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Page 1: MELJUN CORTES E Commerce 2

Revenue Modelsand the BusinessPlan in E-Commerce

Back to Table of Contents

Page 2: MELJUN CORTES E Commerce 2

Revenue Modelsand the BusinessPlan in E-Commerce

E-Commerce Revenue ModelsE-Commerce Revenue Models

E-Commerce Business PlanE-Commerce Business Plan

2

Revenue Models and the Revenue Models and the Business Plan in E-Commerce Business Plan in E-Commerce

SectionSection 8-1

SectionSection 8-2

Chapter 8

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Revenue Models and the Business Plan in E-Commerce

Section 8-1Why 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.

3Section 8-1

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Revenue Models and the Business Plan in E-Commerce

Section 8-1 Key Terms

revenue model

e-zine

blog

affiliate program

licensing

4Section 8-1

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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.

revenue model how a company generates income

5Section 8-1

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Types of Revenue Models

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E-Commerce Revenue Models

Section 8-1

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

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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.

7Section 8-1

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Revenue Models and the Business Plan in E-Commerce

Types of Revenue Models

There are two types of products you can sell:

8Section 8-1

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

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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.

9Section 8-1

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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.

10Section 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. An e-zine can also generate revenue by selling subscriptions.

e-zine electronic magazine

11Section 8-1

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Revenue Models and the Business Plan in E-Commerce

Types of Revenue Models

A specialized type of e-zine is the weblog, or blog.

blog a public online journal kept by a writer, or blogger; short for Weblog

12Section 8-1

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Revenue Models and the Business Plan in E-Commerce

Types of Revenue Models

Another way to generate revenue is through an affiliate program.

affiliate program a partnership through which an online business delivers customers to other online businesses

13Section 8-1

In exchange for bringing business to your affiliates, you receive a commission, or a percentage of the sales they make on that business.

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Revenue Models and the Business Plan in E-Commerce

Types of Revenue Models

The idea behind licensing is simple.

licensing the granting of permission to use intellectual property, such as music, photos, software programs, and inventions

14Section 8-1

Assume you have created a product. Companies would pay you a licensing fee for the right to market, copy, or use the product.

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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.

15Section 8-1

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Revenue Models and the Business Plan in E-Commerce

Section 8-1 Review

What is a revenue model? What is a major factor in determining the type of revenue model to use?

Why is it important for advertisers to know about a company’s customers before advertising on a particular site?

What is the difference between wholesale and retail prices?

What is a blog? How can it generate income?

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2.

3.

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Section 8-1

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Revenue Models and the Business Plan in E-Commerce

Section 8-2Why 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

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Revenue Models and the Business Plan in E-Commerce

Section 8-2 Key Terms

business plan

forward-looking statements

income statement

balance sheet

assets

liabilities

18Section 8-2

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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.

19Section 8-2

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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.

business plan a detailed description of a business’s objectives, products and services, operations, potential customers, and financial resources

20Section 8-2

MELJUN CORTES

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Elements of a Business Plan

21Section 8-2

Cover Page

Title Page

Table of Contents

Executive Summary

Management Plan

Company Description

Product and Service Plan

Mission and Vision Statements

Industry Overview

Market Analysis

Competitive Analysis

Marketing Plan

Operations Plan

Organizational Plan

Financial Plan

Growth Plan

Contingency Plan

Supporting Documents

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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.

22Section 8-2

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Revenue Models and the Business Plan in E-Commerce

Elements of a Business Plan

Your business plan should include forward-looking statements.

forward-looking statements the parts of a business plan that describe the future of a company in both the short and the long term

23Section 8-2

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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.

24Section 8-2

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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

25Section 8-2

A balance sheet is another important financial statement.

balance sheet shows how much a business is worth at a specific time

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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.

assets all of the things owned by a business

26Section 8-2

liabilities debts or lawsuits

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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.

27Section 8-2

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Revenue Models and the Business Plan in E-Commerce

Section 8-2 Review

What is a business plan? Why is it important?

What is an executive summary? Why is it an important component of a business plan?

What does an income statement reveal about a business? Why is it important?

What are customer demographics? Why is this information important?

1.

2.

3.

28Section 8-2

4.

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Revenue Models and the Business Plan in E-Commerce

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Revenue Modelsand the BusinessPlan in E-Commerce

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