll focus on the “news worthiness” of our text messages.

Proposed AdWords Strategy
The ad copies will be written in Chinese, but will be connected with few English keywords to increase impressions. Because Snow Factory doesn’t own a store display, hence Geo-targeting ads coupled with Google Maps will not work.
Considering the current trend of the business, the target audience is still all females, and those health conscious males who don’t mind a little sourness in yogurt. The coverage area is all Taiwan.
So far we have come up with 3 ad groups. The corresponding themes are: Winter/Christmas, Beauty/Health, New business/Entrepreneurship. The three text ads with their corresponding keywords are as follows:
1. 雪坊優格　冬季最美的甜點
　　100%林鳳營鮮乳製造雪白優格，搭配繽
　　紛的天然果醬，最時尚的聖誕禮物。
(Keywords: 布丁, 甜食, 下午茶, 聖誕節, 冬天, 冬季, 雪, 爬山, 鮮奶, 鮮乳, 甜點, 果醬, 天然, 時尚, 禮物, 優格, 優酪乳, 奶酪, 乳製品, 林鳳營, 果粒, 果肉,Christmas, x-mas, winter, )
2. 雪坊優格　時尚美容聖品
　　純手工優格，100%天然食材，僅市售1/2
　　的卡路里，享瘦同時，美麗加分。
(Keywords: 手工, 天然, 食材, 卡路里, 熱量, 瘦身, 瑜珈, 美容, 美白, 曬黑, 肌膚, 減肥, 發酵, 代餐, 消化, 零食, 美女, 鮮奶, 鮮乳, 莎拉奶奶, 植物的優, 林志玲, 楊丞琳, 優沛蕾, 大滿足, 才不會忘記你呢, Christmas, x-mas, winter, )
3. 雪坊優格　研究生創業夢想
　　三位台大商研所學生，製作香滑細緻的優
　　格，一同來感受細心與耐心的創業故事。
(Keywords: 商研所, 台大, 台灣大學, EMBA, 大學生了沒, 大學生, 研究生, 蘇立文, 黎懿慧, 周慶麟, 創業, 創新, 微型企業, 創意, 中小企業, 白手起家, 政大法律系, 故事, 感人, Made in Taiwan, Taiwan)
Negative Matches: 鬼, 吃到飽, 樹, 公公, 聖誕帽, 舞會, A片, 肥皂, 資源, 石材,
Although Wretch, the second most visited site in Taiwan, is not listed among Google content network list, but based on our budget performance, we’ll use content network from time to time.
Our three week 2000NTD budget will be distributed as 650NTD, 350NTD, and 1000NTD respectively. After checking each keyword on keywords ideas by Google, we have found out that the keywords we have selected cost around 2NTD per click (dieting, and loosing-weight are around 15NTD). Daily budget will be allocated as 2/3 of the weekly budget over Monday to Friday, and remaining 1/3 over Saturday and Sunday.
Our goal is to increase Snow Factory’s sales and brand awareness by burning all of the 2000NTD over the whole project period. Considering average CPC as 2,5NTD, our projected clicks are 800 clicks. Projected impression is around one million eyeballs.
Keyword advertising is a trial-and-error business. Therefore, we’ll adjust our bidding, and budget maximum daily to filter out the most suitable keywords for the most suitable time.
Because, Snow Factory’s online contents do not offer direct sales online (online credit card payment e.g. PayPal), it is difficult to measure more conversion rate accurately. We’ll take each download (click on .xl file) of the order form of Snow Factory as real buyer, and each clicker on our ad as potential customer.

