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An in-depth analysis of airbnb's marketing strategy and current business model. The author explores how airbnb's user experience, offline marketing collaborations, and successful referral programs have contributed to its success. The document also discusses the company's extensions, such as airbnb plus and airbnb collections, and the legal issues it has faced. Sources include both electronic and printed materials.
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BAKALÁŘSKÁ PRÁCE
Markéta Veverková 2021 Prohlášení Prohlašuji, že jsem tuto bakalářskou práci vypracovala samostatně, s použitím odborné literatury a pramenů uvedených v seznamu, který je součástí této bakalářské práce. ............................................................ podpis V Plzni dne Markéta Veverková
Markéta Veverková 2021 Introduction The objective of this bachelor thesis is to introduce a marketing strategy and business models in general, however, the main purpose is to present the company Airbnb, their marketing strategy as well as their business model. As a linguistic part of this thesis, the part will consist of a glossary. This thesis will be divided into two main parts – theoretical and practical. The theoretical part will be classified into two main sections. The first one will be theoretical and general, concerned with marketing strategy, marketing strategy analysis tools, and business models without definite specialization. The second part will be focused especially on the company Airbnb. It will be composed of the story of Airbnb from their very beginning, their marketing strategy, and also analyses of their environment which are SWOT analysis, PEST analysis, and Porter's five forces analysis. The description of the business model of the company will be included as well. The last chapter of the thesis will be the glossary of vocabulary associated with the theme. The practical part will be connected to the current global situation relating to the coronavirus pandemic. This part will consist of the approach of Airbnb company to the crisis as well as the way how they handled the obstacles and survived the pandemic.
Markéta Veverková 2021 innovations in the scientific and technological industries. People started to purchase goods more than ever did because it was less complicated for them to buy things than making it themselves. During the early twentieth century, the competition was increasing and became very intense. Thus, the need of businessmen to use marketing techniques, in order to increase selling, became an essential part of their competitiveness. The need to increase production outputs and market shares covering all industries also came up with the increasing competition. The aim of businessmen soon became to persuade clients that the products and services provided by one company were better than the same ones offered by another company. (Historycooperative.org, 2016) According to Philip Kotler's theory concerning the evolution of marketing, the marketing has undergone through five stages since the beginning of the Industrial Revolution. These stages are: the production era, the product era, the selling era, the marketing era and the holistic era. (smallbusiness.chron.com, 2020) The production era is associated with the industrial revolution. During this period, when a large progress in technology was made, the machines replaced the human labor. As businessmen believed that the reduction of costs equals success.The hand-made products required higher costs and machines made those production costs lower. It means, the price of final products decreased and the result was that more people could afford to buy the goods. Therefore, they focused their attention to the production and distribution at the lowest possible cost. (Businessyield.com, 2020) The product era was focused on the product to be the best version of itself. The companies endeavoured to add as many features to the product as possible to attract the consumers. (Yourbusiness.azcentral.com, 2019) During the selling era, the main point catching the company's attention were mainly transactions. From the beginning of the twentieth century, the competition was increasing and the spotlight of the marketing moved to selling. Hence, the companies were doing everything to sell their product, it oftentimes even involved the price reduction. (Yourbusiness.azcentral.com, 2019) The main point of the marketing era was to match the product with the needs of the consumer. They made an effort to understand the consumer's needs and consequently to satisfy these needs. Thus, the companies used surveys and analyses of their market to understand the consumers. The results of these researches were useful for their marketing strategy. (Businessyield.com, 2020) The holistic era involves all aspects of the company, such as production, distribution, advertising. In this period, marketing is not focused solely outward, towards the customer, but also inward, to the company's organization. (Yourbusiness.azcentral.com, 2019)
