Managing Quality of a Customer-to-Customer Transaction

Methodology:
The research topic, quality management and control over peer-to-peer
based companies in relation to the customer, relied on the use of academic
readings, newspaper articles, and research studies to formulate evidence to
back statements made by the writer. These were accessed through the use of
online databases, websites, and the use of the class textbook, which were then
in turn placed in the paper using the APA format of citation. These citations
were used to find the research, however, the analysis of these findings and
application to the topic was formulated by myself and does not require
citations. All research, either used or unused, will be included in a
references section to properly give credit to the works used to help formulate
this research paper. The research can be found under a references section,
which will be included at the conclusion of the writing.

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Abstract:
This research paper will focus on the analysis of how different factors influence the quality of Uber and eBay. These companies were chosen because they were both pioneers and industry leaders in their markets that rely on managing a transaction between two individuals or users as opposed to selling to a consumer. Some factors that will be analyzed are costs considered, customer satisfaction, customer retention, investing and managing quality, supply networks, user security and risk, problems during the growth stage, and the solutions they have come up with to become and maintain profitable companies with large user bases. These platforms will be analyzed based on their ability to meet the user’s expectations.
Introduction:
Advances in technology have long been revolutionary for companies
when trying to reach their potential consumers. At the turn of the 20th
century, the advent of the radio allowed for advertising to be broadcast across
long distances for the first time. Several years later, the television was
created and widely sold, which expanded the reach of corporations into the
popular nighttime shows that saw a high volume of viewers. However, no
technology has had a greater impact than the invention and expansion of the
Internet. This tool connects someone with anybody across the globe with just
one click of a button. The speed and reach at the disposal of corporations is
endless, which is why many companies began to make their own online
marketplaces, known today as E-Commerce. Companies in the 1990s began to
experiment with E-Commerce by managing online transactions between two
consumers, that has come to be known as the peer-to-peer transaction system.
This system has seen a rapid growth over the past decade due to the increase in
online shoppers, in addition to a growth in conspicuous consumption or paying
for goods and services frequently. These systems in recent years have been
adapted to support the increase in mobile technology that was pioneered due to
the innovations by companies such as Apple and Samsung. As the number of online
and mobile users grows each year, it has become apparent for companies like
Uber and eBay to invest time, money, and manpower to the building of their
software systems. The difficulty of managing the quality of the buyer and
seller experience has been a key obstacle for industry leaders in E-Commerce,
such as Uber and eBay.
Analysis:
The basics of a p2p system revolve around the interaction between a
buyer, seller, and a holding company. Conventional companies follow either a
business-to-business or a business-to-consumer model, which makes the model of
managing peer-to-peer online transactions a new and unique concept. For
example, eBay serves as an intermediary during these transactions by providing
a platform to buy and sell. These transactions are monitored using various
tools on the site, and the control over the sale, advertising, and delivery is
almost entirely dependent on the buyer and seller. Similarly, Uber provides the
technology to connect a driver to a potential customer without directly being
involved with the process. This means that an Uber driver must deliver a
consistent quality of service for the riders that can be monitored by software
created by Uber. Both of these companies charge fees for allowing somebody to
use the software, in addition to also providing financial security for every
transaction. Therefore, the business model for these companies is simple;
manage these transactions and charge fees for both parties who choose to use
the software.
This system allows for these companies to overlook many costs that
traditional companies have to deal with. Many of the costs incurred by these
companies, similar to many of the tech giants, have occurred during the
start-up and early phases, such as building a platform and entering a
market.  For example, in an article
written by Maya Kosoff for Business Insider, Uber, a multi-billion dollar
company, had “issues paying off investors going into 2014” which, in a
statement by Uber, they “credited this loss for the need to invest and grow”(1).
Amazon had a similar problem where they went almost a decade until they
incurred a profit. This is due to the need of significant investment to boost
and improve quality, build a platform for the transactions to occur on a large
scale, and build brand recognition to improve customer retention and trust.
