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Mini Case: eBay is getting complaints from customers that the site doesn't have enough product selection. To increase product selection eBay runs a promotion and decides to waiver the listing fees for all sellers. eBay's earns revenue from the listing fees and as a % of sales transaction and the bulk of revenue comes as a commission over sales transactions. The promotion instead of increasing the revenue results in a drop in revenue for eBay. Explain
I asked a few questions about what percent of revenue comes from each of the revenue stream. Came up with a few recommendations on running a more focused promotion campaign to incentive sellers with the right kind of products. This would ensure that promotion budget is optimized and also help buyers see only the kind of products that they were interested in purchasing.
Ebay has actually tried this a few times. The listing fee keeps auctions that have no chance of selling off the site. If there is no listing fee, ebay loses that revenue and still only sees the same amount of auctions close with a sale. Buyers also tire of looking through a glut of items up for sale that they aren't interested in.
The decrease in revenue was expected because eBay will not earn listing fees. However, the objective was better "customer experience", which might lead to more transaction and revenue. Now, despite availability of better listing, revenue had not decreased implying customer experience has not improved - perhaps their search engine or product listing segmentation is not good.
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