business model
DESCRIPTION
simple way to create a business modelTRANSCRIPT
4-1
Chapter 4
McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
Business Models
4-2
Value ClusterValue Cluster
Online OfferingOnline Offering
Resource SystemResource System
Financial/Revenue ModelFinancial/Revenue Model
Components of a Business Model
4-3In Your Project Value Propositions and Value Clusters
Should Include: Value Proposition-requires management to specify three things:
• Target segment• Focal customer benefits• Key resource that give market advantage over competitors
Value Cluster- value proposition consisting of a cluster of composed of three parts:
• Choice of target customer segments• Particular focal combination of customer-driven benefits• Rationale for why this firm and its partners can deliver the
value cluster in a significantly better way than competitors
This means the firm can serve multiple groups of customers with different value propositions.
4-4Value Propositions and Value Clusters Choice of Segments
• Market size and growth rates• Unmet or insufficiently met customer needs• Weak or nonexistent competitors
It is critical to select a segmentation approach that maximizes both actionability and meaningfulness.
Choice of Focal Customer Benefits• Single-benefit approach• Multiple-benefit approach
What is important is not how many core customer benefits a company offers to its target segment, but whether the benefits work together to fill a customer need.
Choice of Unique and Differentiating Capabilities• Tangible assets• Intangible assets• Capabilities of the organization
Firms can have superior resources, but if these resources are unrelated to the delivery of the critical benefit, they are useless.
4-5
Value Cluster• Target segments (savvy investors, “seekers”,
“dabblers”)• Key benefits (up-to-the-minute information;
original, in-depth analysis; personal-finance tools; multiple points of access)
• Supportive rationale (experienced editorial staff with financial expertise, infrastructure allowing access from multiple forms of media, credibility through its association with CBS News and Financial Times brand names)
Marketwatch.com Business Model
4-6
The Online Offering Scope of the Offering (number of categories of products
and services that a firm offers.)
• Category-Specific Dominance: Companies that focus exclusively on one product category (termed “category killer”), such as SecondSpin.com.
• Cross-Category Dominance: The extension of product offerings from a single category to additional product categories (termed “metamarket”), such as Amazon.com & BabyCenter.com.
Their boundaries are derived from activities that are closely related in the minds of consumers, and not from the fact that they are created or marketed by related firms in related industries.
4-7Customer Decision Process — Flower Example
DisposalDisposal
LoyaltyLoyalty
SatisfactionSatisfaction
Purchase DecisionPurchase Decision
Evaluation of AlternativesEvaluation of Alternatives
Information SearchInformation Search
Problem RecognitionProblem Recognition
PREPURCHASE
PURCHASE
POSTPURCHASE
4-8Egg Diagram for 1-800-Flowers.com
Flower / Gift Decision Process
Need Recognition
Search for Ideas and Offerings
Purchase Decision
Message Selection
Post-Sales Support and Perks
Education on Flowers and Decoration
Gift reminder service Holiday specials Everyday celebration suggestions Special occasion suggestions
Birthday Gift Central Gift by occasion Gift by price Monthly gift clubs Corporate gift services
Ideas and Information
Post-Sales Support
Product price Product picture Product description Delivery information Delivery availability
Physical cards in gifts E-mail a bouquet
Order receipt e-mail Q&A chat FAQ Customer service
inquiry form
Perks Miles earned with
flower purchases Free gifts Discounts at AOL &
BN.com with flower purchases
Member specials
“Care and handling” “Do it yourself” Special events and
educational workshops held at stores
Floral ideas Garden ideas Home ideas Gift ideas Gourmet ideas Store locator Recommendations by budget Bestsellers
Evaluation of Alternatives
Gift Recommendations
Shopping basket E-commerce transaction Special shopping features
– Delivery outside U.S.– 1-800-lasfloras.com
Product Offering
Source: Adapted from Mohanbir Sawhney, “Making New Markets,” Business 2.0 (May 1999): 116–21.
4-9MarketWatch.com Egg Diagram
Learn Getting Started Investor’s Primer IPO Basics Financial Term Glossary
InvestSponsorships by Online
Brokerages Datek Online Fidelity Investments National Discount Brokers Ameritrade Cybertrader ScottradeBroker Decision Center
Planning Tools Sharebuilder Payment Calculator Home Price Check Best Credit Card Rates Insurance QuickQuote
Third-Party Sources Market Guide Hoover’s Online Multex Annual Reports Club INVESTools Over 250,000 Investment
Research ReportsCommunity Private e-mail People Watch Hot Discussions Occasional Polls
US Markets Market Monitor Major Indexes Dollar Volume
Leaders
Commentary Thom Calandra’s
Stockwatch Bambi Francisco’s Net
Sense Bezderick on Bonds (Many other commentary
columns) eNewsletters
Online News Watch E-mail Alerts Real-time Headlines Hotstock Tracker Marketwatch Live eSignalRadio Contribution to
Westwood One
Global Markets Key Rate
Snapshot International
Indexes Non-Us Stocks
Track Investments Portfolio View Portfolio Analyzer Portfolio Allocation Portfolio Tracker
Breaking News
Market Figures
Personal Finance Process
Learn About
Personal Finance
Plan Investment
Strategy
Stay Updated on the Latest News
and Figures
Develop Insight
Invest
Track Investments
Television CBS MarketWatch
Weekend Contributions To:
– CBS Early Show– CBS Evening News– CBS NewsPath
Develop Insight
Futures and Options Futures Contracts After-Hours
FuturesBonds Bellwether Bonds
ReportFunds Fund Profile Fund ChartsStocks Interactive
Charting Historical Charts
4-10
Modifications to the activity system logic for the online marketplace
• Shift from physical world to virtual and back to physical world
• Shift from a supply-side focus to a demand-side focus, it is more appropriate to initially focus on the benefits desired by target customers.
