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Lesson#30
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E-BUSINESS REVENUE MODELS
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E-BUSINESS REVENUE MODELS
Experts have identified following revenue models on the web:
Web Catalogue Revenue Model
Though the goal of an e-business can be to reduce cost or improve
customer service, however, the primary aim of most e-commerce sites is to
generate revenue and earn profit. This is the most simple and common type of
e-business model for generating revenue. This model would use electronic
catalogue and shopping cart providing access to customers throughout the
world. Businesses using this type of a model include online sellers of
computers, electronic items, books, music, videos, toys, flowers, gifts,
clothes etc. Payment received from customers is the source of earning
revenue.
Digital Content Revenue Model
Web serves as a very efficient distribution mechanism of content.
Therefore, one finds many e-businesses that offer different types of
information services such as legal information, corporate information,
government information, news and resources for libraries etc. These
services can be customized by an e-business for different firm sizes
depending upon their needs and usage pattern. Normally, a customer has to
subscribe to such services by paying certain amount as subscription fee.
This fee becomes the main source of generating revenue for the e-business.
Instead of subscription fee, a credit card charge option can be made
available for infrequent users. Online journals, newspapers, libraries fall
under this category. Note that E-publishing eliminates high costs of paper
printing and delivery of digital content is much quicker.
Advertising-Supported Revenue Model
In this model service/information is provided free of any charge to
certain audience and the advertising revenue is sufficient to support the
operation of the business and its cost. For example, Yahoo portal provides
useful information and a search engine free of cost, but earns revenue
through advertisements on its portal web site to bear the operational cost.
Advertising-Subscription Mixed Revenue Model
In this type, subscribers pay a fee and accept some level of
advertising. Thus an e-business can earn its revenue from both the sources,
that is, through subscription and advertisements. On web sites that use this
model, normally, the subscribers are subjected to much less advertising than
they are on advertisingsupported sites. For instance, in case of certain
online newspapers, a customer has to pay subscription fee for certain
services/information whereas some services are free of charge as they are
supported by advertising.
Fee-for-Transaction Revenue 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 that basis. 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.
Fee-for-Service Revenue Model
This model does not relate to services provided by agents or brokers
to complete a transaction (the above case). Rather, the fee is charged on
the basis of value of some service rendered. Professional services provided
online by lawyers, doctors, accountants etc. relate to this type of revenue
model. E-businesses that provide online entertainment and online games are
also the examples of this type. In case of online games,
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visitors pay to the business either by buying and installing game
software on their computers or by paying a subscription fee for playing
online for a limited time. This earns revenue for the business.
Internet Marketing
Internet has opened a new door of marketing opportunity to the
marketers. Consequently, a new branch in the field of marketing has
developed very rapidly in the past few years known as internet marketing or
emarketing. This topic can be covered under following main headings: Market
Segmentation E-mail Marketing Banner Advertising Promotions Public Relations
Partnering Customer Relationship Management Creating Brands on the Web
Affiliate Programs Search Engines Global marketing
Market Segmentation
Businesses need to identify specific portions of their markets in
order to target them with specific advertising messages. The practice called
market segmentation divides the potential customers into segments or groups.
Segments are defined in terms of demographic characteristics such as age,
gender, marital status, income level and geographic location. For example,
unmarried men between 19-25 years of age may be called one segment.
Traditionally, marketers have used three types of variables to define three
different market segmentations, namely, geographic segmentation, demographic
segmentation and psychographic segmentation.
Geographic segmentation
In this type, customers are divided into groups on the basis of
where they live or work. For example, urban and rural customers can be the
two segments on the basis of geography. Different marketing plan would be
required for each segment.
Demographic segmentation
Here segmentation is done on the basis of demographic variables such
as age, gender etc. Customers belonging to different age groups may have
different product requirements. This type of market segmentation helps in
identifying those requirements of different groups of customers.
Psychographic segmentation
Here customers are grouped by variables such as social class,
personality or approach to life or lifestyle. For example, a car
manufacturing company may direct advertising for a sports car to customers
who have a particular life style and like thrill in their lives. Variables
used in different segmentations can be combined. So, income level can be
combined with location to create a particular segment.
Market Segmentation on the web
Note that the concept of market segmentation is equally applicable
to e-businesses as it applies to physical businesses. Moreover, one can
easily provide a particular sales environment in case of an e-business as
compared to offline business. In a physical store, one cannot easily change
the environment for different
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customer segments. Therefore, display options, lighting, music, sales
persons remain the same for all customers groups in a physical shop.
However, web gives opportunity to present different store environment online
to different customer segments. So, a web site may have a web page for
children with the right kind of web design for children, and have a
different web page designed exclusively for the old people. In other words,
web can easily and usefully provide separate virtual spaces for different
market segments. Some web retailers allow their customers to create their
own product. For example there are computer companies online that allow
their customers to choose component of a computer to configure their own
computer according to their need. This is called one-to-one marketing.
Behavioral segmentation
Creation of separate experiences for customers based on their
behavior is called behavioral segmentation. Three identified behavioral
modes of the customers on the web are: Browsers – customers who just browse
through the site with no intention of buying Buyers – customers who are
ready to buy right away Shoppers – customers who are motivated to buy but
want more information An e-business site should devise right combination of
marketing strategy to lure visitors in different behavioral modes to become
its customers.
Choosing a Domain Name
Choosing a suitable domain name is the first thing to be considered
at the start of an online business. Due to the worldwide nature of the web,
choose a domain name that people coming form different countries/cultures
will be able to recognize, remember and type easily.
Marketing Research
It consists of interviews, paper and phone surveys, questionnaires,
findings based on previous investigations etc. to find strengths and
weaknesses of your business and the business of your competitors. It also
includes the analysis of opportunities and threats to your business. In case
of e-businesses, marketers have a faster option to find/analyze information
about the industry, customers or competitors, because the information is
just a few clicks away. This kind of marketing research can be extremely
beneficial for the success of an ebusiness.
Web design
Basically, the only interaction of an e-business with its customers
is through the web site. So, a good web design is another very important
factor for the success of an e-business. Note that in online environment the
competitors of an e-business are just a few clicks away, so if your web site
design is not catchy or useful enough the visitors might not wait and
immediately switch to a competitor’s site. The cost of switching to
competitors site is also very low in online environment. All this makes
e-commerce very competitive. An internet marketer should particularly pay
attention to the following considerations as regards web site design: Easy
site navigation – give a site map Frequently asked questions (FAQs) section
Conveniently located contact information Multimedia – use streaming video
and audio – be aware the time each element takes to get loaded Privacy
policy – outline the policy about intended use of customers personal details
General outlook of the web site should be attractive making it sticky
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