Dove Case Review

Question 1.) “For too long, beauty has been defined by narrow, stifling stereotypes,” said Dove’s Campaign for Real Beauty website. “Women have told us it’s time to change all that. Dove agrees. We believe real beauty comes in many shapes, sizes and ages.” Before Dove’s campaign, people get tired of seeing the sexual icons, model type pictures of women bedecked the posters, billboards, TV ads and etc. However Dove brought a new understanding of ‘self-esteem’ and made a revolutionary act to change the concept of “real beauty” by using real Women’ rather than the models. Dove clearly has done this well. Some perceive the campaign as giving everyone the ability to “feel beautiful” and that by buying Dove products, you too can reach your full potential. Women agree about moving away from the stereotypes of women. With its advertising through YouTube and many other blogs, fierce debates and discussion about the issue were in formation. In the very early stages of the campaign” Dove Marketing director for US Kathy O’Brien, told the press that the company wanted the ads to : change the way society views beauty and provoke discussion and debate about real beauty” And this is what exactly Dove did with the “Real Beauty Campaign”
Obviously Dove's new campaign has caught people's attention and did a good job for “brand awareness” It's been mentioned over several prestigious shows including: Jay Leno's late night show, Oprah Winfrey made a show on self-esteem, Ellen Degeneres loved the idea of real women beauty, and news casters reported continuously. After reading several blogs to have an idea about the viewpoint of bloggers about Dove campaign, the results are highly convoluted. Some bloggers support the idea of Real Beauty and have the similar feelings of inner beauty-or natural beauty- while some have found it not really REAL, and highlighted various kinds of controversies under different titles.About the Real Beauty Campaign by Dove, it has become evident that women are touched in "some" level that they identify themselves to one of the 6 ladies on Dove's ad boards. Some sites note that the new campaign's response rate surpassed 700%. There are blog posts about how to help girls have higher self-esteems. Mother’s are posting about how to teach their daughters that they are beautiful. Quite a few women are happy with the Real Beauty Campaign. One blogger posted “Its not perfect, but its a good step in the right direction. No one other mainstream beauty business has done more to expose the dangerous misrepresentation of women in the media.”Another quote from a blogger: “This ad is very real. They're not doing anything special to try and sell you. They're actually taking a very large part in raising awareness that every woman is beautiful, as well as to teach young girls that they don't need to idolize, or compare themselves to airbrushed models on TV.”
Utilizing the internet, Dove's management really got the hold of global attention on female beauty issue. To reach women on the personal level they launched several programs through their funds site.
But besides all the successful entry and sales of Dove mainly attributed to the new campaign, several blogs have mentioned some of the campaign's flaws. Moreover than that some other negative comments about the campaign and some of the ads were also posted . One said the photos of said to be “normal” women are still photo edited to create a type of beauty. Others say they don’t like seeing fat pictures of women and they wonder if it will diminish dreams for beauty.
Question 2.)
Compared to what and how mainstream media worked, the mainstream media of today is not as fragmented as it was. With the invention of Web 2.0, the ever increasing internet users creating and consuming information. What they say matters to the sales of a new product. Businesses of the 20th century rooted for repeat purchasers, but with global reach of the internet access, one time successful promotion to only a half of internet users can make one a millionaire. No matter are online advertising or a traditional ads, customers are smarter and become skeptical to judge an ads. Dove is highly aware of the situation and used the new tools of marketing. Dove's new marketing campaign has been successful due to the velocity with help of internet users, bloggers and tubers (YouTube users) to be specific. The background of the campaign was directed by several researches, interviews, surveys, psychiatrists’ consultations, and conversation with women. etc. (Exhibit 4) so what Dove do is involving the costumers ideas to the campaign directly. Right along with all, Dove organized a contest for the consumers to create their own ads. By doing this they keep the costumers (“real” women)/audience incorporated to the campaign. For the new way of marketing the consumers are not passive anymore. They were totally inside the campaign by blogs, forums, or other social network websites mainly by word of mouth, by a “cheap and fast “way of advertisement. However it is clear that this cheap way of advertisement is not easy to control anymore by Dove. The risk of consumers not being inspired by a brand that doesn’t lead to a new level of attractiveness doesn’t relate to Dove. The campaign which is a type of advertising for Dove products does create a new level of attractiveness. The new attractiveness is individual beauty.
Obviously Dove s marketing strategy is processing well by just looking at the numbers given in the case: “In September 2006 Landor associates identified Dove as one of the 10 brads with the greatest percentage gain in brand health and the business value in the past 3 years. It computed that the brand had grown by $1.2 billion.” Although it is not clarified whether the campaign has worked or not (if we take into consideration that the campaign started in early 2000s) there should be the campaign’s effect on this growth. Dove still advertises for its products and they have an image of creating pure, clean beauty. Since the ads and campaigns have a very clear message we don’t think there is a risk for Dove.

