Innovation and Engineering in America

Meet Your New Sales Force: Consumers


Who sold the most Major League Baseball tickets this year? The Yankees? The Red Sox? Nope. It was the fans.

StubHub (EBAY), the official MLB fan-to-fan ticket-selling exchange, has done an estimated $300 million in business this year and is growing 30% annually. For virtually any Yankees game this season, there are over 5,000 seats being resold by fans in every section of the ballpark.

As they say, baseball is just a microcosm of real life. In the last five years, hundreds of businesses have started up to let consumers sell directly to other consumers and they are turning traditional business models upside down.

Need a place to stay in New York? The leading supplier of New York lodging is no longer Marriott or Hilton but Airbnb, through which individuals can rent their apartments and rooms out to travelers. The site features myriad listings with locations in every neighborhood, including photographs and guest reviews. Founded in 2008, Airbnb is racking up 10,000 guests per night. The company raised more than $100 million in capital at a valuation of $1 billion.

That’s just the start. Want to rent a car?  Instead of Hertz or Avis, check out Getaround.com. You can rent anything from a Tesla Roadster to a Honda Accord by the hour, day or week—from people in your neighborhood, insurance included. Some San Franciscans reportedly earn $500 per month just by renting out their cars.

Hire a Driver Going Your Way

Still can’t afford your own rental? Zimride.com lets you buy a seat from a driver heading to your next destination. Recently there were 28 drivers en route from San Francisco to Los Angeles, charging $20 to 45 per seat. Each driver has a profile, vehicle information, a link to a Facebook page, and ratings from previous riders.

It is possible to buy or rent anything from anyone now. Get a home-cooked meal tonight at Gobble.com, a new website via which individuals sell home-cooked meals. On Zilok.com, you can rent a power tool or a piece of equipment from a neighbor. On TaskRabbit.com, you can hire someone to do chores around the house, such as picking up groceries, dog walking, or handiwork.

Today, everyone is a potential marketer and seller of products and services. The Internet and social networks are making “peer-to-peer” transactions easier. Consumers love it. This sector resembles the local farmer’s market: It feels good to support the community and the hard-working folks down the street, rather than a big, faceless company. Plus the quality of product or service is often better because individuals put their reputations on the line.

While many companies might feel threatened, peer networks represent opportunity. Most consumers who love your products want to tell their friends and acquaintances, so these folks can become an extension of your sales and marketing team.

Motivate and Recruit Fanatics

As with any sales organization, you need to motivate your people and give them cool products they’ll want to show off. Home parties are booming because they’re a great way for companies to leverage the market. The $3 billion scrapbooking business started through Creative Memories’s home parties. Mars has a successful home-party concept with “Dove Chocolate Discoveries:” The company recruits chocolate fanatics to become “chocolatiers” who exclusively sell a special line of high-end chocolates and are trained to make desserts with them.

Any product with fanatical customers is a prime candidate to help companies sell higher-end, often more-complex products. CytoSport began selling Muscle Milk to fitness trainers and other enthusiasts, who in turn sold them to friends and other athletes. The products recruited a corps of enthusiasts in weight rooms and fitness centers until CytoSport signed a distribution agreement with Pepsi (PEP). Muscle Milk now accounts for about $200 million in annual business.

A key to this new model is letting consumers interact and add value to your product. Take the iPhone and iPad. Anyone can develop a new app and sell it at the Apple App Store. This model creates huge value for users and provides an incentive for individuals to create apps. Most important, it creates a nice revenue stream for Apple (AAPL), which takes a cut of every sale.

While this sounds simple, most corporations have a hard time digesting the concept, fearing they will lose control of their products. Microsoft (MSFT) was in this camp until it put out Kinect. XBox hackers turned the motion-sensing, expression-recognizing gaming device into a controller for robotics, rescue missions, even medical rehabilitation devices. Microsoft embraced the surge and created a Kinect software development kit (SDK), which gives developers easier access to modify the device. More than 10 million Kinect units have been sold and the number is growing as people find more uses for them.

Don’t Fight the Trend, Leverage It

Consumer-to-consumer commerce is efficient and eliminates waste. But for many companies, cutting out the middleman—and the company’s role in the transaction—means cutting into profit margins. Naturally, most want to fight it. Rather than trying to stem a tidal wave of inevitable change, companies need to find creative ways to leverage the trend.

Season ticket sales fell after MLB signed its deal with eBay’s StubHub in 2007. As many insiders blamed the StubHub deal and called for it to end, a few, more-innovative teams began tinkering with the ticket-selling model. It turned out that MLB was losing revenue because it wasn’t pricing tickets as efficiently as the market that was being set by the fans. Many teams have since adopted “dynamic pricing,” which means they raise and lower single-game ticket prices according to anticipated market demand, factoring in opponents, starting pitchers, and other variables, much as sellers on StubHub set prices.

Teams that adopted dynamic pricing, such as the San Francisco Giants, Houston Astros, and St. Louis Cardinals, reported a 15 percent to 25 percent increase in ticket revenues from the change. The new pricing is also better for fans. It keeps a greater number of big-game tickets available for those who really want them. For 75% of the games, in fact, ticket prices actually declined, making seats more accessible to the average fan and drawing consumers into the stadiums, where they spend money on hot dogs and beer. The Houston Astros—trailing all other teams in baseball and on pace to lose 106 games this year—rank ahead of 13 other teams in attendance, much of it through the magic of dynamic ticket pricing.

That’s the real power of the consumer-to-consumer market. It’s more efficient. Everyone wins.

Larry_popelka
Larry Popelka is founder and chief executive officer of GameChanger, an innovation consulting firm.

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Companies Mentioned

  • EBAY
    (eBay Inc)
    • $49.2 USD
    • 1.25
    • 2.54%
  • PEP
    (PepsiCo Inc)
    • $93.55 USD
    • 2.04
    • 2.18%
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