Moreover, in order to do this, many tech companies must sign loans or give out
equity in the company that is unfavorable but necessary for them to build. This
puts them at a disadvantage to more traditional product-based companies because
they cannot make a single dollar until their product is well made and ready to
be scaled quickly since the tech market is filled with booms and busts. Companies
in the growth period need to invest to build, but tech companies in particular
have to take much greater risks in order to penetrate their competitive
industries.
Penetrating the tech market relies heavily on the ability to meet
the needs of the customer. Customer satisfaction ratings are a key metric for
any company when measuring your reach. 
Refer to the line graph below:

Illustrated by the graph on the previous page, one can see that
E-Commerce companies are not only growing in size, but also in quality. This
data is measured by the American Customer Satisfaction Index, which uses
resources such as surveys and company records in order to establish the ratings
for each year. The values shown are averages amongst the top companies for each
industry since the beginning of the century. Since 2000, there hasn’t been a
year that customer satisfaction ratings for retail companies surpassed that of
E-Commerce companies. This means that expectations for these companies are
favorable, but there is an issue with having consistently high customer
satisfaction. Meeting these expectations and maintaining them year in and year
out is a great challenge for companies such as EBay and Uber going forward.
Uber and eBay face a unique challenge when managing customer expectations. Most companies have to focus on the design and marketability of their products because they deal directly with their customer base. However, Uber and EBay do not have direct contact with the customer, and they have to deal with the person selling a good or service on their platform. They use the concept of allowing people to operate similar to sales agents, but leave the authority of conducting a transaction almost entirely to the individual. This brings up an interesting problem: How do you manage a system where every transaction between buyer and seller is unique and performed independently of your company? These companies have championed the use of business analytics and scientific management because of their need to meet the customer’s expectations. It is hard to find a metric for satisfaction when people purchase everything from baseball cards to Lamborghinis on eBay or spending several dollars on an Uber ride around the corner to several hundred dollars going from one city to another. A clever solution to this problem, used by both Uber and EBay, can be found using one tactic: letting buyers and sellers manage the quality themselves.
The rating system used by these companies’ gives them the ability to monitor and police the users of these platforms. For example, Uber has a strict rating system for drivers. They require that you, according to James Cook’s Business Insider article, “maintain an average rating of around 4.6 out of 5 stars” or else the driver is in threat of losing their right to use the app. Similarly, eBay uses a “rating system that allows users to praise, complain, or have no comment on their purchase” (Cook 1). Both of these systems are designed in order to make sure that the buyer has their expectations met by the seller. These include time till good or service is received, communication with the seller, and ensuring the quality expectation is met with every transaction or ride. Therefore, not only is the holding company collecting a fee for doing little to no work on a transaction, but also they are even having their users self-regulate and improve the quality of their systems.
The ratings even serve to help make sure the seller has their expectations met as well. Uber uses a similar rating system that they use for their drivers: did they meet their expectation as a rider, did they communicate well, and were there any complications that prohibited the driver from accepting more rides after that one was performed. It is no secret that the driver is under greater threat of losing privileges, but Uber will prevent a customer from using their system if it is warranted. The reason why they and EBay can block users is simple; both have such a high volume of users and annual traffic that it has little to no effect on their revenue.  It seems extreme to ban a customer from being allowed to utilize their software, but peer-to-peer companies rely heavily on their quality.
The ability for these companies to control who can use their software is dependent on the amount of traffic their systems see. For example, eBay has “around 170 million active users”, according to their annual report at the end of 2016. With a customer base equal to about half of the population in the US, they can afford to be selective in order to meet the expectations of the consumer. In addition, Uber has seen a similar explosion in both their drivers and riders, which boosts both business and helps them improve the quality of both the driver and the rider. This exponential increase caused both of these companies to grow rapidly, which has lead to a developing problem for both companies when managing the satisfaction of their users. In their attempt to expand quickly, they have begun to lose many existing customers and have created a barrier between their subscribers and the company itself.