Microsoft adCenter case summary (Shelley's)

1) You are Doug Stotland. What approach (or approaches) do you favor? Why?

Due to Microsoft’s late arrival to search engine advertising, it faced a fierce competition among other search engines, especially Google, which already builds up the relationship between advertisers and thus brings more and more internet traffic. It was not easy to serve as a profitable platform if advertisers don’t come and as a new comer, it would be much more difficult for Microsoft to surpass Google to be a leader in online advertising. Therefore, the challenge Microsoft confronted was recruiting advertisers and publishers as many as possible at the same time.

To evaluate the strategic options, Microsoft firstly has to recognize itself as number one software company in the world. They have a strongest team of technical experts and are skilled at marketing so that the general public has a strong awareness toward their brand name. If I were Doug Stotland, I would choose to adopt three following approaches: recruiting premium publishers to show contextual ads, leveraging other Microsoft services and differentiation.

Firstly, recruiting premium publishers gives more opportunities for Microsoft to access large amounts of visitors. To maintain its brand image, it would be more appropriate to select those publishers consistent with Microsoft’s culture and thus control quality. No matter what types of content that publishers focuses on, it would be easier for Microsoft to execute a quality control as well as differentiate themselves, comparing to the services that recruiting small publishers as Google and Yahoo had already provided. Secondly, lots of people in the world use MSN as a platform to communicate so that Microsoft could use its own strength to leverage its services. As the top seller of display advertising, Microsoft could provide some benefit for display advertisers also advertise on online pages. (Figure: Worldwide instant messenger users)

An estimate users of instant messenger:
˙AOL: 53 million
˙MSN: 27 million
˙Yahoo: 22 million
˙Google: 866,000


2) Suppose Microsoft goes forward with the deal with Digg. Where will adCenter be in 12 months?

What Doug Stotland concerned was Digg traffic was not enough for adCenter as a newcomer in online ad market. Obviously, if Microsoft had to sign up with premium publishers, the quantity of traffic that publishers offer did matter. However, the reasons why Microsoft wins the software competition are not only because they are good at marketing but also they require the advantage of technological expertise. Therefore, to cooperate with publishers in similar background would help Microsoft developing and strengthening the relationship with those advertisers. In an initial stage, cooperation with Digg.com would be a conservative step but would still bring profit to Microsoft.

Furthermore, if Doug Stotland decided to take those three approaches: recruiting premium publishers, leveraging other services and differentiation, Microsoft had better signed with Digg.com as a new partner to sell and serve the ads. On Digg’s side, they would be glad to cooperate with such large organization to reach a win-win situation.

MedNet.com Case Review

1.) If Internet media is so measurable, how can Heather Yates and Bill Bishop be in such a predicament?

Yes, internet media is measurable but there are some parts (like reliability of the site, the perception of the web site visitors… and so on) that are not. Mednet's predicted ad success is measured through qualitative rather than quantitative ways. Due to the type of online company they are, they rely on Click-per-thousand impression (CPM). Mednet's user trusted website (reliable content, free scientifically based articles, evidence- based, and consumer health information) attracts committed customers. Competitors like Marvel have more of a general interest website, in which it justifies measuring profits by click through rate (CTR). Mednet's predicament was that they had to prove to Baker what they were offering, although not quantitatively strong, would produce higher profits through serious customers. Since Mednet fully relied on advertisements for profits, they had to convince advertising companies that their business model would provide very competitive sales over the long run.

2.) What does an advertiser want? Sales, leads, brand awareness? What are the best metrics for measuring these?

