Today’s class focused around the different kinds of business models that exist. The textbook describes a business model as a way to determine how a company generates revenue. For example, a marketplace business model like eBay generates revenue from auctions. A fund raising website like The Red Cross generates revenue from donations made through their website.
TANGENT: I remember something being said about the Wall Street Journal’s website and how they use subscriptions to generate revenue for their site. I found an interesting article in the NY Times about a redesigning of WSJ.com. WSJ.com is becoming more community oriented. Not only are they offering more access to articles for people without subscriptions, but they are also creating a whole social-networking aspect for subscribers. Now, business people can comment on articles, post discussion questions and set up profiles. Read the whole article here.
So now, once a company creates a website that they would like people to go to, they have to figure out how that website is going to turn a regular person into a loyal customer. The first and most important thing, before anything else is to make people aware of the website and what it offers. This can happen through advertising or sponsorships. At my job (I work for a non-profit Musical Theatre Festival), one of our main sources for cash is getting companies to sponsor our festival. A lot of our sponsorships are theatre-oriented websites like TheaterMania.com or BroadwayWorld.com. It’s a kind of a win-win for everyone. These websites sponsor our events and both our name and the websites’ names get out to the NYC theatre community.
Once the customer has an awareness, a company must learn how to acquire, convert and retain these people. Acquistion can be atained by sending out offers to customers like coupons. Once a customer has used his or her offer and purchased something from the website, they are aquired but they might not necesarilly be committed to the brand. Next is conversion, in which a customer buys more than one thing and has a specific spending pattern on the website. The last step, retention, is when the customer makes multiple purchases over a consistant time period, showing loyalty to the brand or company (CLV-customer lifetime value).
We also discussed the front end vs. the back end of a website. The front end is everything that happens before a sale is made, like promotions. The back end is everything that happens after that purchase, like customer service and getting what you ordered.