E-Commerce: DigitalMarkets, Digital Goods Spencer Austing
Zagat • Started in 1979 • Collects information from surveys of customers of restaurants, hotels, and night life. From surveys they create an aggregate review of an establishment for subscribers to utilize. • Problems came when it was time to transition to an online presence, an attempt to sell the company in 2008 failed yet the company continued doing business. • https://www.youtube.com/watch?v=erhtTH1tBIg
Competitive Forces Model • Traditional Competitors • Before online, Zagat had a well established name with many customers as well as publishing in multiple best seller books. • This set them ahead of their competitors and drew in a large portion of the market • During the web boom, many more competitors joined the industry as well as many more consumers • The trick is staying ahead of competitors
Competitive Forces cont. • New Market Entrants • In its peak, Zagat had an advantage over new market entrants because of its well established name and reputation. • However the risk to them is that in the industry start up costs are relatively low • With the internet and mobile applications, there has been a multitude of new companies interested in making their money through the internet
Competitive Forces cont. • Substitute Products and Services • Yelp has created a substitute product by making it possible for anyone to post and write reviews of their own. • This combined with a different pricing strategy poses a major threat to Zagat. • Yet another threat is that new technology is being created constantly meaning that another similar product can come along and leave the old ones to either come up with something better or become obsolete.
Competitive Forces cont. • Customers • Zagat previously had no problems retaining customers. • The internet has opened up an opportunity to reach new customers, however Zagat has been ineffective in doing so. • Suppliers • Zagat struggles in this department because on popular competitor apps and web presence the supplier can be anyone who wants to offer up their opinion, whereas Zagat has to reach out to its users and then translate the information in to its product.
Zagat vs. Yelp • Zagat • Utilizes a pay wall for pricing structure • Customers had to pay a monthly fee to access reviews • Revenues come from subscribers • Users couldn’t see anything without paying up front • Presently, it features some free content • Purchased by Google in 2011 • Offers reviews without the hassle of biased user opinions and a lower chance of inaccuracy • Only offer information about restaurants, hotels, and night life. • Focused on hub cities such as New York and Chicago but have recently branched out to other less populated areas.
Zagat vs. Yelp • Yelp • Offers information to its users for free • Yelp generates revenue from businesses who are interested in using it as advertising • Allows for users to access all information free of charge • Reported 26 million visitors in 2011 • Offers reviews of businesses, including directions, consumer ratings, and ability for users to post unedited comments regarding a business. • Contains information for all types of businesses in nearly all places, for example; restaurants, dentists, retail stores
Questions • Who has used either Zagat or Yelp? Which do you prefer? • What are some things to consider when creating an e-commerce presence? • What are your suggestions about what Zagat could do better both online and in mobile form?