SlideShare a Scribd company logo
Strategy and Models for Virtual
World
 redBus – India’s number 1 bus ticketing platform, was
founded in 2005 and is a part of ibiboGroup. We take
pride in providing bus ticket fare with zero booking
charges. You can now choose from 1500+ bus operators
and 80,000 routes in India
 redBus.in was founded by three engineers -Phanindra
Sama, Charan Padmaraju and Sudhakar Pasupunuri
 All the founders used to work in Bangalore at the time
(sometime in 2005) - all with top IT MNCs - IBM, Texas
Instruments and Honeywell. They were friends from BITS
Pilani, one of India's finest engineering colleges.
 They started writing the code for the software that would
be required to run the operations. Once this was ready,
they put together a business plan and presented it to TiE,
Bangalore Chapter.
 Being run by a team of young people, the culture is
informal and everyone is ambitious and charged to make
it larger than imagined. What started as a team of three
grew into a team of 650 in 8 years.
Internet Relationships
 Private Business (B)
 Public Administration (PA)
 Customers and Citizens (C)
 B2B
 B2C
 B2PA – Tenders and documents. Passport service.
 PA2PA
 PA2C
 C2C – Olx, Ebay and etc
Problems in Dot Com
 Story of Boo.com
 Boo.com was a European company founded in 1998
and operating out of a London head office, which
was founded by three Swedish entrepreneurs, Ernst
Malmsten, Kajsa Leander and Patrik Hedelin.
Malmsten and Leander had previous business
experience in publishing where they created a
specialist publisher and had also created an online
bookstore, bokus.com.
 The vision for Boo.com was for it to become the
worlds first online global sports retail site.
 At launch it would open its virtual doors in both
Europe and America with a view to "amazoning the
sector“ ( around 36 countries).
 According to Malmsten (2001), the boo brand name
originated from filmstar "Bo Derek", best known for
her role in the movie 10". The domain name
"bo.com" was unavailable, but adding an "o", they
managed to procure the domain for $2,500 from a
domain name dealer
 They listed brands such as Polo Ralph Lauren, Tommy
Hilfiger, Nike, Fila, Lacoste and Adidas.
 When selecting products, users could drag them on to
models, zoom in and rotate them in 3D to visualize them
from different angles. The technology to achieve this was
built from scratch along with the stock control and
distribution software.
 For 2000, about $6million was spent on content about
spring/summer fashion ware. It cost $200 to photograph
each product, representing a monthly cost of more than
$500,000.
 The success of this PR initiative can be judged by
the 350,000 e-mail pre-registrations who wanted to
be notified of launch. For the launch Malmsten
(2001) explains that "€œwith a marketing and PR
spend of only $22.4 million we had managed to
create a worldwide brand“.
 Boo possessed classic channel conflicts. Initially, it
was difficult getting fashion and sports brands to
offer their products through boo.com.
 Discuss the problems of Boo.com
 "How many visitors are you aiming for?
 What kind of conversion rate are you aiming for?
 How much does each customer have to spend?
 What's your customer acquisition cost.
 And what's your payback time on customer
acquisition cost?".
 When the site launched on 3rd November 1999,
around 50,000 unique visitors were achieved on the
first day, but there were only 4 in 1000 placed orders
(a 0.25% conversion rate).
 "Eighty-one minutes to pay too much money for a
pair of shoes that I still going to have to wait a week
to get?" •These rates did improve as problems were
ironed out “ by the of the week 228,848 visits had
resulted in 609 orders with a value of $64,000.
 In the 6 weeks from launch, sales of $353,000 were
made and conversion rates had more than doubled
to 0.98% before Christmas. However a relaunch was
required within 6 months to cut download times by 6
months and to introduce a "low-bandwidth version"
for users using dial-up connections. This led to
conversion rates of nearly 3% on sales promotion.
 18th May 2000 the company was liquidated.
 Overestimating demand
 Underestimating promotional cost needed for brand
building
 Over reliance on few revenue streams
 Poor business plans with no clear strategic vision
 Target markets not adequately defined
 Failure to respond to queries via email
 Poor fulfilment strategies and implemetation
 Short term objectives to meet demands of the VC’s
 Setting up at several countries at once
 Failing to reassure customers regarding security and
trust
 Poor customer service, especially online
 Implementation of technology and website design
lacking customer focus.
