1. BUSINESS MODEL
CHAPTER 4

2. LEARNING OBJECTIVES
• What are the four components of an online business
model?
• Do firms compete on value propositions or value
clusters?
• What are the approaches to developing an online
offering, whether the business is providing a product,
service and information?
• What is a successful, unique resource system? What are
characteristics of good resource systems?
• What are the revenue sources available to firms?

3. WHAT IS BUSINESS MODEL?
Business Model Canvas

6. ONLINE BUSINESS MODEL

7. COMPONENTS
OF A ONLINE
BUSINESS MODEL

10. VALUE PROPOSITION AND VALUEVALUE PROPOSITION AND VALUE
CLUSTERCLUSTER
• Construction of a value propositions requires
management to specify three things:
Target segment,
focal customer benefits and
the key resources the business has that can
help it deliver the benefit package in a
significantly better way than its competitors

11.  CHOICE OF SEGMENT
1. Market attractiveness
Market size and growth rates
Unmet or insufficiently met customer needs
2. Firm’s ability
 CHOICE OF FOCAL BENEFITS
 CHOICE OF UNIQUE AND
DIFFERENTIATION RESOURCES

13. THE SENIOR MANAGEMENT TEAM MUSTTHE SENIOR MANAGEMENT TEAM MUST
COMPLETE 3 SEQUENTIAL TASKS:COMPLETE 3 SEQUENTIAL TASKS:
1. Identify the scope of the offering
2. Identify the customers decision process
3. Map the offering to the customer decision
process.

14. THE SENIOR MANAGEMENT TEAM MUSTTHE SENIOR MANAGEMENT TEAM MUST
COMPLETE 3 SEQUENTIAL TASKS:COMPLETE 3 SEQUENTIAL TASKS:
1.1.Identify the scope of the offeringIdentify the scope of the offering
2. Identify the customers decision process
3. Map the offering to the customer decision
process.

15. SCOPE OF OFFERINGSCOPE OF OFFERING
Two specific types of scope
• Category-specific dominance
• Cross-category dominance.
The term “Meta Market” refer to sites that group
naturally clustering categories of goods & services which
are grouped according to how customers engage in
activities.

17. THE SENIOR MANAGEMENT TEAM MUSTTHE SENIOR MANAGEMENT TEAM MUST
COMPLETE 3 SEQUENTIAL TASKS:COMPLETE 3 SEQUENTIAL TASKS:
1. Identify the scope of the offering
2.2.Identify the customers decisionIdentify the customers decision
processprocess
3. Map the offering to the customer decision
process.

18. CUSTOMER DECISION PROCESS

19. PREPURCHASE STAGE

20. PURCHASE

21. POSTPURCHASE STAGE

22. CUSTOMER DECISIONCUSTOMER DECISION
PROCESS — FLOWER EXAMPLEPROCESS — FLOWER EXAMPLE

23. THE SENIOR MANAGEMENT TEAM MUSTTHE SENIOR MANAGEMENT TEAM MUST
COMPLETE 3 SEQUENTIAL TASKS:COMPLETE 3 SEQUENTIAL TASKS:
1. Identify the scope of the offering
2. Identify the customers decision process
3.Map the offering to the customer
decision process.

26. RESOURCE SYSTEMRESOURCE SYSTEM
4 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
• Shift from resources to benefits
• Shift from single to multi-firm systems,

27. SPECIFYING A RESOURCE SYSTEMSPECIFYING A RESOURCE SYSTEM
Step 1:Step 1: Identify core benefits in the value cluster
Step 2:Step 2: Identify resources that relate to each benefit
Step 3:Step 3: Identify to what degree the firm can deliver each
benefit
Step 4:Step 4: Identify partners who can complete resources

30. REVENUE MODELREVENUE MODEL
• AdvertisingAdvertising- Earning revenue through the selling of
ads (banner or interstitial), site sponsorships,
event underwriting, or other forms of
communication
• Product, Service, or Information Sales-Product, Service, or Information Sales- Income
generated from the sale of goods on the site
• TransactionTransaction- 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

