Digital markets are very flexible and efficient because they operate with lower

Digital markets are very flexible and efficient

This preview shows page 46 - 48 out of 49 pages.

Digital markets are very flexible and efficient because they operate with lower menu costs (merchants costs of changing price) Dynamic pricing- the price of a product varies depending on the demand characteristic of the customer or the supply situation of the seller Disintermediation – the removal of organizations or business process layers responsible for intermediary steps in a value chain. Companies are able to raise profits while charging lower prices. Digital Goods Are goods that can be delivered over a digital network. Music tracks, videos, commercial movies, software can all be expressed, stored, delivered and sold as purely digital products For digital goods, the marginal costs of producing another unit is about zero(it costs nothing to make a copy of a music file) The cost of producing the original first unit is relatively high – because they are few inventory and distribution
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Types of E-Commerce Business to consumer (B2C) – electronic commerce involves retailing products and services to individual shoppers. E.g. chapters.indigo.ca Business to business (B2B) – electronic commerce involves sales of goods and services among business. E.g. ChemConnect web site for buying and selling chemicals Consumer to consumer (C2C) – electronic commerce involves consumers selling directly to consumers. E.g. Kijiji, enables people to sell their goods to other consumers E-Commerce Revenue Models A firms revenue model describes how the firm will earn revenue, generate profit and produce a superior return on investment Advertisement Revenue Model – a web site generates revenue by attracting a large audience of visitors who can then be exposed to advertisements o Most widely used revenue model in e-commerce o Everything is free to visitors on websites because advertisers pay the productions and distribution costs in return the right to expose visitors to ads Sales Revenue Model – companies derive revenue by selling goods, information or services to customers o e.g. amazon, the bay Subscription Revenue Model – a web site offering contents or service charges a subscription fee for access to some or all of it offering on an ongoing basis o E.g. Netflix Free/Freemium Revenue Model – firms offer basic services or content for free while charging a premium for advanced or special features o One problem with this model is converting people from being “free loader” into paying customers Affiliate Revenue Model – web sites send visitors to other web sites in return for a referral fee or percentage of the revenue from any resulting sales o E. g. My Points makes money by connecting companies to potential customers by offering social deals to its members Social Networking and the Wisdom of Crowds One of the fastest growing areas of e-commerce revenues are Web 2.0 online services The most popular Web 2.0 service is social networking, online meeting places where people can meet their friends and their friends’ friends Social shopping –
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