Markéta Veverková 2021 The contemporary marketing era is known as the digital marketing era or the social marketing era. Recently, social media is crucial. Establishing personal connections and building relationships on a global scale is the main point of this marketing era. The customer is directly involved in the product development decisions, so that the marketing is based on the personal contact more than before. The company has a larger opportunity to create loyal relationships with customers. (smallbusiness.chron.com, 2020)
1. 3. Marketing strategy and its function in the company A marketing strategy helps the company set up their new product or service with the best chances for making a profit on the market. A marketing strategy of a company is related to a business plan for reaching potential consumers and afterward turning them into customers of the company’s business. The company tries to encourage consumers to purchase their products or services. (Investopedia.com, 2021) A thorough marketing strategy should cover all the four "Ps" of marketing, such as product, price, place, and promotion. The product represents the core of the product, the product itself – quality, guarantee, design, benefits, etc. The price refers to the price of the product. Furthermore, it contains the discounts or the conditions of payments. The place determines where the product is sold, including supply and transportation. The promotion indicates the way how the consumers get to know the product – commercials, public relations, etc. These four Ps are also called a marketing mix which helps the company to define its marketing options. (Investopedia.com, 2020) A marketing mix was introduced by an American marketing professor, Edmund Jerome McCarthy, in his book Basic Marketing: A Managerial Approach in 1960. (En.wikipedia.org, 2020) **1. 4. Marketing strategy analysis tools
Markéta Veverková 2021 becomes invalid. (Sarsby, 2016: 4) Example of PEST analysis; source: pinterest.com
1. 4 .2. PEST analysis The abbreviation PEST stands for the external factors which influence the business. These factors are political, economic, social and technological. PEST analysis is a method whereby a company might estimate the external factors which affect its operation in order to become more competitive in the market. In general, the PEST analysis is a strategic audit of the impact of macroenvironment. PEST analysis has a variation which includes the additional aspects of legal and environmental. In this case, the acronym is PESTLE analysis. This variation on the PEST analysis format is popular mainly in the United Kingdom. (Investopedia.com,
The political aspect of the PEST analysis is focused on the areas of policy which affect the company, such as taxes, employment law, international relations, political climate of the nation, etc. In other words, this aspect is occupied with government policy and changes in legislation in order to the company’s ability to succeed. (Investopedia.com, 2020) The economic aspect of the PEST analysis is related to the external economic
Markéta Veverková 2021 issues, such as the key factors of interest and exchange rates, economic growth, supply and demand, inflation and recession. (Investopedia.com, 2020) The social aspect of the PEST analysis is concerned with demographic and cultural areas of a company’s target groups, for example cultural attitudes, workplace and lifestyle trends, religious and ethical beliefs, age distribution, etc. (Investopedia.com, 2020) The technological aspect of the PEST analysis refers to the technological issues that play an important role in the company, such as development of technologies, trends and changes in technology, government spending on technological research, etc. (Investopedia.com, 2020) PEST Analysis can help the company to recognize and thereby make use of the opportunities offered by existing conditions in the business environment. Companies can apply this analysis for identifying current or possible future challenges, allowing for effective planning of how to best manage these challenges. PEST Analysis can be used in association with other types of strategic analysis tools, such as the SWOT analysis (strengths, weaknesses, opportunities, and threats), for acquisition of even more comprehensive results. (Investopedia.com,
It is assumed that PEST Analysis was firstly introduced under the acronym ETPS by Harvard professor Francis J. Aguilar in his book Scanning the Business Environment published in 1967. Francis J. Aguilar described the economic, technical, political, and social factors as the major influences on the business environment. A few years later, the letters from the acronym were reorganised to the convenient version which is used today. (Investopedia.com, 2020)
