Revenue Models
and the Business
Plan in E-Commerce
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Chapter 8
Revenue Models and the
Business Plan in E-Commerce
Section
Section
8-1
E-Commerce Revenue Models
8-2
Revenue Models
E-Commerce Business
and thePlan
Business
Plan in E-Commerce
2
Revenue Models and the Business Plan
in E-Commerce
Section 8-1
Why It’s Important
A revenue model determines how a company
makes money and how the company functions.
A well thought out model can mean the difference
between success and failure.
Understanding what revenue models entail can
help you understand more about how companies
operate.
Section 8-1
3
Revenue Models and the Business Plan
in E-Commerce
Section 8-1
Key Terms
revenue model
e-zine
blog
Section 8-1
affiliate program
licensing
4
Revenue Models and the Business Plan
in E-Commerce
What Is a Revenue Model?
The type of revenue model
you choose will depend on
the type of product or
service you intend to sell.
Section 8-1
revenue model how a
company generates
income
5
Types of Revenue Models
E-Commerce Revenue Models
E-Commerce Models
Online Applications
Product Sales
consumer goods, retail, wholesale
Advertising
search engines, Web portals, directory pages,
commercial Web sites
Service
online fee-for-service, fee-for-transaction,
subscriptions
Inter-Organizational
procurement, supply chain, distribution
Third-Party
e-malls, online auctions, online exchanges
Licensing
intellectual rights, patents, copyrighted material
Section 8-1
6
Revenue Models and the Business Plan
in E-Commerce
Types of Revenue Models
The most basic revenue model involves selling
one product or related product line to customers
who use your Web site as they would a print
catalog.
Section 8-1
7
Revenue Models and the Business Plan
in E-Commerce
Types of Revenue Models
There are two types of products you can sell:
products you make, which you should sell at
a higher price than they cost to make
products you buy, which you should sell at a
higher price than you paid for them
Section 8-1
8
Revenue Models and the Business Plan
in E-Commerce
Types of Revenue Models
A wholesale price is the price a supplier charges
a business for a product.
A retail price is the price a business charges
customers.
Section 8-1
9
Revenue Models and the Business Plan
in E-Commerce
Types of Revenue Models
Like magazines, TV stations, and other media
outlets, Web sites can sell advertising space as
a source of revenue.
An online business must ensure that its ads will
reach its target audience.
Section 8-1
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Revenue Models and the Business Plan
in E-Commerce
Types of Revenue Models
Most magazines,
newspapers, and
information services earn
income by selling
advertising and
subscriptions.
e-zine
electronic magazine
An e-zine can also
generate revenue by
selling subscriptions.
Section 8-1
11
Revenue Models and the Business Plan
in E-Commerce
Types of Revenue Models
A specialized type of
e-zine is the weblog, or
blog.
Section 8-1
blog a public online
journal kept by a writer,
or blogger; short for
Weblog
12
Revenue Models and the Business Plan
in E-Commerce
Types of Revenue Models
Another way to generate
revenue is through an
affiliate program.
In exchange for bringing
business to your affiliates,
you receive a commission,
or a percentage of the
sales they make on that
business.
Section 8-1
affiliate program a
partnership through
which an online
business delivers
customers to other
online businesses
13
Revenue Models and the Business Plan
in E-Commerce
Types of Revenue Models
The idea behind licensing
is simple.
Assume you have created
a product. Companies
would pay you a licensing
fee for the right to market,
copy, or use the product.
Section 8-1
licensing the granting
of permission to use
intellectual property,
such as music, photos,
software programs, and
inventions
14
Revenue Models and the Business Plan
in E-Commerce
Types of Revenue Models
In the case of musical compositions, licensing is
a critical form of protection.
Whenever a musical work is performed for the
public—beyond family and friends—the
performers must obtain a license.
Section 8-1
15
Revenue Models and the Business Plan
in E-Commerce
Section 8-1
Review
1.
What is a revenue model? What is a major factor in
determining the type of revenue model to use?
2.
Why is it important for advertisers to know about a
company’s customers before advertising on a particular
site?
3.
What is the difference between wholesale and retail
prices?
4.
What is a blog? How can it generate income?
Section 8-1
16
Revenue Models and the Business Plan
in E-Commerce
Section 8-2
Why It’s Important
Creating a company is hard work, and
entrepreneurs must have a clear path, or business
plan, laid out when they begin and as they
continue to operate their businesses.
Knowing what a business plan contains will help
you to understand more about what creating and
running a business entails.
Section 8-2
17
Revenue Models and the Business Plan
in E-Commerce
Section 8-2
Key Terms
business plan
forward-looking
statements
income statement
Section 8-2
balance sheet
assets
liabilities
18
Revenue Models and the Business Plan
in E-Commerce
What Is a Business Plan?
Your business will be defined by your choices.
When you have to make tough decisions, such
as whether to offer a new product, you’ll be
able to refer to your business plan for guidance.
Section 8-2
19
Revenue Models and the Business Plan
in E-Commerce
What Is a Business Plan?
Your business plan will be
used to show potential
investors what you hope to
accomplish and how you
plan to get there.
Section 8-2
business plan a detailed
description of a business’s
objectives, products and
services, operations,
potential customers, and
financial resources
20
Elements of a Business Plan
Cover Page
Market Analysis
Title Page
Competitive Analysis
Table of Contents
Marketing Plan
Executive Summary
Operations Plan
Management Plan
Organizational Plan
Company Description
Financial Plan
Product and Service Plan
Growth Plan
Mission and Vision Statements
Contingency Plan
Industry Overview
Supporting Documents
Section 8-2
21
Revenue Models and the Business Plan
in E-Commerce
Elements of a
Business Plan
The executive summary of your business plan is
a brief but detailed description of the company’s
mission, objectives, products, and competition.
It is used to convince the reader that an
operation is well-planned and has a good chance
of success.
Section 8-2
22
Revenue Models and the Business Plan
in E-Commerce
Elements of a
Business Plan
Your business plan should
include forward-looking
statements.
Section 8-2
forward-looking
statements the parts of a
business plan that describe
the future of a company in
both the short and the long
term
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Revenue Models and the Business Plan
in E-Commerce
Elements of a
Business Plan
Investors will want to know about the
demographics of your Web site.
Demographics include information about a
customer’s age, income level, and location.
This information is used to identify a target
market for a business.
Section 8-2
24
Revenue Models and the Business Plan
in E-Commerce
Elements of a
Business Plan
An income statement is
an important financial
statement.
income statement
summarizes a company’s
revenue and expenses for a
period of time and shows
profits or losses
A balance sheet is
another important financial
statement.
balance sheet shows how
much a business is worth at
a specific time
Section 8-2
25
Revenue Models and the Business Plan
in E-Commerce
Elements of a
Business Plan
A balance sheet lists all of
a business’s assets and
liabilities and shows the
net worth, or actual value
of the business.
Section 8-2
assets all of the things
owned by a business
liabilities debts or
lawsuits
26
Revenue Models and the Business Plan
in E-Commerce
Elements of a
Business Plan
No matter how you choose to raise money, your
business plan will serve as your primary set of
credentials.
If you don’t need to raise money, your plan will
serve as a road map for success.
Section 8-2
27
Revenue Models and the Business Plan
in E-Commerce
Section 8-2
Review
1. What is a business plan? Why is it important?
2. What is an executive summary? Why is it an
important component of a business plan?
3. What does an income statement reveal about a
business? Why is it important?
4. What are customer demographics? Why is this
information important?
Section 8-2
28
Revenue Models and the Business Plan
in E-Commerce
29
End of
Revenue Models
and the Business
Plan in E-Commerce
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