Thursday, 15 October 2009

Eight Ingredients to Brew Your eCommerce Business Model

I published a post about a new tourism webportal for Austrian holidaymakers several days ago in which I also claimed that I did not regard their business model as very innovative. At any rate, a management representative of this portal called me the same day and explained to me that they had a large sales team in the background which ensures the successful implementation of the business model. An ambitious and experienced sales team is certainly one key to success, but is that enough?

What constitutes a business model for eCommerce and eTourism?

eBusiness models are a frequently discussed and at the same time hardly understood aspect of the web. We always emphasise how much the web has changed the traditional business models. But what are actually the ingredients for an effective and sustainable eBusiness model?

There are many different definitions but most authors understand an eBusiness model as a set of planned activities designed to result in a monetary or non-monetary revenue in a marketplace by using and exploiting the qualities and advantages of the Internet and the WWW.

You can cook a special eBusiness model for your firm or organisation by answering the following 8 key questions:
  1. Unique selling proposition (USP): why should customers by from you and not from your competitors and what is the added value for your customers?
  2. Revenue model: how will you earn money? Basically, there are five major ways how you can generate money on the WWW, through advertising, subscription fees, transaction fees, sales of goods and services, and through affiliate programs. Very often a combination of revenue models is applied in practice.
  3. Market Opportunity: what marketspace do you serve and what is its size and realistic revenue potential? The marketspace is a conglomerate of various industry segments, e.g. the European online travel market broken down by travel products (see illustration below).

  1. Competitive environment: who are the competitors in the marketspace and how can you distinguish yourself from them?
  2. Competitive advantage: what is your special advantage to the marketspace (e.g. first mover advantage, cost or technology leadership)?
  3. Market strategy: how do you promote products to attract your target audience? The best business concept or idea will fail if not properly marketed to potential customers.
  4. Organisational development: what organisational and functional structure is needed to implement your business model?
  5. Management team: what experiences and skills deos the management team need? A strong and competent team gives credibility to customers and business partners likewise.

There is no golden rule for developing a viable eCommerce business model, but for being successful the business model should focus on the business objectives rather than on the technology. A very good introduction to eCommerce business models is provided by Kenneth Laudon & Carol Traver (2008): e-ecommerce. business. technology. society.

What is your experience with eCommerce business models? Share your thoughts with us!

Related article: A New Tourism Webportal for Holidays in Austria

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