It depends on what is more important for an advertiser, cheaper click-throughs or good sales leads that bring real sales dollars. Advertisement is a way of leaving impression in customer’s minds (brand awareness), which hopefully will result in lucrative and repetitive leads and increasing sales revenue. Leads are created through brand awareness. But what good is a lead (click throughs) if it doesn’t land a solid sales figure? As we saw in the case, Windham wanted to be charged by CTR, thinking this was the way to measure potential visitors ready to make an order. Yates proved to Windham that impressions bring in revenue over the long run, and this type of brand awareness is what they want. Ultimately advertisers want the conversion of ad-dollars to sales figures, which is the act of making purchase, repetitive if possible, from the ad-sponsor. They also want their customers to market the company through word-of-mouth and social networking.

Finding the best metrics for advertisers should be according to different needs of companies:

A) CPM (click-per-thousand impression)
For products or companies that are newcomers in perspectives of customers are suitable to use CPM if they put raising brand awareness as their first priority.

B) CTR (click-through rate)
If an advertising banner was delivered 1000 times and only 10 people clicked on it, then the CTR is 1 percent. However, this metric would be incorrect if “click fraud” happened or if one person clicked on the same advertisement ten times.

C) PPC (pay-per-click)
PPC is commonly used nowadays on search engines, blogs, social network or some specific web pages. Aside from traditional banner ads, keyword advertising makes it easier and accurate to reach the target customers. Although it still may cause “click fraud,” PPC is the best metric for advertisers with tight budget

3.) What specific consumer behaviors determine whether or not a business model produces the results an advertiser wants?

Since there are different consumer behaviors depending on the business model we will discuss the 3 companies from the case.

A) MedNet.com:
If Mednet's business model is of targeting the "in crisis" customers then number of site visitors/sales should, if profitable, be an attractive result of customer behavior.
Another wanted behavior is Mednet customers spending more time browsing through medical information to deal with health problems. Once they visit MedNet, they click around the advertisements to find a better solution (tips as well as medicine). As Yates said: “our audience is attracted to your products, and we have reason to believe that our advertising partnership adds to your bottom line” (pg;6) We look for attractive customer feelings, of ones who are stimulated psychologically and ready to buy the products.

B) Marvel:
Initially, they wanted customers to search on subjects related to health and be led to a site that could advertise a specific drug. These search engines serve as a starting point for visitors to browse through general health-keeping information. Due to vast audience and free impressions offering to advertisers, Marvel got more click-throughs and posed a threat toward MedNet.

C) Cholesterol.com:
Cholesterol.com provided deeper health information which targeted at remedies for cholesterol problems only. Visitors could store their data and reviews; this behavior is attractive because it could eventually lead to customers marketing a company’s drug. If customers are discussing cholesterol issues online they probably also discuss it among personal contacts. The single focused business model as well as its focus on education has created these customer behaviors.

They obviously really want consumers to purchase an item after clicking on the advertisement. They also want consumers to recommend their product to friends and family. They want customers to market the quality and satisfaction to others.

4.) What steps can MedNet take to address emerging competitive threats?

Although content acquisition makes up 34% of total expense, MedNet should still focus on enriching its contents on alternative therapies, and scientifically based solutions with legal disclaimers. (To compete with U.S. National Library of Medicine and WHO)

Technology support is 12% of the expense. They should focus on changing the looks of the site. According to the case, viewers are divided into Western-Med based (chemical ingredients) and Alternative Health (organic, natural ingredients) based. MedNet can create two versions of the site (like AMD and ATi website) under the same URL for both customer bases. They should provide herbal medicine therapies, its related news and findings, and information for the original customers as well in easy to view and navigate way.

User friendliness and customer incentives are important factors as well. Although the survey revealed that 60% of viewers aren’t in favor of leaving personal information on the site, but the function of a “disposable” entry like blood pressure, body weight information that follows the user during the search will be seen as convenience. What’s more, as long as it doesn’t severely violate any related regulations, recommending suitable treatment would also mean another “user-friendliness”. They could offer memberships which would offer discounts, enlarged article accessibility and personal profile and feedback service.