Markéta Veverková 2021 under pressure which means that customers are able to influence the price and quantity of demanded products or services. In other words, the power of customers affects how many buyers or customers a company has, how important each customer is, and how much the company would spend on finding new customers. When the clientele is small and more powerful, the customer is most likely to succeed in negotiating about lower prices or better deals. (Investopedia.com, 2020) Power of suppliers depends on the number of suppliers available on the market. The fewer suppliers occur in the industry, the more company would be dependent on a supplier. The company's suppliers can be a source of power over the company when there are only a few substitutes. The more suppliers or low costs spent on replacing the competitive suppliers, the lower the company's input costs are and it is easier to enhance the company's profits. (Investopedia.com, 2020) Threat of substitutes is linked to substitute goods or services that can be used instead of a company's products or services. When the company offers special and unique products or services for which there are not any close substitutes, it will have more chances to increase prices. When there are close substitutes on the market, the customers will have more options and they might choose a product or service of another company thus the company can be weakened. (Investopedia.com,
The threat of new entrants refers to new competitors in the field. A company's power is impacted by the force of new entrants on its market. The less time and money the competitor spends to enter a company's market and be an effective competitor, the more already existing company could be weakened. (Investopedia.com, 2020) The five-forces perspective was originally described in a Harvard Business Review article in 1979 and it is named after its author Michael E. Porter, a professor of Harvard University. In 1980, Michael E. Porter published the book Competitive Strategy: Techniques for Analyzing Industries and Competitors where he defined the model of Porter's five forces. (En.wikipedia.org, 2021) 1.5. Business models and their function The term business model expresses the strategy for making a profit in a specific marketplace. Business model includes products and services, target market and all expected outlays. The main point of the business model is the value proposition. The value proposition describes why a company's service or product is of more value to the consumer than the similar one offered by the company's competition. In other words, it describes how the product or the service differs from the others. There exist as many types of business models as types of business. For instance, direct sales, franchising, advertising-based, and brick-and-mortar stores are examples of traditional business models. (Investopedia.com, 2020)
Markéta Veverková 2021 Business models can help new enterprises attract investor's interest. The investor should find out how the company earns its money, and the business model can help him go through the financial data. (Smallbusiness.chron.com, 2016) The core of the business model consists of four elements - product or service offered by the company, how the company plans to launch the product or service, how the business will make a profit, and all the expected expenses. Through the business plan, the investors evaluate companies that interest them as a possible investment. A business model of the new company should contain the startup expenses and financing sources, the target market base, marketing strategy, competition, and projections of revenues and expenses. Also, it can help the new company find a partner among the other established companies. On the other hand, the established companies should be regularly working on their business models. It is necessary to update their business plans to not fail in trends or upcoming challenges. From time to time, many companies revise their business models to reflect changing business environments and market demands. (Investopedia.com,
There are three main purposes of a business model. First, the company can briefly describe its business venture via the business model, and consequently, this description can be developed into a complete business plan. Secondly, it serves the potential investors and employees as the insight into the company's focus. Ultimately, it can be used even as a reminder for the founder, to follow the original direction of his company and stay on his track. (Investopedia.com, 2020)
1. 6. The story of Airbnb First, I would like to explain how the idea of Airbnb was born. It all started in California in 200 7 , however, the company was officially established in 2008. Two young men, Brian Chesky and Joe Gebbia, were struggling with paying their rent after they had graduated from Rhode Island School of Design and they were in need of income. In 2007, they were about to take part in the event of the international design conference in San Francisco and they expected a lack of accommodation during the event. Thus they decided to rent out a part of their apartment where the visitors could sleep on air mattresses. That is how they embarked on their little business. Chesky and Gebbia started to call the new venture AirBed&Breakfast since then and they promoted their idea on design blogs. After AirBed&Breakfast had attracted three customers and received positive feedback from them, Chesky and Gebbia started to think about becoming middlemen and making money through it. (Gallagher, 2018: 32 - 35 ) At the beginning of 2008, Chesky and Gebbia entered into partnership with engineer Nathan Bleacharczyk, Chesky's former roommate. He joined them as a Chief Technology Officer and the third co-founder as well. Nathan Blecharczyk coded the company’s original website named Airbedandbreakfast.com, thereafter they offered a short-term accommodation and breakfast on this web. A very first
