BUSINESS MODELS AND STRATEGIES THE B2C SPACE

Prof. Rushen Chahal

Prof. Rushen Chahal

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ECONOMICS OF E- 3-2 BUSINESS Shift From An Economy of Scarcity to One of
Abundance. Both Businesses and Consumers Have a Glut of Marketplace Choices. Transaction and Coordination Costs are Disappearing. It is Possible to Calculate Demand With Precision. Switching Costs Approach Zero in the Absence of Actions by Marketers. Costs for Many Products Have High Fixed Costs of Development and Virtually No Variable Cost of Production. Scale is More Likely to be Defined by Number of Page 2 Prof. Rushen Capacity. Customers Than by Production Chahal

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THE CUSTOMER HAS NO MORE TIME
MARKETER

‡ The Struggle to Acquire Customers is Exceeded Only by the Struggle to Retain Them.
VISITOR

‡ Internet Time is not Readily Devoted to the Advertising There.
Prof. Rushen Chahal

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SHIFT FROM AN ECONOMY OF SCARCITY TO ONE OF ABUNDANCE
Amazon is a Good Example of Information Becoming More Valuable As It Is Shared
‡ Broad and Deep Assortment of Products ‡ Much Content Provided by Visitors ‡ Use of Data to Provide Personalized Purchase Recommendations ‡ Customer Behavior on Site ‡ Behavior of Similar Customers

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Prof. Rushen Chahal

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BOTH BUSINESSES AND CONSUMERS HAVE A GLUT OF CHOICES IN THE MARKETPLACE

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Used with permission of HotHotHot.com

Prof. Rushen Chahal

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TRANSACTION AND COORDINATION COSTS ARE DISAPPEARING

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Affiliate Marketing as Portrayed By Amazon

Used with permission of Amazon.com

Prof. Rushen Chahal

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IT IS POSSIBLE TO CALCULATE DEMAND WITH PRECISION
‡ Information Flows
± Quickly ± Freely

Up and Down the Value Chain ‡ Winners and Losers Can be Spotted Quickly

Prof. Rushen Chahal

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SWITCHING COSTS APPROACH ZERO IN THE ABSENCE OF ACTIONS BY MARKETERS
‡ The Common TCP/IP Platform Makes It Easy to Move From One Site to Another ‡ Retention/Relationship Marketing Key
Prof. Rushen Chahal

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3-9 COSTS FOR MANY PRODUCTS FOLLOW A MODEL OF HIGH FIXED DEVELOPMENT COSTS AND VIRTUALLY NO VARIABLE COST OF PRODUCTION.

‡ High Up-Front Costs for Necessary Technology ‡ Serving An Incremental Customer Almost CostFree Except for Distribution ‡ Stair-Step Fixed Costs
Prof. Rushen Chahal

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SCALE IS MORE LIKELY TO 3-10 BE DEFINED BY NUMBER OF CUSTOMERS THAN BY PRODUCTION CAPACITY.
‡ Fewer Resources Devoted to Physical Production ‡ Serving a Large Customer Base is Cost Effective ‡ BUT It is Important to Devote Sufficient Resources to Distribution and Customer Service
Prof. Rushen Chahal

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THE ADVERTISING-DRIVEN MODEL
Monetize Advertising

Content

Prof. Rushen Chahal

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REVENUE MODELS
‡ ‡ ‡ ‡ ‡ ‡ Access Membership/Subscription Syndication/Licensing Advertising Transactions Services

Prof. Rushen Chahal

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STRATEGY RECOMMENDATION Web Sites Need Multiple Revenue Streams.

Prof. Rushen Chahal

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ENTERPRISE VALUE CREATION

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Prof. Rushen Chahal

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MAPPING CONSUMER NEEDS TO RETAIL TACTICS

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Source: Jupiter Communications

Prof. Rushen Chahal

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DIMENSIONS OF VALUE
According to Rayport and Svoikla

‡ Content ‡ Context ‡ Infrastructure

Prof. Rushen Chahal

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ELEMENTS OF THE VALUE PROPOSITION
According to Kim and Mauborgne

‡ Eliminate ‡ Reduce ‡ Raise ‡ Create

Prof. Rushen Chahal

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QUICKEN¶S VALUE CURVE

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Prof. Rushen Chahal

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3-19 DEFINITION OF ³BUSINESS MODEL´

The Functions of a Business Model
According to Chesbrough and Rosenbloom:

Articulate the Value Proposition Identify a Market Segment Define the Structure of the Value Chain Estimate the Cost Structure and Profit Potential Describe the Position of the Firm in the Value Network ‡ Formulate the Competitive Strategy
Prof. Rushen Chahal

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INTERNET BUSINESS MODELS
The B2C Space
Aggregator Bricks µN¶ Clicks Content Provider Consumer Portal Peer-To-Peer

The B2B Space
ASP Infomediary Marketplace Machine-To-Machine

Prof. Rushen Chahal

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INTERNET BUSINESS MODELS
The B2C Space
Aggregator Bricks µN¶ Clicks Content Provider Consumer Portal Peer-To-Peer

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Prof. Rushen Chahal

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CONTENT PROVIDER
‡ The Traditional Media Model
± Content Free to Visitors ± Revenue From Advertising

‡ Difficult to Realize Sufficient Advertising Revenue ‡ Other Revenue Streams
± Subscriptions ± Syndication
Prof. Rushen Chahal

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CONSUMER PORTALS
‡ A ³Doorway´ to Major Collections of Content and to the Internet ‡ Niche ‡ Voice

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AGGREGATOR
‡ As Intermediaries, Provide Selection, Organization, Price, Convenience, Matching, and Fulfillment (Tapscott, Ticoll and Lowy) ‡ Not Unlike Physical World Retailers
± Many Successful on Web ± New Opportunities²Integrating Financial Services

Prof. Rushen Chahal

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BRICKS µN¶ CLICKS
‡ Combination of Online and Offline Retailing
± Physical Products ± Services

‡ Degree of Integration Depends on
± Brand, Management, Skills, Resources (Gulati and
Garino)

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PEER-TO-PEER
‡ File Transfer Between Individuals
± Napster ± Gnuetlla and Other Emerging FileSwapping Services

Prof. Rushen Chahal

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STRATEGIC SUMMARY
‡ Take Advantage of the New Economics ‡ Value = f(Customer Needs, Core Competencies) ‡ Multiple Revenue Streams Essential ‡ Viable B2C Models Are Evolving

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‡ Little Distinction Between B2C and B2B Models
Prof. Rushen Chahal

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