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Kodak EasyShare Gallery: holding memories hostage
Abdulrahman N. Alrashed University of Tampa
Keith R. Schott University of Tampa
Alan S. Demo University of Tampa
Sarah Linthicum University of Tampa
Kelly Flynn University of Tampa
Erika Matulich, Ph.D University of Tampa
Raymond Papp, Ph.D University of Tampa
Abstract
Kodak, a pioneer of the photographic industry throughout the last century, entered the online photo sharing market with great fervor but experienced difficulties early on. In the following years Kodak’s strategic decisions led to the rapid demise of their EasyShare Gallery. This case illustrates the pitfalls of failing to understand customer needs and wants. The case discusses the importance of understanding strategic marketing, illustrating the significance of brand equity, and understanding the significance of research, implementation, and evaluation of the target market.
Keywords: marketing, Kodak, social networking, online gallery, marketing research, customer value, core competencies, customer service, EasyShare, pricing strategy.
INTRODUCTION
This case covers the time frame in Kodak’s history when photographs were moving from being printed and stored in albums on a shelf to being not printed and digitally stored in electronic albums that could be viewed by the entire world over the web. Although Kodak was a leader in all things photographic until the 1980’s, Kodak was quickly losing market share and the digital advancements of other companies led to Kodak having to play catch up in the digital market. To address this problem, Kodak purchased Ofoto.com, an online photo sharing site, to increase its presence in the digital storage arena. Kodak subsequently changed the name of this website to EasyShare Gallery. The decision to change the format of the online gallery was a turning point in the customer value proposition for Kodak. The goals of this case include exploring ways Kodak could have changed the website to increase revenues without damaging the Kodak brand or alienating its customers. By exploring and understanding the need for pre-planning and marketing promotions as they relate to adding value to customer experiences, the choices a company makes that play a role in the customer experience and the company’s success or failure become evident. This case is suitable for both undergraduate and graduate courses in marketing, e- commerce, information systems or business management in areas where the students are studying strategy implementation and customer value.
CORPORATE HISTORY
George Eastman dropped out of school at the age of 14 (George Eastman Biography, 2004). His teachers said he was an average student, but he had an inventive mind and a creative spirit. He also had a gift for organization and management. In his mid-twenties he planned a vacation and bought all the equipment to take photographs on the trip. Eastman became fascinated by the photography process, but felt it was far too labor intensive and the amount of equipment required was overwhelming. He also felt the equipment was difficult to operate and transport. (History of Kodak - George Eastman, 2011) He began reading everything he could about photography and the advances the Europeans were making on the subject. He then began to experiment and eventually, after many attempts, invented a dry plate technique that dramatically reduced the intricacies of the process. He patented this dry plate and a machine to produce dry plates. (History of Kodak - George Eastman, 2011) "I really needed only a one horse-power," he later recalled. "This was a two horse-power, but I thought perhaps business would grow up to it. It was worth a chance, so I took it." - George Eastman (History of Kodak - George Eastman, 2011) Thus, in 1880, Eastman’s company was born. He leased office space and began selling his dry plates to professional photographers. Later, he realized that with the improved technology photography could be an “everyday affair.” With this in mind, he set a goal to make photography “as convenient as the pencil.” He experimented until he had many sequential exposures on a roll instead of using individual dry plates. Through his research and experimentation, he paved the path photography would follow for the next hundred years. (History of Kodak - George Eastman,
In 1888 Eastman invented the KODAK camera, which was preloaded with enough film for 100 pictures. The camera was small enough to be handheld and light enough to carry conveniently. The camera cost $25 and could be returned to The Eastman Company for
Kodak’s marketing team hoped offering items such as DVD slideshows, photo stamps, framing and picture cards would drive enough revenue to justify providing the services at no charge. Features were added, changed, and removed and the gallery continued to fall short of desired profit margins. However the investment was not completely lost, and in 2006, Kodak Easyshare Gallery was named one of the “Best 100 Products of the Year”. (PC World, 2006) EasyShare Gallery appealed to customers as signing up was easy; it required only an email address and users felt the service provided high quality prints, simple organization, and a wide array of photo gift offerings. However, some complaints included the extremely limited photo editing tools and slow gallery viewing. (Boehret, 2007) In the face of these mixed reviews Kodak continued to tout the EasyShare Gallery as the “next generation” in photo sharing and storage. The company felt the gallery could be a more extensive website offering its members premium products, tools, and a better user experience than competitor’s galleries (Kodak Gallery: The Next Generation, 2008). As these events unfolded, the company continued to follow a progression based on a gradual adoption of the technology, as exemplified in the following timeline from the Kodak’s website:
- 1999 – Kodak sells its copier division
- 2000 – Dan Carp named CEO
- 2003 – Kodak releases a five-pronged business strategy focused on digital technology and commercial businesses. The five “prongs” included commercial printing, display and components, health imaging, digital and film imaging systems, and commercial imaging.
