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

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QUICKENS VALUE CURVE

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Prof. Rushen Chahal

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3-19 DEFINITION OF BUSINESS 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 N 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 N 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 Doorway 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 OpportunitiesIntegrating Financial Services

Prof. Rushen Chahal

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BRICKS N 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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