• Shift from resources to benefits
• Shift from single to multifirm systems, resources might be acquired in the open market (outsourcing).
What Is a Successful Resource System?
4-11
Step 1: Identify core benefits in the value cluster
Step 2: Identify resources that relate to each benefit
Step 3: Identify to what degree the firm can deliver each benefit
Step 4: Identify partners who can complete resources
Specifying a Resource System
4-12
Online Gift Center
Online Gift Center
Integrated Partner Offers
Integrated Partner Offers
Broad Assortme
nt of Gifts
Broad Assortme
nt of Gifts
Customer Service
Customer Service
Wide Reach to CustomersWide Reach
to Customers
Widespread
Easy Access
Widespread
Easy Access
Multiple Contact Points
Multiple Contact Points
Popular WebsitePopular Website
High Quality
of Flowers
High Quality
of Flowers
TechnologyTechnologyStrong Brand
NameStrong Brand
Name
Strong Distribution
Network
Strong Distribution
Network
=Resources
= Core Benefits
Core Benefits
1-800-Flowers.com Resource System
4-13
Resource System• CBS News• Financial Times• Marketwatch.com• BigCharts.com• Content partners (Hoovers, Zacks,
INVESTools, etc.)• Distribution partners (Yahoo, AOL,
Quicken, etc.)
Marketwatch.com Business Model
4-14MarketWatch.com Resource System
=Core Benefits =Resources
Credible Analysis and
Personal Finance Tools
Up-to-the-Minute
Information
Multiple Points of Access
Distribution PartnershipsDistribution Partnerships
Association with CBS
Association with CBSExperienced
Editorial StaffExperienced Editorial Staff
Partnerships with Content ProvidersPartnerships with Content Providers
Available Infrastructure
Available Infrastructure
International Presence
International Presence
CORE BENEFITS
4-15
Revenue Models
Advertising- Earning revenue through the selling of ads (banner or interstitial), site sponsorships, event underwriting, or other forms of communication
Product, Service, or Information Sales- Income generated from the sale of goods on the site
Transaction- Revenue accrued from charging a fee or taking a portion of the transaction sum
Subscription- Revenue generated through subscriber fees for magazines, newspapers, or other information/service businesses
License Fees- Revenue generated from licensing of content
4-16
Online Business Models
Metamarket Switchboard Model
Traditional and Reverse Auction Models
Freshest-Information Model
Highest-Quality Model
Widest-Assortment Model
Lowest-Price Model
Most-Personalized Model
4-17
Online Business ModelsBusiness Models
Metamarkets Switchboard
Auction Freshest
Information Highest Quality
Widest Assortment
Lowest Prices Most
Personalized
Core Benefits and Proposition
Single point of access for all needs
Depth and breadth of product as-sortment
Number of ac-tive buyers
Timely and ac-curate informa-tion
High-quality products with exclusivity
Broadest in-ventory possi-ble
Can lead to best prices
Lowest prices Unique prod-uct, service, or experience
Online Offering
Either cate-gory specific of access categories
Usually a large number of products
Broad or tar-geted audi-ence
Concentrates on smaller offerings for smaller mar-kets
Can be either category killer in one category or widest as-sortment across man categories
Niche cate-gory or across wide variety of categories
Geared toward a single buyer
Key Resources
Large, active customer base
Commitment to building
Large base of buyers and sellers
Good, reliable technology
Strong brand name
Hiring best personnel
Ability to source products
Outstanding customer ser-vice
Strong brand
Significant brand name
Strong logistics to manage brand name
Ability to build strong back-office systems and leverage scale econo-mies
Ability to generate ex-ceptional cus-tomer knowl-edge
Revenue Model
Transaction fees
Product sales Advertising Affiliate deals
Transaction fees
Product and service sales
Subscription Advertising
Product, service, and information sales
Advertising
Product sales Product sales Product sales Subscriptions
Examples
BabyCen-ter.com
Verticalnet CarPoint.com Fashion-
Mall.com
eBay Amazon Auc-
tions Covisint
NYTimes.com Salon.com Business 2.0 Zagat.com
FAO.com Ashford.com
Amazon.com CDNow Sephora.com EBags.com
Lowest-fare.com
Allbooksfor-less.com
Outpost.com
Reflect.com Sevency-
cles.com eDiets.com
4-18
Revenue model• Advertising revenue (37% in 2001)• Licensing revenue (52% in 2001)• Other revenue, subscription, etc. (6% in
2001) Value model (best information) Growth model
• Advanced portfolio-tracking tools• International markets• Services to address expanded trading
hours• Expand reach to wireless devices• Expand TV and radio shows to more
stations
Marketwatch.com Business Model
4-19
Discussion & Application