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Fundamentals of e-Business

Assignment 2

Surname : Ahamedali Jafar


First Name : Ahamed Udhuman Zaheed
Student Number : 0817191
Course Coordinator : David Corfan

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Executive Summary
The objective of this report id to analyse the online business strategies that are being followed by Skype
Technologies S.A Luxemburg. The major foucus is on Strategical approach on online branding, Extent of their
marketing segmentation, how they satisfy different needs of different customers. Strategic Partnership has been
chosen from one of the Marketing Mix, to show how their alliances with different organization help them to be
more success. Futher to that, their approach in relationship marketing has been analyzed. From this analysis
suitable recommendations has been made and drawn conclusions.

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Contents

 Introduction...........................................................................................1

 Terms of Reference...............................................................................1

 Skype – organizational overview...........................................................1

■ What are they Selling to make money?....................................2

■ Do customers really pay for Internet phone?............................3

 Online Branding of Skype......................................................................3

 Extent of Segmentation........................................................................

 Marketing Mix – Strategic Partnership...................................................

 Relationship Marketing............................................................................

 Recommendations..................................................................................

 Conclusion...............................................................................................

 References.............................................................................................

 Bibliography............................................................................................

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Introduction:
In this fast and competitively moving world, equipped with advancement in science and technologies. People are
finding no time even to shop for their personal needs. This gap has been now filled with a bridge called e-
business or online shopping in simple words. The original definition of e Business by IBM is “e-business
(e’biz’nis) – the transformation of key business processes through the use of Internet
technologies ”. Now a days the usage of computers and Internet have become a fundamental necessity for
everyone irrespective of whether they are professionals or a home-maker. Some of the basic activities on day to
day life are done online. For example online bank transactions, bills and payments, ticket reservation for journey
as well as cinema are made reachable without stepping out of our home. UK Payments Administration has come
out with a news that the Internet usage on online banking is exceeding 50% of the total Internet users. It is also
said that that the number of banking users over telephone has declined to 14.5 million from 16.1 million as of
2005 !

Terms of Reference:
The objective of this report is to analyse a framework of ebusiness that is being carried out by Skype
technologies via their website www.skype.com . The general focus would be how are they making money with
their website. The structure and approach of this report will be as
 Skype – organizational overview
 Online Branding of Skype
 Extent of Market Segmentation
 Marketing Mix – Strategic Partnership (eg. 3mobile)
 Relationship Marketing
 Recommendations
 Conclusion.
This report is developed by using text books that are available at the University of Bedfordshire, Online journals
later than year 2000, from Digital Library such as EBSCOhost EJS and some free online journals that are
available on websites.

Skype – Organizational overview:


Skype Technologies S.A is one of the popular and top ranking IP telephony company founded in 2003. It has its
base at Luxemberg, United States. In the year 2005, e-Bay another giant of the internet business acquired
Skype. Now Skype is the subsidiary e-bay along with Paypal, Rent.com, Shopping.com, International Classified
Websites, Verisign Payment Gateway and Tradera.com as of the financial year 20062. Skype has increased
growth in revenue by 38% in first quarter of 2009 than financial year 20083. From this we can find that the
performance of the organization is profitably good. Skype sell their products via their website (www.skype.com)
as one of the medium of transaction. Recently they have also started to sell Skype voucher through Sainsbury
all over UK4.

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What are they Selling to make money?
The Skype offers wide range of products like skype-in (calls between skype to skype), Skype-out (calls between
Skype and PSTN phones). Skype-in is free of cost available to all registered Skype subscribers and Skype-out

(Figure 1: Subscription Price list of Skype.com)


is available one different packages like Unlimited country, Unlimited Europe, Unlimited World etc as shown in
the image above. Apart from this, they also sell Skype enabled phones, accessories like headphones as shown
below

(Figure 2: Accessories being sold on Skype.com)

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Do customers really pay for Internet phone?

(Figure 3: Skype Usage in last quarter)


Source: http://skypejournal.com/2009/04/skype-2009q1-showed-ipo-worthy-growth.html
It has been found from Skype journal that, totally 26.5 billion minutes were called in last quarter, out of them 23.6
billion minutes were used by customers within Skype network (Skype in or Skype to Skype). The remaining 2.9
billion minutes is the paid calls used by subscribers with any one of the subscribing options shown in Figure 1.
The ratio between free and paid users are 8:1, i.e. one among the eight customers use paid services5.