Uber is having a serious issue with the overload of riders and drivers, which has created problems for both parties in metropolitan areas.  Their focus on the “surge pricing” has led to a schism being formed between the customer base and the holding company. The issue is difficult because of fluctuating surge pricing that leads to drivers being upset when the rate should be higher than it is, and riders being upset when they have to spend much more than expected, especially in US cities. This issue directly hurts the experience of the user and can cause people to reach out to competitors such as Lyft or local taxis that have more consistent rates. This brings up a major issue Uber has had to overcome in scaling. They are growing at a rate where the supply, drivers, and the demand, riders, are fluctuating to extremes rather than maintain a balanced rate. This has to do with time and location, but Uber has no way to manage how many drivers can turn their app on. Surge rates can get out of control because drivers choose to or are not aware of the spikes in demand at any given time. Therefore, drivers are missing out on potential income and riders are spending more than desired, which hurts the quality of the service performed.
Uber, in addition to dealing with problems with their growth, are having issues with retaining their customer base. To see the extent to which this is a problem for them, refer to the chart below:

This chart, provided by a marketing research firm called Quettra,
illustrates a snap shot of the retention rates for Uber and their competitor,
Lyft. This graph shows the number of customers who, once they order their first
ride, stay with Uber or Lyft over some duration of days. Shockingly, within a
week Uber drops down to about ten percent customer retention. This can only
mean one thing; they are acquiring customers at a fast pace, but cannot hold on
to them. Retention rates are important metrics when analyzing the ability for
companies, such as Uber, to maintain their profits down the road. These rates
fluctuate for many reasons, but managing the transaction of a high quality
product or service to a customer is a great way to retain more customers.  
Many tech companies have experienced similar issues to Uber during
the growth stage. Investment and planning around gaining new customers leaves
your ability to retain them in question due to the lack of focus on how to
improve the platform. Companies, especially centering on tech, must keep
improving in order to keep the interest and the business of their customers
going or else they will experience failure. This has been the story for
companies, such as Atari, who went bankrupt because “they believed their revolutionary
gaming system would last until competitors ran them out of the market.” This
comes from a Bloomberg article written by Douglas Wong and Andrew Harris, which
describes how a “lack in innovativeness caused for their French partner to not
yield a profit in over a decade” (1). To avoid a significant loss such as the
one suffered by Atari, companies must focus on quality instead of reach to keep
themselves from losing their customer base, profits, and even their business.
Total quality management in a peer-to-peer company is essential in
order to continue to hold onto a large number of consumers. The range of the
variation for goods or services performed is too large to use as a metric.
Thus, eBay and Uber would most likely rely on the use of fishbone diagrams to
find causes for a customer to switch to a competitor. For example,
miscommunication between the buyer, seller, and company could cause one of
these parties to have complaints and issues with making a transaction. Since
these companies cannot manage the process of a transaction directly, it makes
them have to correct issues with their software to hold on to customers. However,
in a tech article provided by BBC News, eBay “set a guaranteed standard for
3-day delivery.” This allows them to set standards and guidelines for their
sellers using numbers to hold individuals accountable who go against this norm
and improve transparency between the buyer, seller, and company if there is a
complaint. This has led to these companies performing research to find what are
the core problems with their systems, and what does the consumer value most
when using their software.
eBay’s customer base, along with Uber’s, has experienced
technological issues with the protection of confidential information required
to make a username. Cyber security and the threat of being hacked is a major
threat to companies as they make the transition to electronic platforms. In
2014, in an article written by Jose Pagliery for CNN, EBay saw a large-scale attack
that affected “many of its 148 million accounts resulting in a loss of account
information, addresses, phone numbers, and email accounts” (1). One of the
fundamental roles of the holding company is to ensure the transactions and
private information of each customer is secure from other users and hackers.
