business model involves the following choices:
1. Value proposition – how to deliver value to the
2. Market offering – what will sell, where, …
3. Resource system – what facilities, …
4. Financial model – how will you charge for
your product or service
Choice of target segment
Choice of what benefits you will offer
Choice of capabilities
Identify scope of the offering
Address customer decision process
Match product/services to customer decision
What resources to deploy ?
Resource system shows how a co must
align its internal “systems” and partners to
deliver the benefits of the value proposition
Shareholder value models
P roduct/service information (infomediary)
A dvertising (Google Adwords, Adsense)
S ale/transaction (eCommerce – buy/sell)
S ubscription (to a service – Bloomberg, Dunn &
Bradstreet, Prowess DB, …)
Shareholder Value Models
Metamarket- hub for many buyers/sellers, multiple
categories; e.g., BabyCenter.com
Auctions- competitive bid hub: eBay, Freemarket
Category switchboard- aggreg brands: PlanetRX
Best Information- Zagat, NYTimes
Wildest assortment- Secondspin.com
Lowest Price- Buy.com, Lowestfares.com
Most Personalized- Reflect.com
Revenue Growth Models
Deeper penetration into current market
New product development (existing market)
New market development (existing product)
New products and new markets
On-line and off-line space
Types of e-business models
generally they are classified on the following
Parties connected transaction types
e.g B2B, B2C etc
business models : transaction
Aggregator Brokerage Value chain
Manufacturer Info-mediary Advertising
Subscription Affiliate Community
Low VALUE INTEGRATION
Virtual Merchant – Pure Play e-tailers
Catalog Merchant – Levenger
Bit Vendor – Avast
Manufacturer Model – Intel, Apple
-Banner Exchange, Pay-per-click,
- Voluntary contributor model (NPR)
- Knowledge Networks (Deja, Guru, ..)
Subscription Model (WSJ)
Utility Model – use based
Revenue Is the amount of money that a
company actually receives during a specific
period, including discounts and deductions
for returned merchandise. It is the "top
line" or "gross income" figure from which costs
are subtracted to determine net income.
Revenue = Price of goods and services X no. of
Five Cases revenue models:
Transaction fee model
Simply you have website and provides a
contents and forum for advertisements and get
fees from advertisers.
The advertising model is an addition of the
traditional media model. The web site,
provides content which always free and
services like email, IM, blogs and users
accepts advertising messages in the form of
To attract users to its site, leading Web portal
Yahoo! offers things like free e-mail, extensive
content, and travel services. The firm got its
start in early 1995 when founders Jerry Yang
and David Filo put together a simple list of
favorite Web sites.
A company offers it users content or services
and charges a subscription fee for access to
some or all of it offerings.
where a customer must pay a subscription
price to have access to the product/service.
The model was pioneered by magazines and
newspapers, but is now used by many
businesses and website.
Industries that use this model include mail
order book sales clubs and music sales clubs,
cable television, satellite television providers
with pay-TV channels, satellite radio,
telephone companies, cell phone companies,
internet providers, software providers,
business solutions providers, financial services
firms, fitness clubs, and pharmaceuticals, as
well as the traditional newspapers, magazines
and academic journals.
Transaction fee model
There are businesses offering services for
which they charge a fee based on the number
or size of transactions they process. The
business provides information to the
customers which is required to complete a
transaction and revenue is purely earned on
For example, online travel agents receive a
fee for facilitating a transaction that includes
the making of travel arrangement for their
clients, as well as, advising them about
lodging, transportation etc. Stock brokerage
firms also use this model as they charge their
customers a commission for each transaction
of stocks/shares executed through them.
A company derives revenue by selling
goods, information, or services.
Here the merchants provide goods and
services online but based on list prices or via
This site sells the flowers online, and deliver
your order almost everywhere in US.
A company steers business to an affiliate
and receives a referral fee or percentage of
the revenue from any resulting sales.
This site uses Amazon Associates Web
Services to deliver a complete marketplace of
Hinweis der Redaktion
Choice of target segmentMarket Opportunity analysis (area, demographics, ..)Market attractiveness (can you make money?)Ability to compete (what is your usp?)Degree of fit with existing channels (Choice of what benefits you will offer:Single benefit vs. multiple benefitsConflicting benefits lead to average performanceWhat are the customer preferences (service, ease of access, … price only 10th preferred attribute)Choice of capabilitiesWhat unique and differentiating capabilities do you need to possess? (Capabilities need to be linked to the benefits which form the value propositionChoice of tangible assets (plant, machinery, …Choice of intangible assets (brand), Core competencies (C K Prahlad) vs. external partners
Identify scope of the offeringWhat categories – single/multiple (books, CD’s)Cross-category – metamarkets; cluster of goods and services; (e.g., Travel: airline, hotel, car rental, …)Address customer decision processPre-purchase: Identify the need for the product, search, evaluate alternativesPurchase: Purchase decisionPost-purchase: Satisfaction, loyalty, disposalMatch product/services to customer decision process:Web site should “walk the customer through”Encourage the customer to revisit the decision cycleRepeat the cycle for every categoryRecognize the need: reminders for birthdaysSearch: store locator, price listsEvaluate alternatives: comparisonsPurchase decision: shopping cart, credit cardSatisfaction/loyalty: cust. support, incentives
Value proposition and offering dictate resource systemResource system shows how a co must align its internal “systems” and partners to deliver the benefits of the value propositionIt is the choice of actions/assets used to deliver the value proposition
Basics: Method of doing business by which a company can sustain itselfE-commerce gives rise to new models or re-invent tried-and-true models (e.g., Auctions)No comprehensive and cogent taxonomy of web business models exists – combination of modelsIntellectual Property protection perspectiveTypes of models based on parties connected: B2B, B2C, …Types of models based on transaction types are classified by two parameters: Value Addition and Control on business
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