Online Branding of Skype:


“Brand (Leslie de Chernantony, Malcom McDonald; 1992) is defined as an identifiable product or service
augmented in such a way that the buyer or user perceives relevant unique added values which match their
needs most closely. Further more, Its success results from being able to sustain these added values in the face
of competition”. Brand plays an important role in positioning of the product in the market 6. The characteristics
which are essential that makes the brand a successful and strong one given by Dave Chaffey are
 it is dependent on perception of the customers
 the added value of the product influences the customer perception
 the added value of the product should sustainable.

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According to Dayal et al (2000), in the Internet the brand is experience and experience is brand. Let us assess
the branding of Skype using PCDL model (Ghodeswar; 2008) which has four important elements in building the
successful brands.

(Figure4: PCDL Model of branding)


Position of the branding:
Brand positioning is the part of brand identity and value proposition that has to be communicated actively to the
target group, which demonstrates and advantages over the competing brand (Aaker; 1996). This can be
assessed by selecting suitable ones from listed in above figure that are relevant to Skype.
 Features: When features are concerned skype provides all features like Video calling, good voice clarity
and chat facility. An important feature which makes it differ from others are Skype on mobile, which will

(Figure5: Skype Directory)

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be discussed in detail about partnership with 3 mobile network. Skype directory (Figure5) is an important
feature which other PC calling softwares does not have. Here we can search people based on email,
Skype is or geographical location.

 Benefits: Some of the benefits to the Skype users are very easy to use. They are available for all
operating systems, now even mobile versions are available. People can call their friends and relatives at
lower cost than the usual phones

Communicating the brand Message:


Brand awareness is the ability of the potential buyer to recognise or remember that brand is also a member of
product category. “A link between product class and brand is involved (Aaker; 1991). Hence the communicating
the message about the brand plays a vital role in its success. How these messages are communicated?
 Advertising Campaigns: Skype carry out its marketing campigns in innovative manner. In the Summer of
2008 they selected an Australian writer Rebecca Campbell. She travelled 33 days across the globe
spreading the marketing message of Skype. She had Skype 3 phone, Nokia Tablet PC to keep updating
her movements on Facebook, Twitter and Youtube7
 Theme: Theme is a way of expressing the emotions and feelings to the customers to show that they
care for them. It reports in hearts and minds of the people which results in emotional relationship with
customers8. Skype uses its blue colour to express its theme and emotionality to its customers. This can
be seen in a page extracted from “The Skype Brand Book” shown below.

(Figure 6: Skype Brand book expressing their feelings)

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We can find that Skype uses blue color to express different themes like travel, business, mobile etc. Not only
here even in their partner's website like 3 mobile, they use their color to build their brand image and identity.

Delivering the brand Performance:


Brand performance is an important factor which plays a vital role in deciding the brand value in the annual report
every year. The brand performance of Skype can be assessed with relevant attributes.
 Product Performance and Customer Satisfaction; Both the attributes can be assessed with one evidence
that is available to us. There are 443.2 new accounts per day 3. Millions of customers registering per day
is a strong evidence that their product performance is more than expected with customer satisfaction.
 Customers Care: From the reviews by the customers on Skype forum, the quality of customers care
service delivered in not satisfactory which needs improvement 9 .
 Customer Delight: One Major delight which Skype offers to its customers are Cheapest call rates and
unlimited free calls within Skype network. Their Partnership with 3 mobile network enable their
customers to use Skype anywhere at free of cost. This does not need any top-up 10.

Leveraging the Brand Equity:


This can be defined as the leveraging the process which is linking the brand to some other entity which creates a
new set of associations from the brand to the entity as affect existing brand associations (Keller; 2003b).
 Ingredient branding: This is achieved by incorporating the attributes of one brand with another to gain
popularity in the market. This practiced by Skype by joining hand with with well known brands like 3
mobile, Nokia, Sony Ericsson etc.
 Brand Extension: In brand extension is the experience of parent brand would have great impact on the
performance of the child brand. At the same time the failure of the child would have great impact on the
parent, it can harm the parent's brand equity (Swaminathan et al; 2001). The acquisition of Skype by
ebay would have great impact on this attribute. As both are good performing brands this will be a strong
element in the brand equity of Skype.

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Extent of segmentation :
The Underlying priniciple of Market segmentation is that the individual customers have different product or
service needs (S.Dibb; 1996). The three important elements to extent of Market segmentation to serve the needs
of different people are the organization itself, Different marketing mix and categorizing the target audience or
target group.

