About Me

John Fahy is the Professor of Marketing in the University of Limerick and Adjunct Professor of Marketing at the University of Adelaide. He is an award winning author and speaker on marketing issues around the world.

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Entries in value proposition (8)

Tuesday
Sep232014

How To Make Money Online

One of the biggest challenges facing the ever growing digital business sector is how to generate a consistent revenue and profit stream. A good illustration of just how to do it is provided by the photo image website Shutterstock which recently again set a new high for quarterly earnings. It is a company that demonstrates how a well thought out business model can help to generate early and on-going profitability.

 

Shutterstock was founded in 2003 by Jon Oringer who had been frustrated in his attempts to find good quality images for marketing materials like brochures and blogs. His first investment was in a $800 Canon Rebel camera with which he took over 30,000 photos and uploaded them onto his website. Customers could either purchase photos individually or pay a subscription fee to download up to 25 images per day. This option was then expanded to allow unlimited downloads. The company’s primary customers are businesses operating in creative industries that Oringer reached through search advertising and direct sales. Shutterstock’s business model meant that, unlike many start-ups, it got paid first making it instantly profitable and it has generated revenue growth in excess of 30 per cent per year since its formation. In 2011 the company reported gross profits of US$105m on sales of US$169m and went public in 2012 making its founder a billionaire. Its stock currently trades at a price-to-earnings ratio significantly ahead of stellar names like Apple and Google .

On the supply side, the opportunity was opened to any photographer anywhere to submit photos and they were paid from 25 cents to US$120 if these were downloaded. But its decision to provide feedback to photographers on what was and was not selling was innovative and helped it to generate a supply for photos that customers were looking for. By 2014, 55,000 photographers around the world were uploading 30,000 images per day giving the company a total database of over 30 million images. Since 2006, the company has included video images in its library and in 2014 it decided to expand its business with the launch of Shutterstock Music, giving musicians everywhere the opportunity to make money from the music that they create.

 

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Monday
Sep232013

Ryanair's Customer Service Charade

On its journey to become one of the preeminent airlines in Europe, one of the things that Ryanair has been brilliant at is defining the rules of the game in a way that suits them but not their competitors. For example, when the company was re-born in the early 1990s, it told us that air travel was not about frills or food or classes of travel but simply about getting from A to B as cheaply as possible. Customers bought the story and loved the low prices. More surprisingly, Ryanair’s competitors bought it too and starting falling over themselves trying to compete on price and generally doing it badly. They played Ryanair’s game and got hammered.

 

 

Emboldened by this success, Ryanair got more audacious and tried to convince us that they provided great service as well. To do this they redefined customer service in air travel to mean on-time flights and low levels of lost baggage. Well after all, when you fly point-to-point to airports in the middle of nowhere that few other airlines ever fly to, these are two operational measures that you should score well on! More traditional elements of customer service such as treating people with responsiveness and empathy were conveniently ignored. Instead customers were treated with contempt and generally told to pay up, put up and shut up! If there was any grief going, it was to be dished out by Ryanair and not the other way round. Yet again, Ryanair’s limp competitors thoroughly failed to make any capital out of this situation.

 

So hot on the heels of a profit warning that knocked €1.3m of its market value and the disastrous customer service ‘own goal’ of charging Dr. Sattar €188 to change his flight as he rushed back to the UK where his family had been murdered, the company has now promised to review its ‘abrupt culture’. Oh that it would be that easy. The company’s CEO, Michael O’Leary has been at the helm for over 20 years and its hard-nosed approach to be dealing with customers is ingrained in everything that they do. Efforts to change its culture will have little or no effect in the short-term which ironically is probably just as well. Ryanair’s culture works for them. It is an integral part of what make them different and as ever the essence of great marketing is not to try to appeal to everyone. And thanks to the UK’s Competition Commission putting the final nail in Ryanair’s attempt to acquire Aer Lingus this month, Irish customers at least will have a choice about who they want to fly with.