Managerial Practice-Customer Involvement at eBay
Most manufacturers do not have to contend with customers waltzing around their shop floors, showing up intermittently and unannounced. Such customer contact can introduce considerable variability, disrupting carefully designed production processes. Costs and quality can be adversely affected. While customer contact is an issue even with manufacturers (each process does have at least one customer), extensive customer contact and involvement are business as usual for many processes of service providers. Customers at restaurants or rental car agencies are directly involved in performing the processes. The area where the sales person interacts with the customer is the shop floor.
How much should customers be involved in a process, so as to provide timely delivery and consistent quality, and at sustainable cost? Various ways are available—some accommodate customer-introduced variability and some reduce it. eBay provides two services: It provides sellers a platform for selling their goods or services, and it provides buyers a platform to find the goods and services they want. From a business perspective, providing these two services generates a high degree of variability in the demands for the company’s resources. eBay illustrates one way to accommodate that kind of variability—provide an online auction house. As an online auction house, eBay accommodates high volumes as well as service order variability from customers seeking to buy and sell an endless number of items. eBay customers also have variability in technological capability, some with considerable Internet experience and some needing more handholding. Such variability would greatly complicate workforce scheduling if eBay’s customers were not involved in many of its processes. eBay’s process strategy utilizing customer involvement has been successful. Founded in 1995 in California, it now has 145 million active buyers globally buying and selling more than 650 million listed items with revenue of about $16.5 billion per year. It connects hundreds of millions of people around the world every day with only 31,800 employees. This relatively small workforce is possible in the face of customer-induced variability because its customers perform virtually all of the selling and buying processes through the e-commerce platform eBay.com and other vertical shopping sites. When the customer is responsible for much of the work, the right labor is provided at the right moment.
Managerial Practice : “Customer Involvement at eBay” [MO2.1, MO2.2, MO2.3, MO2.4]
a. How does customer involvement at eBay compare to customer involvement at Amazon and Craigslist? What are the major similarities and differences? What would you change about customer involvement in these companies, and why?
b. What are some of the challenges eBay may encounter by deeply involving customers in its process strategy? How can these challenges be effectively mitigated?
c. As a senior consultant for eBay, Amazon, and Craigslist, what strategic process improvements would you recommend to their boards of directors? What are some possible organizational barriers to implementing these valuable competitive processes?