Rappa (no date) defines a business model as "the method of doing business by which a company can sustain itself - that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain." Timmers (1998) adopts a broader perspective to include other stakeholders and defines a business model as "an architecture for the product, service and information flows, including a description of the various business actors and their roles; and a description of the potential benefits for the various business actors; and a description of the sources of revenues." Novak and Hoffman (2001), without departing from the common elements of revenue…
Some models mean the same thing but are given different names by their creators. With the evolution of the internet, many new models have emerged. At the same time, some do not stay long and have gone. Rappa (no date) identifies nine generic forms of business models, including the brokerage model, advertising model, infomediary model, merchant model, manufacturer model, affiliate model, community model, subscription model, and utility model. Timmers (1998) classifies business models by positioning them along the two dimensions of the degree of innovation and functional integration. In Novak and Hoffman (2001)'s customer-centric framework, for any business model to be successful, it must integrate customer models, value models, and revenue models. In this paper, the customer-centric framework of Novak and Hoffman (2001) will be adopted as each of the three subsidiary model answers questions such as who are the communities or customers served by the firm, how the firm attracts target audience, and where does the revenue for the firm come from respectively.
A THEORETICAL FRAMEWORK: NOVAK AND HOFFMAN'S CUSTOMER-CENTRIC BUSINESS MODEL
According to Novak and Hoffman (2001)'s customer-centric framework, a successful business model consists of customer models, value models, and revenue models.
A customer model is a segmentation of the users of the electronic business. The four groups of users are businesses, consumers, agents, and employees. Each customer model consists of two groups of users. The most common type of customer model seen on the internet today would be businesses to consumers. Businesses to businesses and consumers to consumers are not uncommon as well. Therefore, fourteen segmentations of customer models are possible, as shown by Figure 1.
Novak and Hoffman, 2001
The value model of Novak and Hoffman (2001)'s framework seeks to address how firms can attract target audience by providing them value. The twelve possibilities of how the web can create value are by offering brokerage service, content, search tools, incentives, freeware, communication, control, outsourcing, entertainment, transactions, affiliate opportunities, and communities. Of course, any model would not have commercial feasibility if it does not generate revenue for the firm. The revenue model identifies the revenue stream of the firm conducting electronic business. The seventeen revenue models are transaction fees, hosting fees, referral fees, subscription fees, license fees, pay-per-view, pay-per-performance, micropayment, advertising, sponsorships, ransom model, margin on sales of goods or services, sale of customer data, offline customer response, efficiency and effectiveness gains, value-added services (linux model), and virtual real estate. Various value models and revenue models can be created ...
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