(Figure 7: Extent of Segmentation)


Segmentation Variable:
Identifying the segmentation variable is the first step of market segmentation. The variables which skype uses
are geographic variables and based on the usage like commercial and domestic purpose like B2B and B2C
strategy.
 Geographic Consumer segmentation variables: From figure 1, we can find that the Skype has classified
its products based on the geographical location of their customers. They sell credits online based on
giving them unlimited and limited minutes to particular locations if a customer buys Unlimited Europe
package, he can call within Europe any number of minutes, but the call to Asian content will not be
allowed. If customer needs to call United states and India. He can go for World Unlimited package. So
the Skype has focused on Individual customer's need, giving him the freedom of choosing any package.
 B2C and B2B: Business to Consumer is the type which we have been discussing so far. Business to an
individual or a common man. Business to Business is one where they deal with corporate customers.
They offer Internet telephony services to organizations, as their medium of communication in much
economical manner than the typical PSTN telephones. Maxim Integrated Products is an electronics
components manufacturing company, Walter Curd CIO of the company says that they use Skype for
making conference calls, sharing documents. Scott Smyth – Planning Solution, he says that most he
enjoy with skype is the Video calls between his colleagues and customers. They also make calls in
marketing operations. Customer support in Maxim is also carried out through Skype. The CO of the

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company says that they have been spending $2.5 million, when they were using normal PSTN
telephones, But now they have reduced it to $100,000 (One Hundred thousand dollars). These
informations were collected from a video whose source is given below.
Source (Video): http://www.skype.com/intl/en-gb/business/case-studies/maxim/

Marketing Mix – Strategic Partnership:


The strategic partnership can be defined as the alliance between two or more organization to achieve common
goals and maximum effectiveness of their resources. Some of the popular partnerships of Skype Technologies
are with 3 mobile network, Nokia, Plantraonics and many more. Let us discuss some of the major partnerships of
Skype and analyze the benefits out of them.
 Strategic Partnership with 3mobile: This is one of the major partnerships of Skype with Hutchison
3mobile in March 2006. They both planned to give people freedom to talk anywhere at free of cost within
Skype network and at low cost to other networks. The benefit out of this partnership will enable Skype to
tap 75 million customers of Hutchison 3 network 11 .
 Partnership with Nokia: Skype has joined hands with Nokia in the year 2008 at Barcelona, Thereafter
Skype will be available on Nokia Phones with Symbian S60 Operating system. Nokia Customer will be
provided Skype as preloaded while coming out of the box. This features will be available to use in Wi-fi
network and 3G network. They attracting customer by integrating the default phone book with that of
Skype. By this Skype is able to bring in Nokia N-series users into its customers list 12 .
 Partnership with Plantraonics: This is one the oldest partnerships of Skype, Plantronics is leading
Headphones manufacturers that are light weight. In 2004, Skype made partnership to manufacture
headphones that are compatible with Skype software to make Internet calls over PC (Personal
Computer) as Plantronics is a 40 year old experienced company13 . The benefit out of this partnership
would be customer satisfaction by providing value added services. When Skype recommends
Plantraonics for PC calls, Customers buy this brand with guarantee that it would be compatible for sure.
Some of the upcoming and recent Partnerships of Skype are given below.

Date Partnership Firms Benefits


Announced
05/01/2010 LG, Panasonic and Ushers They have decided to embed skype in LG
and Panasonic Broadband TV. This will
acquire more customers who
watch TV
06/10/2009 European Directories This would enable business callers to
make free calls at one click and access to
over 700,00 business across Europe.
16/04/2009 QIWI Private Cabinets - Russia This will enable customers from Russia to
buy Skype credits from retails outlets as
UK customers buy from Sainbury's.
Source: http://about.skype.com/press/partnerships/

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Online Relationship Management:
“Relationship marketing, defined as marketing activities that attract, develop, maintain, and enhance customer
relationships (Berry, 1995; Berry & Parasuraman, 1991; Gronroos, 1994)”. From the research, it has been
predicted that, relationship marketing has influence over consumer loyalty, which is achieved indirectly through
relationship investment and relationship quality. It is found that people who perceive high quality of relationship
marketing are likely to be more loyal and specific to the service provider, which contributes more toward
customer retention and loyalty 14 . Here is an online relationship model derived as a result of this analysis.

(Fig ure8: Relationship Marketing Model)


Source:http://0-ejscontent.ebsco.com.brum.beds.ac.uk/ContentServer.aspx?
target=http://www.informaworld.com/smpp/ftinterface%3Fcontent%3Da794973881%26format%3Dpdf%26magic
%3Debscohostejs||AA3D3EFB68C36A3B40C78D54581474B7%26ft%3D.pdf

Customer Acquisition is not complex part for Skype as they acquire customers by strategic partnerships and they
have 443.2 million new accounts every day. Concentrating on other two important elements of relationship
marketing i.e customer retention and customer extension, this model would be helpful.

As whole of this model shows that attaining customer loyalty is achieved by relationship investment and
relationship quality.