Strategy
 Market penetration – Eg) By superior online
customer service
 Product Development – Eg) New trading exchanges
to existing markets
 Market Development – Eg) Reaching new markets
by online selling
 Diversification – Eg) Customisation of industry
specific products
How to grow
 Chaffey et al 2000
 Level 0 – No website or presence on the web
 Level 1 – Web presence is minimal, listing domain
name
 Level 2 – First level basic web site emerges
 Level 3 – Interaction exist and email enquiries
 Level 4 – Site development to handle sales
transactions
 Level 5 – Site fully developed with all stages of the
buying process
First Consulting Group
 Publish – Creating web awareness with customers and
employees
 Interact – Engage the community
 Transact – Deploy robust self service capability and
online transaction
 Integrate – Automation of numerous transactions
 Transform – End to end web interactions with customers
and business partners
Classification of Business Models
How e-business models get revenue?
 Advertising – Banner advertising, Interstitials(pop
ups) and superstitials(activated by an user action)
 Query based paid placements and content targeted ads
 Sales – B2B sector accounts for 80% transaction
 India has 20% internet penetration and out of that 10%
use online purchasing option.
 Sales Model has two main categories
 Manufacturing model – Dell – Uses cost plus pricing method
 Subscription model – HBS, Wall street journal, Vikatan.com
 Referral Model ( Affiliate Marketing)
 Revenue generated by promoting and linking one site to
another.
 Pay per click ( Google ads)
 Pay per sales ( Amazon Affiliate Program)
 Pay per lead ( Facebook Ads)
 Intermediation Model
 Online brokers – 99acres.com
 Buyer aggregators – alibaba.com
 Exchange/auction hosts – ebay.com, olx.in
 Virtual malls – virtualeshopping.com
Business Categories in the modern economy
 Bricks and mortar
 Clicks and mortar
 Pure players
 Clicks and contents
Strategic Options for Retailers
 Information only
 Export
 Subsume into existing business – adding IT in
current biz
 Treat as another channel – www.tesco.com
 Setup as separate business
 Pursue in all fronts – using multiple services(online)
 Mixed systems – Offline and online
 Switch fully – Only online
 Best of both – Giving the best in online and offline
 Revitalise and buck the trend – Developing new
trends
Physical and Virtual Worlds
 Location and hosting
 Marketing and presentation
 Payment
 Security
 Fulfilment

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Strategy and models for virtual world

  • 1. Strategy and Models for Virtual World
  • 2.  redBus – India’s number 1 bus ticketing platform, was founded in 2005 and is a part of ibiboGroup. We take pride in providing bus ticket fare with zero booking charges. You can now choose from 1500+ bus operators and 80,000 routes in India  redBus.in was founded by three engineers -Phanindra Sama, Charan Padmaraju and Sudhakar Pasupunuri  All the founders used to work in Bangalore at the time (sometime in 2005) - all with top IT MNCs - IBM, Texas Instruments and Honeywell. They were friends from BITS Pilani, one of India's finest engineering colleges.
  • 3.  They started writing the code for the software that would be required to run the operations. Once this was ready, they put together a business plan and presented it to TiE, Bangalore Chapter.  Being run by a team of young people, the culture is informal and everyone is ambitious and charged to make it larger than imagined. What started as a team of three grew into a team of 650 in 8 years.
  • 4. Internet Relationships  Private Business (B)  Public Administration (PA)  Customers and Citizens (C)  B2B  B2C  B2PA – Tenders and documents. Passport service.  PA2PA  PA2C  C2C – Olx, Ebay and etc
  • 5. Problems in Dot Com  Story of Boo.com  Boo.com was a European company founded in 1998 and operating out of a London head office, which was founded by three Swedish entrepreneurs, Ernst Malmsten, Kajsa Leander and Patrik Hedelin. Malmsten and Leander had previous business experience in publishing where they created a specialist publisher and had also created an online bookstore, bokus.com.
  • 6.  The vision for Boo.com was for it to become the worlds first online global sports retail site.  At launch it would open its virtual doors in both Europe and America with a view to "amazoning the sector“ ( around 36 countries).  According to Malmsten (2001), the boo brand name originated from filmstar "Bo Derek", best known for her role in the movie 10". The domain name "bo.com" was unavailable, but adding an "o", they managed to procure the domain for $2,500 from a domain name dealer
  • 7.  They listed brands such as Polo Ralph Lauren, Tommy Hilfiger, Nike, Fila, Lacoste and Adidas.  When selecting products, users could drag them on to models, zoom in and rotate them in 3D to visualize them from different angles. The technology to achieve this was built from scratch along with the stock control and distribution software.  For 2000, about $6million was spent on content about spring/summer fashion ware. It cost $200 to photograph each product, representing a monthly cost of more than $500,000.