Stealing that much data cost EBay customers and a great deal of money to fix.
Uber has not seen a large scale hack, however, people have often complained of
rides being significantly more expensive than the estimated fare rate.
Cyber security is a differentiating point between high quality and lower quality p2p companies, which is why Uber and EBay have prioritized making an effort to increasing their protection. In an interview with a Belarusian hacker conducted by Howard Amos, a reporter for The Guardian newspaper, he asked about the security of various systems. Sergei Pavlovich, who is serving ten years for crashing systems of companies and government agencies, stated, “it’s easier to hack an election than it is to hack eBay” (2). This comment shows the investment that companies like eBay and Uber are doing to increase the security of their users. It is frightening to think that a group of people with computers can steal hundreds of millions of profiles that could generate them billions in stealing people’s assets. In addition, Uber, according to a news report by Arjun Kharpal for CNBC, was responsible for “handing over 12 million peoples information to US officials” (1). With privacy being a big issue in the US over the past couple of years, this makes their consumers uneasy and more inclined to stop their use of the product. Therefore, companies with large revenues have to make the effort to protect their networks from the threat of a cyber attack. This is one of many costs the companies must deal with to ensure their personal quality checks are met.
The main cost incurred by eBay and Uber, since they do not have to deal with holding, creating, or selling inventory, is opportunity cost. For Uber, this means that they focus on targeting high growth markets to bring in customers away from their competitors. Their opportunity is based on acquiring more customers from the taxi companies, Lyft, and chauffeurs. However, for eBay, their opportunity cost is based on advertising the sales of users more frequently, since most transactions on the website never happen. This means that both of these companies are missing out on millions upon millions of dollars in more revenue because they cannot directly affect their inventory system. Therefore, conventional means, such as measuring their total productivity measure and the use of six-sigma, would not work because these metrics vary greatly due to the vast difference in the price and location of each transaction between buyer and seller. Therefore, a strategic approach could be to find out what initially drew the customer to using their service in the first place, which would entail asking existing customers questions to get valid research. However, their challenge is that they have no sales people and they have no direct line to a seller, which means that measuring these factors is difficult. Therefore, they rely heavily on the use of trends in their industries to find out how to properly reach their consumers.
The use of benchmarking has been critical for Uber and eBay when measuring their quality of services performed. For eBay, they set quality marks using their main competitor, Amazon. Refer to the graph, accessed through Ina Steiner’s article on Ecommerce, on the graph depicted below:

This chart, provided by Foresee, a researching firm, portrays the
customer satisfaction ratings for eBay, Etsy, and Amazon. Evident in this
graph, Amazon is the benchmark for this industry since their satisfaction
scores in 2013 were better than their top competitors. This means that, along
with an internal review, eBay should do more research on the practices of
Amazon to better reach the customer. However, their business models vary and
Amazon has the ability to have much greater control over their distribution
process, which they are renowned for being one of the best companies in the
world for doing. These scores may not seem that far apart; however, the
difference of even six percent satisfaction encompasses millions of users for
eBay that could switch to dealing with online retailers and go to Amazon. Uber
struggles with these scores as well, which is why you can see the rise of
competitors who offer a very similar platform, such as Etsy and Lyft, taking
away some of their market share and potential revenue. Another factor that
plays into these poor scores is reflected by the difficulty that Uber and eBay
have is their partnering with “suppliers.”