Last, sales and marketing expense stands for 27% of the total expenses. They should look for alternative income methods. Besides selling contents, MedNet, by designing seamless framework, can sell doctor’s prescription and necessary drugs for the prescription (NTU Hospital website lets patients to fill out a survey like sheet and diagnose one’s health condition). MedNet could also offer lower-cost medical information service for companies. With their strong business network, MedNet should come up with pharmaceutical suppliers and medical doctors for those companies at cheaper price.

In the long run, MedNet should project for becoming global online pharmacy with solid information that sells medicine like Netflix does with DVDs, and prescribes doctor’s treatment like hospitals do for patients. They should expand internationally. They should also create ties with hospitals, pharmacies, corporations and NPOs.
They have to follow the new trends of advertising
• Try to stay ahead of their competitors and always keep their eye out
• Value proposition
• Increase the content of the site (again health related) so that by enlarging the subjects they may get more advertiser opportunity
• Enlarge their network

Netflix case review

Q1. Would you buy Blockbuster stock or short it at the time of the case? How about Netflix? Why?

When deciding whether to invest in either of the movie distributors at the time when the case was written, assuming year 2007, we have summarized strengths and weaknesses of each company.

Blockbuster:

(+) It is a well known brand name, and has established a strong financial reputation that has presence in more than 30 nations around the world, including Taiwan.

­(+) It has more stores around the nation that can and are serving as distribution centers to online orders.

(+) Movie rentals are impulsive decisions, and the overall market still prefers watching newest releases.

(+) Blockbuster has been meeting customer’s needs seamlessly when bringing new releases to the market as quickly and abundantly as possible.

(+) They have better agreements with the major studios, which will help a lot on keeping cost down.

(-) On the other hand, compared to Netflix, Blockbuster acted myopically when it came to embracing new technology, such as running an interactive web site, and promoting attractive pricing systems to retain the already existing customers and recruiting new ones. So rather than being a leader, it appears as a follower company, which may be seen as a bad signal and turn off many investors.

(-) No one can be sure of which mode of ordering and delivering movies to watchers will be most appreciated in the future, but had the Netflix’s model turned out to be sound, Blockbuster’s subscription rate of 2.2 million compared to Netflix’s 6.3 million would serve as a major disappointment for investors.

Netflix

(+;-) Obviously, Netflix’s popularity among movie renters has grown to such a degree, that Harvard had to write a case about its success. Therefore “brand-image”-wise Netflix is nearly as solid as Blockbuster. But compared to Blockbuster, Netflix’s operation only covers the United States.

(+) With their creative thinking, powerful management, systematic planning and careful execution of those plans, Netflix has grown from zero to profit in a mere 5 years. Their subscription rate, along with their stock value has been growing constantly since the late 2002. (See attachment)

(+) Their approach to capturing revenue is modest yet stable, as the case mentioned “positive cash flow before growing wildly”. Therefore, investors can be assured that the company won’t go bankrupt instantly.

(+) With more than warm intra-organizational atmosphere (naming offices by employees favorite movies); strong hold of the current and future technology (well appreciated online recommendation system); innovative actions to increase customer satisfaction, Netflix would have been among our investment portfolio.

Q2. Did Netflix offer same values for consumers that Blockbuster did? How did this evolve over time?

Blockbuster offers around 2500 newest movie releases on both VHS and DVD formats through each of its ten minute drive stores located all over the U.S.

Netflix, on the other hand, recommends more than 70,000 DVD titles to its subscribers based on their interests and past movie rental behavior, and delivers to most of them overnight without late return fee and unlimited monthly rentals for $18 a month. Although most of the movie rentals are new releases, Netflix observed that many customers never had chances to watch movies older than 6 months, and not only did they wish to watch those movies, but they were interested in lesser-known movies that didn’t make it to the box-office. To live up to the standards of its rivals and offer even more than that, Netflix systematically evolved over time.