31. Metamarket Switchboard model
Traditional and reverse auction models
Freshest-Information Model
Highest-Quality model
Widest- Assortment Model
Lowest Prices Model
Most Personalized Model
7 MODELS FOR E-BUSINESS7 MODELS FOR E-BUSINESS

32. METAMARKET SWITCHBOARD MODELMETAMARKET SWITCHBOARD MODEL
 brings together buyers and sellers based upon the
activities the customer engage in to meet
particular goals.
Example: Babycenter.com

34. BABYCENTER.COM
Core Benefit: providing a single point of access for
all needs related to child development.
Offering: products, services, community, News on
child rearing, Advice
Resources: A Large, active customer base and a
significant brand name
Revenues: Transactions, product sales, affiliate
deals and advertising

35. TRADITIONAL AND REVERSETRADITIONAL AND REVERSE
AUCTION MODELSAUCTION MODELS
bring together large numbers of buyers and sellers
In Traditional Model, the buyer with the highest
bid buys the item. In reverse model, the supplier
with the lowest bids delivers the goods to the
buyer.
Example: ebay.com

37. EBAY.COM
Core Benefit: Large and deep product line, large
number of buyers and sellers
Offering: Trustworthy and easy transactions of
products and cash
Resources: large user community, brand name,
credibility, technology and support
Revenues: Transaction Fees, in-house auction

38. FRESHEST-INFORMATION MODELFRESHEST-INFORMATION MODEL
quickly and efficiently deliver information to
users
Example: nytimes.com

40. NYTIMES.COM
Core Benefit: Timeless, accuracy, quality, reporting
and passion for news
Offering: Local, national & world news: exclusive
and breaking news
Resources: Best Personnel, freshest information,
archives, etc.
Revenues: Products, services, information and
advertising revenue

41. HIGHEST QUALITY MODELHIGHEST QUALITY MODEL
 High quality, premium-priced products, services
or information
Across all consumer markets and categories, there
is a room for high-quality offering
Example: fao.com

43. FAO.COM
Core Benefit: High-quality products and their
associated exclusivity
Offering: Toys, Dolls, arts & crafts, collectibles, etc
to a niche market
Resources: Sourcing Ability, Brand exclusivity, an
outstanding online experience that’s simply the best
Revenues: High Margins for premium products

44. WIDEST- ASSORTMENT MODEL
 breadth and depth of product assortment, within
and across product categories.
Example: secondspin.com

46. SECONDSPIN.COM
Core Benefit: Large Inventory and best prices, so
shop here first
Offering: Internet’s Largest buyer and seller of used
CD’s, DVD’s, videos, games etc.
Resources: very strong logistics, quality control,
large user base and brand name
Revenues: Product sales, premium pricing of most
desired products

47. LOWEST-PRICE MODELLOWEST-PRICE MODEL
 Offers the customer the lowest prices available
online
Example: buy.com

49. BUY.COM
Core Benefit: Lowest prices above anything else
Offering: Large variety of products across many
categories
Resources: Outstanding supply chain management
and procurement, strong back-office systems, Frugal
culture
Revenue: Small percentage of product sales

50. MOST PERSONALIZED MODELMOST PERSONALIZED MODEL
 Able to provide a highly personalized, truly
unique, one-of-a-kind experience
Example: reflect.com

52. REFLECT.COM
Core Benefit: a unique experience or product or a
personalized solution to a problem
Offering: The offering is built on the demands of
each customer
Resources: Exceptional customer knowledge, a good
website, a combination of personnel and technology
Revenues: Premium prices for high cost services

53.  CONCLUSIONCONCLUSION
• A Company can pursue more than one model at a
time
• Never blindly follow any business model
• Companies should think how each components
- Value proposition, Online Offering, Resources and
Revenue Model – will fit together to form a successful
business.