Uber and eBay do not have any direct suppliers, however, they rely
on the sellers or drivers to fill that role. In any supply chain network,
cooperation and transparency amongst the company and its suppliers is crucial
to operating efficiently at a large capacity. While many companies are relying
on large distribution channels to deliver a product or service, these are
unique because they go from supplier directly to the consumer for each
transaction. The two companies decentralize their organization meaning they
give control over various parts to individuals in order to promote increases in
quality for each transaction. In eBay’s case, they rely on individuals to
procure good that they do not want or need anymore that allows for a potential
buyer to make the purchase and give eBay their profits in holding fees. This
means that they have a large number of stockpiled goods on their site awaiting
a sale, which occurs during different seasons for a variable amount due to each
being unique. In Uber’s case, they rely on their ratings system to promote
supplier preferencing or the ability to control that is going to provide the
service to the customers. However, for both of these companies, they struggle
to create long-lasting partnerships, which hinders their ability to
consistently provide a good or service at the best quality. Since they cannot
draft new expectations for each ‘supplier’, they must be dependent on the
honesty and ability for the transaction to occur to the customer’s
expectations. Trusting a supplier is something that many traditional companies
have both issues and doubts about, but peer-to-peer transaction based companies
will not be successful unless the suppliers can deliver. Therefore, it is
important for eBay and Uber to make their company attractive to the best
possible suppliers of their good or service.
Developing an attractive platform for people to offer a product and
time on has allowed companies like Uber and eBay to bring in high quality individuals
to increase the brand image of these companies. For example, a report written
by Niall McCarthy, based on information provided by The National Bureau of
Economic Research, states Uber drivers can make 1.5 times the amount a
traditional taxi driver can make when driving on the app. In addition, their
slogan “Get your side hustle on” markets to the working middle class Americans
who want to work part time to make extra cash, which helps broaden the amount
of candidates they can choose from.  Moreover, as a person who grew up right
outside of New York City, the prices of taxis can get very high depending on
the time of day, and based on experience, an Uber costs less, and is much more
convenient to find than a taxi cab. Similarly, eBay markets itself by allowing
people to make extra cash on the goods they do not want, while also providing a
discount for the buyer. Since they have to find a way to market to each side of
the transaction, these companies made sure to be competitive amongst both the
companies selling these concepts on top of the people who are purchasing them
by slashing prices and increasing profits for the buyer and seller. This is
also a big reason why they have not been profitable for years because they had
to grow and build with not a lot of cash inflow. Therefore, creating a platform
attractive for consumers has allowed for them to both grow in size and take in
quality people to represent the company and bring in profits.
The ability to create an attractive platform to increase customer
satisfaction has been influenced by their ability to offer their good and
service at a large scale. Similar to an economy of scale, these companies
create a stockpile of drivers and products in their system awaiting use or
sale. For example, Uber understands that when people want a ride, they need to
get a ride to someplace that can be dependent on time. This means that having a
large amount of drivers available is important to make sure a customer can get
to their destination within a reasonable amount of time so their expectations
are met and they continue to order rides. Similarly, people use eBay to find
deals or odd items you can’t find at a regular store, so it is important to
have a diverse set of products on their site to connect the right buyer with
the right customer. In both of these cases, the companies satisfy their users
needs to keep the satisfaction with the company high. However, an important
aspect for these platforms, especially in the tech world, is the need to
continue to innovate their user experience to improve their ability to satisfy
the customers.
eBay has invested a great deal of money in order to make the quality
of their platform better for their users. They have been able to do this by
increasing their investments into the acquisition and developing of programs
that would improve their software. A graph portraying how they choose to use this
investment is included below:

Shown above, included in a blog post based on statements from eBay’s
CEO, John Donahoe, are the various investments made for eBay’s growth. This
data was acquired from CB Insights, a subscription based website providing
metrics and analysis on companies across various industries. According to the
pie chart above, the most notable percentages are ecommerce, their online
platform for transactions, and the investment in their payment system being
PayPal. In a press release by eBay on their website, PayPal, a system for
payment developed by eBay, Inc., made transactions amongst users more
efficient, which is why there are “more than 152 million accounts” (eBay, Inc.
Staff). To invest in a system that helps to grow their website was important
because consumers can see when a company decides to make their product more
user friendly. Moreover, all of their acquisitions can be reflected on the need
to improve and retain their customers from moving to other more appealing
designs.