-They started offering movies based on editorial reviews, which, after considerable amount of investment, was changed to more accurate algorithm + large user database recommendation system that has been receiving subscribers’ high appreciation ever since. With Netflix’s well thought, user friendly, versatile web site, anyone with internet access can easily subscribe, or unsubscribe (management decided to offer easier un-subscription to those leaving their service = less frustration, higher satisfaction, more recruitment) and make up a movie list, usually averaging 50 titles. The movies which are made of recommendation from the website are made sure that they are in house, hence no out of stock problem.

-At first, Netflix used a traditional video store pricing model, which included late return fees, but soon they changed it into unlimited rentals, no late-return fee package.

-They slowly increased the number of their distribution centers over the nation, and worked closely with USPS on shortening delivery and return time of DVDs. They claim that 90% of their over 6 million subscribers can be reached within a single business day.

-Instead of using store based inventory, they run national inventory, which doesn’t create over or under stock of titles at different regions.

-In order to decrease content acquisition cost, and increase the number of titles available, they collaborated with Ted Sorandos, who from Video City brought many personal experiences and relationships on acquiring titles from major studios.

-They work closely with lesser-known producers to help promote them, and in return acquire more variety of contents for relatively cheap bucks.

Q3. Compare Blockbuster’s and Netflix’s profit models. How might the differences affect the respective company’s strategies?

Blockbuster’s vision on making profit from movie rentals was:

Renting out new releases rather than old, or lesser known titles, since their demand was inconsistent and maximizing the days that any individual movie was out for rent, because about 10% of their income came from late return fees. They acquired each copy of new releases for 18$ and sold their previewed releases at a discount, generating incremental return on its investment and clearing shelf space for the next wave of new movies. Each one of its more than 5000 stores had to have several copies of new releases, which eliminates the need for mail delivery to customers, but creates over stock problem after a while.

Netflix’s model starts from subscription to the system, which generates cash on hand before any rental. They use the cash to acquire movie titles from major studios based not on the number of copies but for the number viewed. Through their Red Envelope Entertainment, they acquired copyrights to lesser-known titles at lower price, and enriched their movie selections for both new releases and lesser-known releases. Thanks to their national inventory system, no shelf space problem hinders their operation. What’s more, by combining movie queues based on recommendation system and national inventory, and well thought and fixed delivery method with USPS they don’t cause out of stock, or late delivery problems respectively. Their more titles, few copies, queues based on in stock titles, agreement with USPS on delivery and return make it possible for no late return fee and unlimited rental for subscribers.

Q4. As you examine each major shift in Netflix’s strategy, what might have been the assumptions that they might have at each stage? What assumptions will you make upon evaluating VOD?

1. DVD format - the next format for main stream entertainment

2. Mail delivery – being home entertainment provider means quick home delivery

3. More old, or less known titles – not everyone is interested in new releases, good movies never age

4. No late return fee; unlimited rentals – reward power is effective than coercive power; not everybody watches movies every night

5. Accurate, in stock recommendation system – movies are impulsive decision, yet if a system, based on past behavior, predicts one’s interest more accurately, obviously the act of “buying customers” succeeds

6. Easier un-subscription method – customer satisfaction increases with less frustration, and ease of use, ultimately it translates to better customer retention, and higher customer recruitment

With VOD, either it is live streaming, pay per view, or downloadable on several devices, the biggest problem will be content acquisition terms. Under current digital content distribution method, it is very unsecure to upload any content to the internet. As long as it is a digital content, there’s always a way to copy and redistribute it to the cyber citizens. Second, say that they come up with enough secure way of distributing the film, they should be aware that current internet speed or the cable is not fast enough to deliver high quality videos without lag or any other interruption. Third, going to the movies, or going to rental stores, walking through the movie isles, selecting titles, buying coke and pop corn, or ice cream cone might sound too old fashioned, but this has been part of American pop culture for the past several decades. If acquiring movies become a matter of a few seconds, what kind of consumption behavior will it produce? Had all of the above issues been handled correctly, would we be sure of the future of VOD.