Markéta Veverková 2021 Since the user experience was crucial for Chesky and Gebbia, they wanted to make the Airbnb experience to be effortless, they wanted their website to be easy to use. Steve Jobs was a genuine design hero for Chesky and Gebbia, he was inspiring for them. They found inspiration in his three clicks principle. When Steve Jobs invented iPod, he intended users to never be more than three clicks away from playing a song. The point is, in the case of Airbnb, that the customers should be able to book their room through no more than three clicks. On their journey to simple reservation system, there were many elements that their website needed to solve. Such as payment, customer service, and reviews. The most intricate part of this process were payments. The main issue was the fact that they needed to remit 97 percent of the payment back to individual hosts. Their Chief Technology Officer, Nathan Blecharczyk, was trying his best to build such a mechanism. It lasted months to create the convenient and functional system but after all the complications and abortive attempts, he built an end-to-end payments system. This payment system was able to satisfy their requirements. The end-to-end system enables to solve the intricacies of global markets and currencies and can remit payments to individual hosts. (Gallagher, 2018: 184- 185 ) 1.7. Marketing strategy of Airbnb The marketing approach of Airbnb is focused on building and maintaining the strong community created among its guests and hosts and the company targets the long-term loyalty of both parts of customers. This attitude is connected to offline marketing techniques that are also utilized by Airbnb. The services of the company are dependent on users' positive physical experiences which reinforces the company's reputation. Airbnb's guests are motivated by the opportunity of enjoying exceptional holidays as well as securing competitive rates. Offline marketing of Airbnb includes guerrilla marketing. The company utilizes guerilla marketing either when it entrances the new geographical markets, or as a supplementary device to attract additional attention in already existing markets. One of their guerilla campaigns was, for instance, a floating house that was sailing for five days on the River Thames. This campaign was realized in 2015 in London. This unusual matter attracted many people, it resulted in approximately 200 million reactions on social media. The campaign roughly brought about 10,000 new users to the platform overall. (Startingbusiness.com, 2020)
Markéta Veverková 2021 Airbnb’s floating house; source: pinterest.com (https://cz.pinterest.com/pin/314759461433546574/) Offline marketing collaborates with the company's elaborated digital marketing strategy. Airbnb significantly invests in digital marketing. It focuses on effective sharing of content to the company's target group through diverse channels, especially through social media. Influencer marketing is an integral part of Airbnb's digital marketing strategy. The company collaborates with high profile celebrities to broaden their range of advertising to their target group, in other words, to their potential new customers. These partnerships typically involve posting images of luxury Airbnb stays, which are sponsored by Airbnb, on celebrity's Instagram. The company also keeps its own blog aimed especially at hosts. It is frequently updated with tips for home improvement, statements of Airbnb experts, and relevant platform updates designed to engage users. (Startingbusiness.com, 2020) The company invests in market research to obtain data about its constantly developing user demographic, and note their rapidly changing requirements. These researches are effectuated through Airbnb's website and mobile application which collect information about customer behavior, preferences, age, gender, location, and more. Airbnb utilized gathered data to identify niche markets, create new features, and adjust its marketing delivery with great success. (Startingbusiness.com, 2020) As I have already mentioned above, the user experience was crucial for the company. Hence Airbnb created a referral program that rewards community members for inviting new users to the platform, and therethrough the company established one of their marketing tactics. The referral program helps the company to expand into the awareness of the new potential users through existing users. For