- 2004 - Kodak announces it would cut 12,000-15,000 jobs worldwide and shed one-third of its real estate
- Kodak purchases digital printing business Scitex Ltd. of Israel, renaming it Kodak Versamark Inc., and absorbed Heidelberg Digital and NexPress commercial printing businesses as part of an accelerated push into commercial printing
- 2005- Antonio M. Perez named CEO. The average stock price is $27.46. Revenue is $14.3 billion and the company loses $1.3 billion
- 2007 – Kodak launches its EasyShare All-in-One desktop inkjet printer line.
Financially, the company had initially outperformed the markets in the years leading up to mid-2005, but underperforming the indices thereafter. By 2008, it had diverged from the market performance by nearly 70 percent (Daneman, 2011).
INDUSTRY ANALYSIS
Consumers were storing more photos than ever before and the photo sharing and storage industry was expected to grow by 50% by 2008 and be valued at $5.5 billion (Siliconindia, 2005). With this intense predicted growth, Kodak was facing some tough decisions to remain a strong competitor. Figure 1 illustrates the tough competition Kodak faced (Wilson, 2007).
Figure 1: Photo Storage Industry Analysis
Yahoo acquired Flickr for around $30 million in March of 2005, and Flickr had already amassed a “community of 1.5 million rabidly loyal users” who were continuously uploading photos (Schonfeld, 2005). Yahoo’s purchase of Flickr was part of a larger strategy to compete with web giant Google. Flickr provided consumers with free photo storage but also offered Flickr Pro, a premium fee based subscription service allowing users to increase personal storage limits to 2 gigabytes per month. These subscription fees generated 13% of Yahoo’s revenue in
- Flickr offered users the ability to not only store photos but also tag photos for the public to view. “Most users describe their photos with tags and make them public for the benefit of friends and family, without realizing that they're greasing the wheels of a great social media machine. Add together all those labels and you have millions of keywords — a gold mine of image search” (Schonfeld, 2005). Another competitor of Kodak’s EasyShare Gallery was Shutterfly, founded in 1999. The original Shutterfly website launched the very same day as Ofoto – December 11th, 2009 (Mitra, 2008). Shutterfly differentiated itself from its competition by offering more than just photo storage and printing services; on par with its largest competitor, the EasyShare Gallery, in 2005 Shutterfly made the Inc. 500 list of fastest growing private companies. This same year Shutterfly had most of the same offerings as its competitors and introduced drag-and-drop hardcover photo books with optional caption boxes (ElateWiki, 2008). The third major competitor of the Kodak EasyShare Gallery was Snapfish, acquired by HP in 2005. Snapfish had 3 million users in 2005 and was the third largest online photo sharing service behind Kodak EasyShare Gallery and Shutterfly (Siliconindia, 2005). Snapfish offered many of the same features as its competitors such as free online photo storage, editing tools, and
DISCUSSION QUESTIONS
- Describe who should be in Kodak EasyShare Gallery’s target market.
- How can Kodak turn this problem into a profit making opportunity? a. Kodak could charge customers to store photos in the gallery b. Kodak could discontinue the online gallery and force customers to use other online sites (grace period to transfer photos) c. Kodak could change the website to an ad based model d. Kodak could offer the website to only Kodak product owners e. Kodak could form a strategic alliance with an existing photo sharing site
- What type of customer analysis should the company perform before making a decision?
- Perform a brief SWOT analysis for Kodak.
- Perform a brief SWOT analysis for Kodak EasyShare Gallery.
- What sustainable competitive or differential advantages should Kodak offer on a photo website?
- List the problems Kodak was experiencing with the online gallery.
- What was Kodak’s motivation for acquiring ofoto.com?
TEACHING SUGGESTIONS
- Ask for a hand-count of your students to see how many of them store photos online. Ask the storage users how often they purchase products with their photos imprinted on them from the online website. Do you pay to store your photos online? Approximately how much? Annually? Monthly? Size based?
- Have your students go online and Google photo storage websites. How many websites were available?
- Do you maintain your photos on your personal hard drive? How much space do your photos take up? What other devices do you store photos on?
- Ask your students to take on the role of CEO (Chief Executive Officer). What type of product would you offer Kodak customers to entice purchases from the Kodak website? What other solutions do you see for the company?
DECISION-MAKING QUESTIONS
- How can Kodak recover from this marketing misstep?
- How could Kodak have better handled this situation to make the transition more comfortable for the customers?
- What should Kodak do to rectify the brand image?
- How does this move affect Kodak’s brand equity?
EPILOGUE
The Epilogue which follows this page contains information on what actually happened to
Kodak and should not be shared with students until after case discussion has finished.
On March 23rd, 2009 Kodak contacted its EasyShare Gallery notifying them about a policy change requiring them to make annual purchases. Customers would need to make a
purchase of $4.99 for storing under 2 GB and $19.99 for anything over 2GB. If the purchases
were not made within 60 days the photos would be deleted. Responses to customers expressed
this quite literally, as seen in Figure 3 (Waldow, 2009).
Figure 3: Customer communication email
With over 70 million customers (Kodak Inc., 2008) each paying at least $5 per year, revenue would be approximately $350 million. Needless to say, the investors would be delighted! What Kodak did not realize was that customers would not share the same sentiment as the investors. On January 19, 2012, Kodak filed for Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York (K.N.C., 2012)
Figure 4: Kodak Files for Bankruptcy in 2012
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