CH2 E-ecommerce Business Models and Concepts
1. Compare Pandora´s original business model with its current business model. What’s the difference between “free” and “freemium” revenue models?
Pandora’s initial idea was to offer 10 hours of free music, and then, if the user wants to keep listening to music he would have to subscribe and pay for the service. This strategy did not work so they increased the “free” time to 40 hours. The same problem occurred so they decided to introduce ads and remove the limit time in order to face the cost they had.
A free revenue model makes its money adding ads and provides to the customer a “light”, limited, or uncompleted version of the products, hoping that they will subscribe and pay for the service. A freemium revenue model provides a simpler version of the premium service that hopefully the customer will subscribe to it and pay a monthly fee for its use.
2. What is the customer value proposition that Pandora offers?
The customer proposition that Pandora offers when the customer subscribes pays for the services includes: no ads, fewer limits, a desktop app, and higher quality of the service.
3. Why did MailChimp ultimately succeed with a freemium model but Ning did not?
MailChimp’s strategies succeed because the free version that they provide includes just the right amount of things and encourage the customers to pay for the extra service and subscribe to them. On the other hand, the strategy that Ning used did not convince the customer to pay for the full version, and the cost that the free users were generating was causing them a big economic loss.
4. What’s the most important consideration when considering a freemium revenue model?
When considering this type revenue model, it is important to know the cost of the business and make sure that are affordable even when there are not too many subscribers. It is also important to offer a good deal for the full version, letting the customers know that the experience when they are subscribed its greater than the free version, and they are really missing a great service.
1. What is a business model? How does it differ from a business plan?
The business model is how the company is going to generate revenues. The business plan includes the strategy and the expected financial performance for the future years.
5. Why is targeting a market niche generally smarter for a community provider than targeting a large market segment?
Finding a market niche were their needs has not been covered provides a competitive advantage, there is a big margin for growth, and reduces the amount of competitors. Targeting a large market can be complicated when competing against large established companies in the market.
10. Why is it difficult to categorize e-commerce business models?
It is a new way of business and it keeps evolving and creating new models. However there are some categorized business models such as C2C (Consumers-to-Consumers), B2C (Business-to-Consumers), and B2B (Business-to-Consumers).
15. What are the key success factors for exchanges? How are they different from portals?
The main key success factor for exchange is size. The site must be able to support a large number of buyers and sellers to it, and it must be able to attract them to the site. Portals are a powerful search tool plus an integrated package of content and services.
20. What is crowdfunding and how does it help e-commerce companies raise capital?
Crowdfunding uses the Internet to enable individuals to support a project. Some companies have used to launch a product. The company will ask for a donation, and depending of the quantity donated by the individual, this will receive a reward if the campaign is successful; normally they will receive the final product when launched to the market.
2. Examine the experience of shopping online versus shopping in a traditional environment. Imagine that you have decided to purchase a digital camera (or any other item of your choosing). First, shop for the camera in a traditional manner. Describe how would do so (for example, how would you gather the necessary information you would need to choose a particular item, what stores would you visit, how long it would take, prices, etc.). Next, shop for the item on the Web or via mobile app. Compare and contrast your experiences. What were the advantages and disadvantages of each? Prepare a report or slide presentation to support your analysis and approach.
- Buying a digital camera: Traditional manner.
The first thing I would do would be to gather enough information about what kind of digital cameras are right now in the market and what kind of camera would better fit my necessities. In order to do so, I would try to collect as more brochures as I could. After reviewing some of the cameras available in the market I would start to visit stores with the purpose of look for the models I have found and more information. I would go to Target, BestBuy, and Walmart because probably they have a wide variety of video cameras. It would take me a long time to go to each store, find the camera I want, reach a seller and ask questions to him or her, and remember the prices of each store.
- Buying a digital camera: Shopping online
I would google digital camera and see what it is the feedback received. It would be relatively easy to find information about brands, cameras, and its description to find which one fits better my necessities. Once I have decided what model I want, typing the name of the camera in Google, would give me back the results with the prices for a bunch of stores, so I will know which one is the cheapest place to buy my camera. It would be really fast, if I have a preconceived idea of what I want, I would probably buy the camera within an hour.
The advantages of the traditional manner is that I can try the cameras before buying it, something that I would not be able to do when buying online, however, I am sure I would be able to find a video of someone analyzing the camera and how it works. The disadvantages of the traditional are that it is time-consuming, stressful, and complicated, while buying online is fast, you do not need to move, and you do not have to deal with long lines to check out and related issues.