Markéta Veverková 2021 Illustration of the campaign We accept; source: airbnb.com 1.7.1. Swot analysis of Airbnb In this type of analysis, we will focus on the strengths, weaknesses, opportunities, and threats of Airbnb. Strengths of Airbnb include for instance their good customer service and it is also one of their main strengths. Airbnb provides users a customer service of twenty-four hours a day, seven days a week. Furthermore, Airbnb is present on many social media platforms, it helps the company to be more in touch with their customers and also to be more visible to them. (Marketing91.com, 2019) For example, they dispose approximately of 4,7 million followers on Instagram ( March 2021). It is related to the fact that Airbnb is a well-established brand, the company is known worldwide. It is active in approximately 220 countries. (Stratosjets.com, 2021) Airbnb offers quite extraordinary experiences when compared to hotels. Guests are accommodated in unique rooms and houses. Airbnb offers a diverse range of accommodation, guests can spend a night in the city center apartment or in the country cottage. (Marketing91.com, 2019)They can choose from cabins, farms, tiny homes, boats, castles, yurts, treehouses, or even igloos, etc. They can stay in a private room or even a private house, or they can sleep in a shared room with the option of meeting new people. Airbnb made an expansion that allows guests to book activities with guides, which are for example guided tours, cooking classes, and meetups. (Airbnb.com, 2021) Thanks to this expansion, the guests have more options to meet new interesting people and also new interesting places. Another strength of Airbnb is the fact that it is a cheaper alternative to other resorts and hotels. The prices are naturally very varied depending on the location. However, every single person can find what he or she is looking for because there are so many options, as I have already mentioned before. Everyone can find accommodation which fits their budget. Before the guest commits to making a decision, he or she can check the reviews provided by previous guests. This is the way how to build and maintain trust in the Airbnb community. During the year 2018, Airbnb extended its offer with Airbnb Plus and Airbnb Collections. The Airbnb Plus program recognizes the additional amenities, such as well-designed,
Markéta Veverková 2021 fully equipped, and perfectly maintained spaces. The feature Airbnb Collections is a collection of homes that are highlighted for a specific type of trip or occasion. For instance, Airbnb for work, for families, for honeymoons, for parties, etc. These features are also considered to be the strengths of Airbnb, it facilitates the process of choice for the guests. (Marketing91.com, 2019) The major weakness that Airbnb has to face is the violation of housing laws and regulations. The issue is that hosts are paid for offering their rooms or apartments for short-term accommodation, which as per many housing laws is against the law. For instance, the housing law in New York allows owners to rent out their property for a short-term stay (less than 30 days) provided that they do not live in it. Another problem of Airbnb could be poor hosts. Airbnb relies on the quality of services provided by the hosts, and the company does not have any direct control over them. When the host does not follow the Airbnb guidelines, it can damage the reputation of the company or even threaten their profit. The business model of Airbnb is dependent on hosts to a certain extent which makes the company vulnerable in its success. Furthermore, their business model is easy to replicate because it is a very simple concept. On the other hand, Airbnb is spread all around the world thus it would be hard for the new brand to turn competitive. (Marketing91.com, 2019) The opportunities of Airbnb include expansion of its product. The company is constantly evolving and introduces new features to customers, such as the possibility of travel guides, experiences, and activities, such as surfing, hiking with rescued dogs, crafting, kayaking, soccer events with fans, etc. Or, for instance, the company could expand its product by providing car rentals which is related to expansion into other markets. All of these services are, besides the website, available in the well-arranged mobile application that enables the hosts and guests easy and simple connection. Another possible opportunity of Airbnb is support provided by celebrities, either from the position of the host or the guest. (Marketing91.com, 2019) Celebrities who rent a property on Airbnb are, for example, Elizabeth Taylor and Kevin Jonas. Or there are former properties of celebrities rented on Airbnb, such as Tyler Perry’s manor in Georgia, former home in Montgomery of F. Scott Fitzgerald and his wife, Zelda, a tiny studio in Maui where Jimi Hendrix stayed when filming Rainbow Bridge, etc. (Travelandleisure.com, 2019) Celebrities who used the services of Airbnb are, for instance, Rihanna who spent a vacation in the Paul Mitchell Estate in Hawaii, Emma Stone who went for a trip to Oahu, or Beyoncé who rented Airbnb during Super Bowl. (Cntraveler.com, 2016) The last element of SWOT analysis is threats. It is beyond doubt that threats include competition. One of the main competitors is HomeAway, furthermore for example Tripping.com, HomeToGo, FlipKey, VRBO, etc. Also, local laws and regulations may threaten the Airbnb business. Plenty of cities all around the world have some short-term rental restrictions. Likewise, many cities adapted their law so