MKTG 396

Alana S. Manning

Student ID: 3144948
Assignment 3

“StubHub: Ticket Scalping, a Respectable Endeavour?”

Question 1 (20 marks)

Identify the strengths and weaknesses of StubHub as well as the threats and opportunities this organization is facing.
Note: Use point form with very explicit statements. (There are 2 marks available for each good point. Limit your answer to 10 points).

Strengths:

1. Stubhub offers a risk free experience the ‘FanProtect Guarantee’ for ticket purchasers whereby they will not be charged for any purchases until Stubhub receives confirmation of delivery of those tickets. 2. Stubhub has a competitive advantage over other ticket reselling companies because they list the tickets for the seller for free, and split the fee upon a successful purchase between the seller and buyer. Also, Stubhub assumes very little risk with their business because they don’t actually carry their own ticket inventory. 3. Stubhub doesn’t disclose the names of the sellers, they have a purely level playing field among the sellers and that provides a more transparent purchasing experience for the buyers. They tickets are all comparable for their venue, price, seat number etc. regardless of the vendor selling the ticket. Additionally Stubhub will prohibit any sellers found to be illegitimate vendors from using their site. 4. Stubhub has capitalized on the professional sports team market by signing agreements to become the organizations’ official secondary marketplace for their season ticket holders, allowing season ticket holders to regain some of the sunk costs they would otherwise lose if they were not able to sell unused tickets.
Weaknesses:
5. Stubhub is limited to only one market, the ticket reselling market. while there will always be a need for event tickets, it could be seen as a weakness that the company only has one product, albeit diverse to market. To be honest, having read this about Stubhub, I think it’s a brilliant company and I wish I’d have thought of it. Weaknesses are tough to point out. 6. They seem to have recognized a weakness in that they were only able to target the North American market and have since started up a similar business plan in Europe. Problem solved, so long as the European company is designed and executed using the same successful business plan they used for Stubhub.
Threats:
7. The biggest threat facing Stubhub that I can see is that this company was a massive success, and so competitors will be very interested in how they can get a piece of the pie. Stubhub will definitely notice that other reselling companies will be trying to compete for their business as well as for resigning some of the agreements Stubhub has in place with their sports teams, musicians, venues etc.
Opportunities:

8. Because of their explosive growth and the positive buyer and seller experience generated by their practices, Stubhub has the opportunity to take out Ticketmaster as the most looked to supplier of event tickets, this could change their business model from not only a reselling company but from an initial offering ticket selling company. Their business model would have to change, but the opportunity for growth would be massive. 9. Similarly to the agreement they’ve reached with Major League Baseball Stubhub could seek the opportunity to sign a similar guaranteed reselling agreement with other major sports leagues such as the NFL, CFL, NHL etc. 10. In addition to their North American reach and emerging presence in Europe, Stubhub should consider in the future continuing the global expansion of their business model to other areas of the world keeping in mind the level of development and the type of technology required by their target market in order to utilize their service.
Question 2 (25 marks)

The online ticket resell system offered by StubHub can be considered as an innovation. Evaluate this system using the product characteristics that affect the rate of adoption. Are you surprised by the initial success of this system? Why?
Note: Divide your answer into sections, one for each characteristic and one for your thought.

Relative Advantage when discussing a new product refers to any type of advantage or superiority a new product has to already existing products in its field. In the case of Stubhub, the relative advantage to using them over any other reselling company is the reduced risk to seller and buyer, reduced fees, level competitive playing field through anonymity, 24 hour customer service, plenty of field offices for operational fluidity, and I think most importantly their FanProtect Guarantee. Compatibility when discussing a new product refers to how well the innovation fits the current values and experiences of the targeted market. With Stubhub, they hit the market entirely online once the ‘line up for tickets before Ticketmaster was open’ phase was almost entirely eliminated. Virtually almost every home in North American (their initial target audience) has a computer or access to the Internet via a smart phone, their work etc. I don’t believe they could have planned their entrance into this market via their use of technology any better. Complexity pertains to how difficult the new innovation is to use, and can be compared to the complexity of a similar pre-existing product. Stubhub is easier to use than Ticketmaster, and eBay in my opinion. By eliminating the seller information, Stubhub allows buyers to view tickets based on pictures of venues and clicking on a seat, not by going through individual buyers and trying to visualize where that seat might be in the venue. It is extremely user friendly, I know this because my mom is almost entirely computer illiterate and she uses Stubhub constantly because she thinks its so easy. Divisibility is the degree of which an innovation could be tried or sampled on a limited basis. In the case of Stubhub, a simple purchase of cheap tickets to a local sporting event would be a very simple way to test the new company’s ability without exposing too much of the consumer’s money. This is especially more attractive when you factor in their FanProtect Guarantee. Communicability refers to how easily communicable the results of using a product can be conveyed to other parties, i.e. future customers. You get to your seats at a concert or a sporting event, you bought your tickets through Stubhub, and the people right next to you were in a bidding war for theirs on eBay and subsequently paid more for their tickets. You tell them where you got your tickets and how much cheaper they were, and its almost a guarantee that in the future those will be Stubhub customers. That’s how I began using Stubhub, and I recommend it to everyone. All you need to do is compare prices and explain the guarantees and the visual seat choosing mechanism of the website and people will want to check it out. I am not at all surprised by the initial success of Stubhub. Upon reviewing the characteristics for the rate of new product adoption, I believe that as young, likely event attending men, the inventors of this new company designed it based on real life experiences of their own and built it keeping in mind many of their own grievances with purchasing remarketed tickets. They launched it at the perfect time during the technological age, they kept the customer ease of use and protection in mind and they remain a competitive option for purchasing and selling event tickets. Overall it was a fantastic idea and it’s an awesome company; success such as this would be difficult to replicate.
Question 3 (10 marks)

Describe how the four online marketing domains apply to StubHub.
Note: Divide your answer into sections, one for each domain.

