eBay Bucks Drops VIP Benefit

January 26, 2011 · 0 comments

According to a report at AuctionBytes, eBay is discontinuing its VIP level of membership in eBay Bucks effective 1/31.  VIP members were allowed to earn a max of $750 in eBay Bucks every three months, versus a $500 cap for non-VIP members.

Last Thursday, eBay CEO John Donahoe said in a conference call with investors (see SeekingAlpha) that the company was “surprised at the attractiveness [of eBay Bucks] to heavy eBay buyers.”  Eliminating the VIP tier means the company avoids paying an additional bonus of up to $250 a quarter to heavy eBay shoppers who, face it, are going to shop at eBay anyway.

Should a loyalty program reward its most loyal customers?  Yes — but in a way that makes sense to the bottom line.  Department stores offer perks like free gift wrapping, coupons, and special cardholder discount days to motivate shoppers to continue to shop with their store and not their competition.  But unlike the case of department stores, where there are a dozen or more to choose from, eBay HAS no perfect substitute.  There are other sites that may try to compete but eBay has close to a monopoly on the market.

When you have heavy users of a business that has no other real competitors, throwing money at them to do something they were going to do anyway makes no sense.

What does make sense is for eBay to come up with incentives that bring in new customers (and Donahoe acknowledges that the current eBay Bucks system isn’t going to do that), or incentives that encourage additional sales by infrequent buyers (and I don’t think that 2% in rewards is high enough to accomplish that, either).  Back to the drawing board, boys!

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