  • 8.  The success of this PR initiative can be judged by the 350,000 e-mail pre-registrations who wanted to be notified of launch. For the launch Malmsten (2001) explains that "€œwith a marketing and PR spend of only $22.4 million we had managed to create a worldwide brand“.  Boo possessed classic channel conflicts. Initially, it was difficult getting fashion and sports brands to offer their products through boo.com.
  • 9.  Discuss the problems of Boo.com
  • 10.  "How many visitors are you aiming for?  What kind of conversion rate are you aiming for?  How much does each customer have to spend?  What's your customer acquisition cost.  And what's your payback time on customer acquisition cost?".
  • 11.  When the site launched on 3rd November 1999, around 50,000 unique visitors were achieved on the first day, but there were only 4 in 1000 placed orders (a 0.25% conversion rate).  "Eighty-one minutes to pay too much money for a pair of shoes that I still going to have to wait a week to get?" •These rates did improve as problems were ironed out “ by the of the week 228,848 visits had resulted in 609 orders with a value of $64,000.
  • 12.  In the 6 weeks from launch, sales of $353,000 were made and conversion rates had more than doubled to 0.98% before Christmas. However a relaunch was required within 6 months to cut download times by 6 months and to introduce a "low-bandwidth version" for users using dial-up connections. This led to conversion rates of nearly 3% on sales promotion.  18th May 2000 the company was liquidated.
  • 13.  Overestimating demand  Underestimating promotional cost needed for brand building  Over reliance on few revenue streams  Poor business plans with no clear strategic vision  Target markets not adequately defined  Failure to respond to queries via email  Poor fulfilment strategies and implemetation  Short term objectives to meet demands of the VC’s  Setting up at several countries at once
  • 14.  Failing to reassure customers regarding security and trust  Poor customer service, especially online  Implementation of technology and website design lacking customer focus.
  • 15. Strategy  Market penetration – Eg) By superior online customer service  Product Development – Eg) New trading exchanges to existing markets  Market Development – Eg) Reaching new markets by online selling  Diversification – Eg) Customisation of industry specific products
  • 16. How to grow  Chaffey et al 2000  Level 0 – No website or presence on the web  Level 1 – Web presence is minimal, listing domain name  Level 2 – First level basic web site emerges  Level 3 – Interaction exist and email enquiries  Level 4 – Site development to handle sales transactions  Level 5 – Site fully developed with all stages of the buying process
  • 17. First Consulting Group  Publish – Creating web awareness with customers and employees  Interact – Engage the community  Transact – Deploy robust self service capability and online transaction  Integrate – Automation of numerous transactions  Transform – End to end web interactions with customers and business partners
  • 19. How e-business models get revenue?  Advertising – Banner advertising, Interstitials(pop ups) and superstitials(activated by an user action)  Query based paid placements and content targeted ads  Sales – B2B sector accounts for 80% transaction  India has 20% internet penetration and out of that 10% use online purchasing option.  Sales Model has two main categories  Manufacturing model – Dell – Uses cost plus pricing method  Subscription model – HBS, Wall street journal, Vikatan.com
  • 20.  Referral Model ( Affiliate Marketing)  Revenue generated by promoting and linking one site to another.  Pay per click ( Google ads)  Pay per sales ( Amazon Affiliate Program)  Pay per lead ( Facebook Ads)  Intermediation Model  Online brokers – 99acres.com  Buyer aggregators – alibaba.com  Exchange/auction hosts – ebay.com, olx.in  Virtual malls – virtualeshopping.com
  • 21. Business Categories in the modern economy  Bricks and mortar  Clicks and mortar  Pure players  Clicks and contents
  • 22. Strategic Options for Retailers  Information only  Export  Subsume into existing business – adding IT in current biz  Treat as another channel – www.tesco.com  Setup as separate business  Pursue in all fronts – using multiple services(online)  Mixed systems – Offline and online  Switch fully – Only online  Best of both – Giving the best in online and offline  Revitalise and buck the trend – Developing new trends
  • 23. Physical and Virtual Worlds  Location and hosting  Marketing and presentation  Payment  Security  Fulfilment