Business to customer online marketing refers to businesses selling good to customers as a final sale. In Stubhub’s case, they are not the business actually carrying and selling these tickets to they buyers using their website. However, it is very likely that Stubhub will put into contact a final customer with a small business or other sized ticket reseller using Stubhub as a portal to market their inventory and resell their tickets. Business to business online marketing is the utilization of websites, catalogues, emails, trading and social media networks to contact potential new business partners and in turn, serve their customers more efficiently and provide better prices due to potentially improved buying efficiencies with a new business partner. What Stubhub has done in this marketing domain is build agreements with sports teams and venues to become their main ticket-reselling agent. With this amount of tickets available, the prices should drop rather than rise, providing the buyer with a better experience, and likely selling more tickets for their business partner. Stubhub also places adds for their company on Facebook and sports team, concert and event websites for easy access and visual reminders of their business. Customer to customer online marketing is the online exchange of goods and information between final customers. Stubhub technically is one umbrella under which all of the active parties are their ‘customers’. They sellers and the buyers are all customers of Stubhub, paying a split fee for Stubhub’s services to be put into contact with one another. Customer to business online marketing is the online exchanges between customers and businesses in which customers can seek out businesses or sellers and learn about their products, prices etc. with Stubhub, technically the buyer and seller are both customers however the seller is technically providing a business to the customer. The downfall for any business using Stubhub for their ticket reselling is that they cannot be names, so the fact that they have a business at all is superfluous from a marketing point of view. Another way to look at it, however, is that Stubhub is the business and the buyer and seller are the customers who can use the internet to search out tickets, likely getting many search results linking them to Stubhub thereby using online marketing to connect the customer to the business.
Question 4 (15 marks)

The case states that “StubHub’s website structure also creates a marketplace that comes closer to pure competition.” Could ticket resellers use cost-based pricing in such a context? Explain.

Cost based pricing is the act of setting prices on your products based on the costs of producing, distributing and selling the product, plus a fair mark-up for a return based on effort and risk. Ticket resellers could use this method, but I would not recommend doing so unless the mark-ups being applied made the difference between turning a profit, breaking even or losing money on your investment. Because, with the website structure of Stubhub, the customers can view every price for every seat in a section of seats in the same area. If one seller is attempting to recover a bunch of costs at the expense of the buyer, while another few with seats in the same area are not, the seller with the mark-up will only potentially sell his tickets once the rest of the cheaper priced tickets have been sold. And even then, buyers could be deterred from purchasing those tickets when it’s evident by such a simple comparison that this seller is trying to gouge the buyer. In such a transparent buyers market, I would not recommend a cost based pricing method unless it’s the method used by the majority of your competitors.

Question 5 (15 marks)

Discuss the major ethical issue that might be raised against ticket-reselling activities, and explain how ticket-reselling websites such as StubHub can contribute to making ticket reselling legitimate.

Note: Divide your answer into two sections, one for the discussion and one for your explanation.

The major ethical issue with reselling tickets is based off of the well known act of scalping tickets either at the door of an event or online. Those events that sell out quickly or are difficult to find tickets for, are always scalped for insane mark-ups by those who were fortunate enough to come across tickets they aren’t using, and even some times by using forged tickets that wont get you into the event, or purchasing tickets from secondary vendors such as brokers who send the tickets to late or not at all. I think anyone’s first reaction when they hear about tickets being resold is that the seller is trying to make money off of them, and that’s why when you see people posting ad’s to sell tickets, if they aren’t marking up the price, they include the words “face value” to ease the minds of the majority of us who assume we are being overcharged. Stubhub and other online ticket reselling agencies will be able to clean up the seedy image of ticket reselling, street corner scalpers and illegitimate or poorly run secondary vendors. They can accomplish through their FanProtect Guarantee, monitoring of sellers for legitimacy and banning those who are frauds, ensuring fair prices via the pure competition structure of their website, and guaranteeing delivery via their secure and stable relationship with only FedEx.
Question 6 (15 marks)
Based on your understanding of the product/market expansion grid, which growth strategy StubHub has used until now? Which grow strategy should StubHub use in the next couple of years? Explain.
Note: Divide your answer into two sections, one for the discussion and one for your explanation.

The product/market expansion grid is a tool used to plan a portfolio for identifying company growth opportunities through market penetration, market development, product development and diversification. • Market Penetration is the strategy to grow by increasing sales of current products to current markets without changing the product. • Market Development is a strategy of growing a company by identifying and developing new market segments for current company products. • Product Development is a strategy for company growth by offering modified or new products to current market segments. • Diversification is a strategy for company growth through starting or acquiring businesses outside the company’s current products and markets.
Until now, Stubhub has used the Market Penetration strategy to launch their company into ticket reselling market. They used market penetration in conjunction with the Product Development strategy to grow the company. Because, ticket reselling was an existing market, Stubhub created a new product, their service and website, to enhance and clean up the already existing ticket reselling business.

Going forward Stubhub should consider a strategy focused more towards diversification. As I mentioned earlier, the market for buying even tickets is likely an unwavering one. However, they could stand to further increase the size of their business by geographic diversity, i.e. starting up other branches around the world, and perhaps building more headquarters aside from the one in San Francisco depending on whether that would improve or hinder their currently high level of customer service. They could diversify their product as well, by entering the initial offering ticket sales market and having both initially offered and reselling ticket sale options available to their customers.

References
Kotler, P., Armstrong, A., Cunningham, P. & Trifts, V. (2011). Principles of Marketing. (8th Canadian ed.). Toronto: Canada: Pearson Canada Inc.