A company must know how to connect with their consumer in order to
improve to their satisfaction. In addition, acquiring other companies that can
improve your own is essential for holding on to their market share. This is
because maintaining a high value product that leaves the customer dazzled with
each new improvement allows for companies like eBay and Uber to continue to, as
CEO John Donahoe said in his statement about PayPal’s separation from eBay, “understand
how to innovate and deliver compelling experiences for customers.” In a market
where innovation happens seemingly every day, it is essential to continue to
grow and build your company in order to compete. Having large amounts of
revenue streams, such as those held by Uber and eBay, has allowed for these
companies to invest in their software to prevent other competitors from
overtaking them. On top of this, being one of the first companies into their
market gives them a competitive advantage because they get to set the prices
and standards that would be competitors have to meet and challenge.
Setting standards and correctly identifying factors that influence a
customer’s satisfaction rating is important for remaining profitable and
competitive. A graph, provided by an article written by James Cook for UK
Business Insider, depicts Uber’s information on their most frequent complaints
from riders using their app. This graph can be seen below:

This graph depicts the top five complaints help by riders when they provide feedback for why they did not give a driver a five-star or high quality rating. This chart can be used by quality control employees to properly identify and fix issues that people have with the app. In response to these issues, “Uber, back in 2014, released to their largest market at the time, San Francisco, a list of how to improve their ratings.” (Cook 1). A statement such as this one not only improves the satisfaction of the drivers using the app, but can help to improve the quality of the services performed as well. Since Uber is a product that provides a service for riders, and drivers, it could take feedback such as this and conduct a QFD analysis on how they can improve as a whole. For example, Uber started making drivers use Google Maps, which could very well be a response to the large amount of negative feedback focusing on the poor routes drivers are taking. Moreover, I remember them updating the app to allow you to track and preview the shortest possible route for your trip. A QFD analysis finds the most sensitive areas of customer feedback and the product or quality of service, and compares them to find what is the source of positive or negative feedback of a company. One can say that the complaint about driver route can be reflected on the company, so it is in their power to provide systems to improve the quality. However, complaints such as poor driving or being disrespectful to the customers reflects poor quality on the driver, which is why Uber has the ratings system to find the individuals with the most complaints so they can be replaced to improve the quality of the brand and service. Thus, it is important for Uber and eBay to continually have contact with the customer to understand their expectations and complaints in order to continually meet their expectations when they use their company’s products.
An important factor to consider with customer expectations is that they are constantly changing. Consumers enjoy updates and new designs when it comes to using a product. As a user of Uber and eBay, their designs change frequently in response to the need to keep a consumer engaged and bring them back to the app or website. This is accomplished through marketing research, which supports quality management because it provides up to date information on various types of consumers. Such updates are crucial in staying competitive in their markets.
Conclusion:
Uber and eBay, like many technology platforms, experienced many challenging issues with their products, but maintaining a high quality has allowed them to persevere. They have faced problems from cyber attacks and user security, issues with the functionality of their software, difficulty managing the relationship between the buyer and seller of the good and service, issues with generating a profit due to the need to invest in growth, and the constant threat of innovation from a competitor that could drive them out of business. These problems have cost them greatly, and it is no secret that these have all been barriers to entry for new companies because only one with the manpower and funds are able to handle them without fearing bankruptcy. No company is bulletproof or has no flaws despite their size, so the need to innovate and remain attached to the expectations and feedback of the consumers is what has allowed for Uber and eBay to remain profitable over many years. These companies have championed the quality control issues that have arose due to their large investment capability and research into the minds of their consumers. In addition, their research lets them control the people offering a good or service, which has helped them improve quality by pinpointing individuals or trends that are causing customers to complain and give negative feedback. They have entered a market where they depend on not only consumers using their product, but individuals taking on the role as employees to uphold the company image and quality of the product. In an industry filled with incredible successes and miserable failures, the risks have always been high, but these companies have been able to survive and thrive thanks to quality management.
References:
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