Business model is among the essential aspects of digital enterprise management. The online business environment has enabled various digital enterprises to develop business models different from the traditional business models. According to a business model is simply a way of doing business. Companies chose on different business models depending on how the model can sustain their business through revenue generation. The business model will dictate how companies make money by defining their value chain position. This paper examines the business model for two digital enterprises, CQout and Amazon, in relations to the target audience, how the sites attract their target audience, future sustainability of revenue stream, and competitive pressure.
Managing the digital enterprise
Comparison and evaluation of business models
The merchant business model is used by both CQout and Amazon. However, the model is not entirely the same for both companies because in addition to merchant model, Amazon also uses the affiliate model. The merchant model used by CQout utilizes auction to generate revenue. The website allows other people to sell products through its online stores. This implies that not all the products listed in CQout portal are owned by the company. Interested sellers who intend to sell their products through the website are only charged a small fee upon every sale. The CQout portal attracts traffic on that one particular site. Even though it tends to act as an affiliate by allowing others to sell their products through the site, it does not attract traffic to other sites. Participants are expected to bid for the listed products and services over the online platform.
On the other hand, Amazon uses both the merchant and affiliate business model. It also sells products by allowing participants to bid for the listed items. However, unlike CQout, Amazon uses an affiliate model where traffic volume is not driven to a generalized portal. The affiliate model provides opportunities for item purchase in the some of the popular sites that people like visiting. The model is structured in such a way that Amazon gives financial incentives to affiliates when a sale is made through their websites; normally a percentage of the sales revenue. The affiliate site has a purchase point click where surfers can make purchases through Amazon’s main site. Essentially, the affiliate model rewards or pays only the affiliates who generate sales. If sale is not generated in an affiliate website, there is no cost incurred by the merchant. Mensing (2007) says that the affiliate model suits online business environment perfectly and this is the reason for the model’s popularity today. Sometimes merchant websites would offer to pay affiliates based on every click. This implies that an affiliate does not have to generate sales to receive payment from the merchant site but every time a surfer clicks on the purchase point click, the affiliate is entitled to some payment.
Communities and target audience segment
Segmenting the market is just as important for digital enterprises as it is for traditional enterprises. There are various online customer type clusters as identified by which are based on the characteristics of the customers. Kim & Lee, (2011)says that attitudes such as awareness to particular brands, perceived risk, shopping experience, convenience, flexibility, and price are some of the characteristics that can be used to segment target audience. Both Amazon and CQout target online shoppers for their products. Generally online shoppers are time pressed and prefer the convenience of online shopping to tradition shopping. The risk involved with online shopping is viewed as something small to these shoppers. Both CQout and Amazon targets this kind of audience who’s their number one priority is convenience and flexibility.
There is also the segment that considers online shopping a very risky affair. Based on the evaluation of the two stores, this segment of the market is not targeted at all because they tend not to appreciate flexibility and convenience of online shopping. The other market segment targeted by the companies is the price focused convenience shoppers. The top priority among this segment is item price and convenience of shopping. They would tend to weigh prices from various stores before deciding on the cheapest. Therefore, it is the concern of both companies to ensure that the different products have a wide range of prices to attract various segments of the market.
Strategies used to attract target audience
Both CQout and Amazon use various strategies to attract their target audiences. Online promotion is one strategy that is commonly used by both companies. Promotion is not only used to increase sales but also to build the company’s online brand image. The affiliate program is also a strategy, however used only by Amazon, to attract target audience. For instance, Amazon realizes that there are technology review blogs where surfers are most likely to visit with regards to various IT products. By allowing these sites to sell Amazon products more customers are attracted to the site and actually make purchases of the products.
Discounts and reduced prices are used by Amazon to attract the price focused convenience shoppers. Discounted prices are an effective way of attracting customers who are price sensitive. Discounted prices are applied across the wide range of products offered at Amazon. This strategy is also applied by CQout. By creating remarkable content, Amazon is able to attract the target audience to its web store. This implies additional products or information which is used to supplement the existing products. Remarkable content can include videos, blogs, catalogues, and buyers guide. For instance, in the Amazon’s web portal, the company allows customers to get free apps for their Amazon Kindle which runs on android operating system. This product therefore supplements the smart phone and tablets sold by Amazon. Different products would attract different audience. A look at Amazon’s portal reveals that the company mainly targets to sell some of the products which it owns. For instance, the main site tends to attract visitors to products such as the Amazon Kindle, Amazon Apps, and e-books. However, there is also the opportunity for visitors to access other products ranging from electronics to health and beauty products. Similarly, CQout also provides the opportunity for online buyers to select from a wide range of products. Buyers guide and additional information regarding products are provided at CQout. In every product category, the company provides additional information about the products therein which gives visitors the confidence for need satisfaction.
As a merchant CQout, provides sellers with the opportunity to list their products for free. The company does not charge for any product listed in the portal and this can be seen as a strategy to attract sellers to list their products. Product reviews is another strategy used by both companies to attract target audience. For every product sold through the web stores, the companies encourage buyers to write a brief review of their experiences with the products. A product that receives several positive reviews is likely to increase confidence among potentially new customers. In addition to product reviews, Amazon leverages social media. It is through social media that online stores are able to promote their products and connect to their customers. Taking advantage of the opportunities in social media has been noted by Hsiang (2005) to help online enterprises attract huge traffic to themselves. Unlike CQout, Amazon uses social media promotions to attract more customers. For instance the company runs a Facebook promotion that allows customers to win up to 1000 sterling pounds worth of gift cards. Customers can use the gift cards to shop for items at the store.
Appraisal of revenue stream sustainability
One of the identified revenue streams for Amazon is affiliate marketing. This strategy of increasing sales has been argued to be a powerful force in online business. The strategy is becoming common among merchants as they tend to rely on it to boost their business and increase revenue. However, affiliate business model has shortcomings which tend to limit the hype that is associated with it. Since the model tends to overlook customer service, then its sustainability only lasts as long as its promoters remain good. As long as affiliate programs are noticed for the right reasons, they will continue to be a reliable source of revenue stream for online businesses.
The use of merchant business model as a revenue stream is equally sustainable for the future. This business model has been in existence both in online and traditional enterprises. This model is sustainable due to the increasing need for both buyers and sellers to get convenient platforms for purchasing and selling goods. The online platform offers the most sustainable solution for meeting this need. At the same time, the supply
Competitive pressures that influence business models
Business models are a critical source for competitive advantage for digital ventures. Both internal and external pressures can affect or influence the competitive nature of a business model. Technological advancement and diversity exerts pressure on the competitiveness of both merchant and affiliate business models. In order to remain competitive, both companies need to use the latest technologies for effective operation of the online business. Another critical aspect is customer loyalty which has proven to influence the competitiveness of merchant business model. This business model requires that customers remain loyal to a particular store. Both companies put strategies in place to ensure that customers continue to remain loyal to their business. For instance, both Amazon and CQout allow customers to have accounts with the website. Amazon even goes ahead to refer to customers subscribed to the web portal as the Amazon family. Potential customers who visit the site are always asked to join the Amazon family before making purchase of any product.
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