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1. Evaluate Zagat using the competitive forces and value cha

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shelley chenoweth

on 24 April 2014

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Transcript of 1. Evaluate Zagat using the competitive forces and value cha

4. Do you think Zagat's decision to use a pay wall for its Web site a mistake? Why or why not?
5. Will Zagat's aquisition by google make it more competitive? Explain your answer.
The question is what Zagat gained not Google.

Google will be able to plug in Zagat’s wealth of reviews to its Places pages.
use advertising to drive business value.
Google Places needs a community and user-generated content. Zagat has both.
On the print side, Google said it intends to keep publishing Zagat’s printed books, which it says are very profitable.
It’s a win/win for Google and Zagat depending on how it is played by Google+, however the Internet generation is likely more familiar with Yelp, even if Zagat has been doing the same business longer and (arguably) better.

2. compare Zagat's and Yelp's e-commerce business models. How have those models affected each company's Web strategy
1. Zagat used a membership type model when entering the e-commerce market creating an elite status market, and kept the model close to what they were comfortable with when writing books
2. Yelp used a social media type model going off of the wiki model where anyone in the world can add content.
3. Why was Zagat's content well suited for the Web and for the mobile digital platform?
- Zagat's is digital content is very well suited for the internet

- Content is streamlined, with a minimal number of search boxes and links immediately available.

- Organized by several major “hub” cities as well as popular lists of the top restaurants of a certain type.

- Distilling reviews into one coherent whole. (e.g the site shows the percentage of users that “like” the restaurant, and several featured reviews. More reviews are available if the user wants to keep scrolling.)

- Gives a clearer and more concise impression. (e.g Yelp relies more on individual reviewers that allow to post full and unaltered. Far longer than necessary, and may contain distortions or false claims designed to damage reputations.)

1. Evaluate Zagat using the competitive forces and value chain models.
Zagat published restaurant guide based on user generated survey content
Offers reviews without the hassle of biased user opinions and a lower chance of inaccuracy
Only offer information about restaurants, hotels, and night life.
Focused on hub cities such as New York and Chicago but have recently branched out to other less populated areas.
Started in 1979
Collects information from surveys of customers of restaurants, hotels, and night life. From surveys they create an aggregate review of an establishment for subscribers to utilize.
Problems came when it was time to transition to an online presence, an attempt to sell the company in 2008 failed yet the company continued doing business.

Case Study #3
Zagat's Dilemma

Zagat-Market creator, and content provider.

Yelp- Market creator, content creator, and community provider.
Substitute Products
New Market Entrants
Traditional Competitors
Before online, Zagat had a well established name with many customers as well as publishing in multiple best seller books.
This set them ahead of their competitors and drew in a large portion of the market
During the web boom, many more competitors joined the industry as well as many more consumers
The trick is staying ahead of competitors

In its peak, Zagat had an advantage over new market entrants because of its well established name and reputation.
However the risk to them is that in the industry start up costs are relatively low
Yelp was able to easily enter the market with the online wave

Yelp has created a substitute product making it possible for anyone to post and write reviews of their own.
This combined with a different pricing strategy posed a major threat to Zagat.
Yet another threat is that new technology is being created constantly meaning that another similar product can come along and leave the old ones to either come up with something better or become obsolete.

Zagat previously had no problems retaining customers.
The internet has opened up an opportunity to reach new customers, however Zagat has been ineffective in doing so.

Zagat struggles in this department because on popular competitor apps and web presence the supplier can be anyone who wants to offer up their opinion, whereas Zagat has to reach out to its users and then translate the information in to its product

Customers and Suppliers
Value Chain Analysis
Value Chain Model Analysis

Inbound logistics.
Surveys from Zagats included only a few hundred people in each city. Survey’s from Yelp could use a crowd source model and survey thousands of consumers. This is an example of decreased value.
Zagats saw their primary activity as publishing.
Prior to the online boom Zagat had outstanding and differentiated content, and the opportunity to migrate it from offline to online, both on the Web and on mobile. Zagats books were designed to fit in a pocketbook wanted content mobile, social and local
Outbound logistics.
Poor choice after the Google penalizes sites that keep content behind a pay wall. Why pay for a digest of last year’s digested opinions when you can log on for the latest in full free review?
The custom guides for corporations were especially lucrative because the Zagats didn’t have to share revenue with bookstores or deal with returns.• T
Marketing and Sales
Zagats did not see ‘inducing trial’ and offering free online content as a primary activity during the shift that the value chain of all publishing businesses underwent as a result of the web. If they put it all online for free, they feared they would lose margin on book sales. Distribution of content:
They chose to keep content behind a pay wall
But while the company maintained its margins on the paper books, it was missing the opportunity to snare new customers who were trawling Google for information on specific restaurants.
Creates degradation of the brand if you are not showing up on that first page of search results for local content

Because fewer people came to Zagat.com, which meant that it didn’t have the opportunity to convert them to paid subscribers by providing content as a service.

- Lack of understanding and planning. Zagat was one of the first companies to popularize user-generated content, and yet they didn’t quite understand how the volume of the users can impact the prosperity of the business. Therefore, they struggled to find a business model that stayed true to the company’s origins when the rise of the Internet, e-commerce, and mobile technology.

- Narrowed audience. Zagat relied heavily on their brand recognition and sold content to selected consumers and corporations. Only focused on major cities. (e.g Zagt.com had only 310,000 visitors while Yelp had 31 million.)

- Slow response to make more aggressive effort to go digital. Zagat’s reviews are organized by several major “hub” cities, however, Yelp has reviews from almost any location you can think of including less prominent cities and towns. Its slow response to the emergence of the mobile digital platform may also have hurt the company.

- Lost its uniqueness. Zagat was one of the first companies to popularize user-generated content, collecting restaurant reviews from its readers, aggregating those reviews, and computing ratings. However, failure to effectively go digital have allowed similar service providers such as Yelp, Groupon, and Google places to intervene by offering free reviews content to consumers. Ultimately it caused to drop the value of the company entirely. (e.g in September 2011, Google paid $151 million versus offering Yelp for $500 million in 2009.)

Zagat Strategy to keep the same value added content its books offered, just on the web, including its elite status by using pay wall to create a membership of high end customers this created a market that did not exist on the web in the past. As a market creator Zagat is a digital environment that introduced its current readers, who already knew and used the hard copy book, the opportunity to have the books in an easy to read and searchable digital format. The digital content was the same professionally researched content as the books creating an elite version worth paying for, and a database of elite customers.

Content provider Zagat 's intellectual property of the researched content of its books is sold at the price of the membership following the book sales model you pay for the whole thing once. monthly dues are comparable to purchasing the newest version of the book.

Zagat is a community provider in the sense that they create a professionally researched community of restaurants and hotels and an online place where those who are willing to pay for access to the professional content and can find useful information.
Yelp's strategy to create a market and a community much like Wiki where anyone can write anything true or false no matter if they are the business owner or a competitor. The site is more of a Community provider than a content provider because Yelp is not professionally researched leaving the community open to the masses to write what they please. This is attractive to the lowest common denominator, due to easy and free access as well as feeling like you neighbor told you about a good place they know of instead of a market researcher.

Yelp is also a market creator as it is a digital environment in which buyers and sellers display the services and products in a way that they are reviewed so consumers will either purchase from the sellers or move to another seller or service provider. In Yelps strategy there is no possible room for a membership model it has to be open to the public.
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