Tuesday, April 24, 2007

Ebay Seller Unrest based on "Implied Customer Contracts"

I wish I had come across Will Hsu's blog a long time ago. I just referred to his blog in my previous post and included a link to another of his posts called Implied Customer Contracts

This is one of the best posts I have read dealing with the problems facing eBay in a changing Internet. Please read his entire post. I just want to make a couple of comments in regards to eBay.

Will says, "The overlap between the user bases of the various companies is intriguing. This is not about the brand preferences of different users segments; but that given the same person he or she has different expectation from different companies on the way they conduct their businesses. I call this expectation - “implied customer contracts.” Brand is more about preference, value, and choice. Brand rarely illicit uproars unless something seriously goes wrong. “Implied customer contracts,” on the other hand, is much more. It limits (or opens up) the strategic options of the company whether it is a new product, a new acquisition (MSFT buying Claria), or new strategy. Customers seem to believe that there is an unspoken contract between them and the company on how the company is “allowed” to behave. Anything outside the implied customer contracts, huge displeasure is voiced as if a contract was breached. In many ways, customers are running the show more so than ever before. "

The bold font is mine. This is exactly what is happening at eBay right now. Sellers have an "implied customer contract" with eBay and I would guess that eBay doesn't believe there is any contract, implied or otherwise. The friction begins to build between sellers and eBay management until the change, fee increase, "glitch" has run its course and then the cycle repeats. Unfortunately at some point, one party "sellers" or the other "eBay" gets tired of the friction and a separation begins. Sellers eventually get tired of the "implied broken contracts" and eBay gets tired of sellers and starts to look at non-GMV businesses that don't have this friction.

Will goes on to say, "Companies need to be exceeding aware of the action it is taking today and how that action and future actions will accumulate to create customer expectations that might be a strategic weakness or strength later on down the road. Careful planning and communication is needed to really create a coherent “implied customer contract” that allows for flexibility and goodwill from its customers. It is much harder now for incumbents to change the way their customers expect them to behave. Like real contracts, I believe this “implied customer contract” could eventually become a liability. For many ‘net giants this expectation could become their Achilles heels. Clayton M. Christensen concept of “innovator’s dilemma” could become more acute than ever. "

Again, the bold is mine, this is the state eBay and Sellers are in right now. It would be in eBay's best interest to address this "implied customer contract" while there is still Seller "Goodwill" to give.


Biddy said...

That's VERY interesting - and definitely something that eBay's senior management would do well to get their heads round. (I'm an optimistic - they might!!)

Randy Smythe said...

Unfortunately, I don't think Senior Management cares. I find the most idealistic, passionate and accessible managers are Director level and below, once they make it to VP or higher they seem to be more concerned with the stock price and unfortunately that level of managment makes all of the decisions.

I don't blame them. Their priorities change when they reach VP. I just wish they would consider sellers an asset rather than a liability.

I have a regular audience with several Director level managers and they are all bright, articulate and passionate people. I wonder what happens when they cross the executive suite into senior management, is the price of entrance their soul? (Okay, maybe a little exageration)