Relationship Investment:
The relationship marketing is achieved by the combination of other variables like financial bonding, social
bonding and structural bonding.
● Financial Bonding: According to Berry(1995), defines financial bonding as customer loyalty with respect
to pricing incentives. When pricing is considered, Skype offers cheap and economical way of calling
without compromise in quality. One of the news article of Skype says that there has been 50% increase

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international calling minutes. This increase in Skype to Skype free call by 50% i.e 21 billion minute, is
due to the pricing strategy of Skype 15.

(Figure9: Increase International calling minutes 15)

● Social Bonding: According to researchers, the social bonding in relationship marketing has effects over
consumer's interaction psychologically, according to Srinivasan et al (2002), showing more care to
improved design in interactivity which results in longterm relationship. One form of social bonding which
Skype does to improve customer relationship is, when customer buy something online, they try to help
them showing best selling products or categorizing for which the customer is looking at as shown below.

( Figure10: Social Bonding)

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Source:http://shop.skype.com/intl/en-gb/?cm_sp=hw%7Cshop-_-shop_index-_-shop_acessories%7Cen-us_GB

● Structural bonding: According to Berry (1995) and Chiu et al (2005), structural bonding is giving value
added benefits to the custmers which are expensive in the market. In treating its B2B customers, Skype
offers a wide range services like having a desktop phones like the PSTN one in the VOIP scheme.
According to an official in Maxim Integration says that they have saved $100,000 from expense on
communication, as specified earlier.

Relationship quality:
In online context, as we cannot see the buyer's face, the assessment of customer's happiness and feeling
becomes intangible. The relationship quality purely rely on the quality of service we offer to our customers.
According to Garbarino & Johnson (1999) and Smith (1998), relationship quality is the ability of the customer to
rely on the seller's ability to exchange uncertainty and advanced task performance. The exchange uncertainty is
all about delivery or shipping of the product, as Skype provides service delivery, the quality and minimal
downtime service plays a vital role in relationship quality. As the quality of the Skype's product is good they
increasing number of customers who are satisfied and trusting 14.

Customer Loyalty:
According Oliver(1995), “loyalty is defined as a deeply held commitment to re-buy or re-patronize a preferred
product/service consistently in the future”. Customer loyalty can be observed in two ways, one by customer
retention and other by customer cross-buying.
● Customer Retention: It is a well known fact that that customer acquisition is more expensive than
customer retention. The theory of relationship quality and research on relationship marketing says that
the ultimate goal of relationship marketing is to strengthen the relationship of existing customers and
convert the indifferent customers into loyal ones (Berry & Parasuraman, 1991). Skype's strategy to retain
its customer by providing value added services and advanced features in communication industry,
irrespective of whether they are paid or free users.
● Customer cross buying: Skype website which do sell skype enabled phones of 3 network, where the
customers not only purchase Skype credit online. They also do purchase accessories for PC, Skype
phones which is branded by 3 network (partner's brand). This mode of purchasing a product of a
different brand id due to loyalty which is coupled with trust of satisfaction of customers over Skype
technologies.

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Recommendations:
Advertisements on Skype Applications and website:
In order to strengthen the eBusiness, Skype can introduce online advertisements like other chat service
providers for PC as well as for mobile users. According a news article the mobile advertising has grown vast and
will have a good break in 2010. The revenue of mobile advertisements in the year 2008 was £28 million which is
99.2% of the year 2007 and expecting more for the year 2009. Hence concentrating on mobile and online
advertisement would yield more profit for Skype 16.

Improve Customer service quality:


From the forum of Skype available to customers, we can find that the feedback from customers are not happy
with the support, that is being offered. Customers are paying for the product, after sale service plays an
important role in customer retention phase of relationship marketing. Today Skype may be having millions new
accounts everyday, Imagine there is a new entrant into the market and the Skype continues this quality of
service after sale, then this would end up in disaster. This leads them to pay more for customer acquisition than
retaining the existing ones. Hence the quality of service in customer support needs improvement setting some
standards to it 17.

Conclusion:
As long as there is advancement in science and technology, the change process in environment keeps
happening. Every new day it dawns, there are new products and sellers in market arising day by day. Like this,
the days are nearing to make electronic business as fundamental necessity for every human being to survive on
earth. The growth of Skype has made a revolution in this information era, today calling our friends and relatives
who are living abroad has been made easy and at free of cost. This enables the researchers and inventors to
think out of the box and give something new to the people often. This e-Business has given raise to e-retailing,
e-branding, mobile shopping etc. Most of the activities have become mobile and transact electronically, Let us,
use them in a safe and secure manner, in such a way there is no harm society and environment.

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References
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