HOW TO SET UP AN ONLINE BUSINESS FREE TEMPLATE WITH A WORKING EXAMPLE
Executive Summary The report will outline the internet-based market opportunity at which we are targeting our product widely following Rayport, J and Jaworski, J’s (2003) model considering the research undertaken for our particular market. This leads on to the proposed business strategy, evaluating customer segmentation, value propositions and our prototype customer interface. Partly developed above our business models are then considered. How we will communicate our value and market development is then discussed based around the framework of Keller, K, L and Kierzkowski et al (1996). The report finally considers the implementation and metrics of the proposed business strategy with direction from Kaplan, R, S and Norton, D, P (1996) and Porter, M (2008)
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Contents Introduction ............................................................................................................................................ 3 The Market Opportunity: ........................................................................................................................ 3 Business Strategy: ................................................................................................................................... 6 Customer Segmentation and Value propositions................................................................................ 6 Business models .................................................................................................................................. 7 Online Offering ................................................................................................................................ 7 Resource System ............................................................................................................................. 9 Communicating value and marketplace development ..................................................................... 10 Customer Interface........................................................................................................................ 10 Branding ........................................................................................................................................ 12 Organisational Design and Start ups ..................................................................................................... 13 Implementation................................................................................................................................. 13 Metrics .............................................................................................................................................. 14 Conclusion ............................................................................................................................................. 14 Appendices............................................................................................................................................ 16 References ............................................................................................................................................ 17 Books ................................................................................................................................................. 17 Additional Sources ............................................................................................................................ 17 Journals ......................................................................................................................................... 17 Internet Sources ............................................................................................................................ 18 Conferences .................................................................................................................................. 19 Newspaper Articles ....................................................................................................................... 19
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Introduction Thank you for downloading our free EBook on ‘How to set up an online business’ In this day and age nearly everything could be completed digitally, so why wait? In the following document I will be referring back to the example I produced to show you how the framework is used in reality. “Sustainability is the business strategy. It is our roadmap for how we operate and how we innovate.” (Immelt, J 2012) “From knowing what we know today it is not difficult to recognise that a sustainable business from an economic, social and environmental point of view is not only a responsibility and non-negotiable but offers all of us a business opportunity”. (Bristow, R 2011) Therefore we have taken the responsibility to place the environment at the centre of our business decisions by creating Eco-Farms; a vertical indoor garden that allows for all year round growing. Following the frameworks of Rayport, J and Jaworski, J (2003) E-Commerce strategy illustrated in Figure 1 and building upon the E-business model strategy of Osterwalder, A and Pigneur, Y (2002) illustrated in Appendix 1 I will develop the initial ideas presented building upon the value propositions across all six the functions.
Framing the Market Opportunity
Business Model
Customer interface
Market Communication and Branding
Implementation
Metrics
Figure 1- E-Commerce Strategy
The Market Opportunity: Figure 2 illustrates the steps of opportunity that should be satisfied in order to frame a market opportunity; the seven steps revolve heavily around four key environments; customer, company, technology and competition. (Rayport, J and Jaworski, J. 2003) Identify the unmet and/or underserved customer need Identify the specific customers a company will pursue Assess advantage relative to competition Assess the company’s resources to deliver the offering Assess market readiness of technology Specify opportunity in concrete terms Assess opportunity attractiveness Figure 2- Steps of Market Opportunity
Following this framework what is the underserved customer need you wish to fill, our example is shown below:
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From research undertaken Eco farms will be situated in Paris, France. With a population of 65,800,800. (Insee, 2013) Most interestingly France’s greenhouse gas emissions in 1991 levelled at 104 whereas in 2010 it dropped to 93, however compared to Germany, 75 and the United Kingdom, 77, France has the opportunity to further drop their levels of greenhouse emissions demonstrated already in their national recycling rates currently at 75% and houseplants purchased in 2002 around 455 million Euros (Dantzig, T 2005) This highlights the potential for sustainability in France particularly Paris. Interestingly Euromonitor (2013) reported that E-commerce had become increasingly popular due to home delivery services and prices and internet retailing was 1% highlighting a lot of unexplored areas; by harnessing the E-commerce opportunity and Frances’s environmental agreements such as Climate change, Hazardous wastes and ozone layer protection (CIA, 2013) we will provide a successful business opportunity. Next you must identify the specific customer you will pursue again shown below is our example: Paris would be an ideal location with a value of 6,507,783, heavily channeled around fashion (Europa, 2013) and 38.1% agree the ease of finding a ‘good’ job in Paris, we are able to target consumers with a high disposable income parallel with Eco-Farms highly set prices. “Brands are becoming simpler, people increasingly base purchase on price.” Kim, W and Mauborgne,R (2004) backs up our high pricing decisions. So you have your undeserved need and specific customer type but who is the current competition in this market, our example highlights our main competitor would be Windows Farms LTD. What are your advantages over your competitor are you cheaper, more reliable? Our direct competitor Windowfarms sell their two column garden for $299.00 this works out 21.91 Euros cheaper than our price of 250 Euros. According to Kim, W and Mauborgne,R (2004) customers should perceive our product as higher quality. However with Windowfarms target market channeled only to the USA and little media coverage out of the USA, this provides little competition to Europe and Paris enabling us to charge this higher price with little competition. Windowfarms provides customers with a “vertical, indoor garden allowing for year round growing in almost any window” (Windowfarms, 2013). Their main capabilities include their ability to contact a wide community totaling 40,000 members and has included coverage from CNN and Fox News. However Windowfarms main weakness is their ability to influence outside of the US with no direct shipping partners they’re currently incapable of international sales. Furthermore they do not have a wrap-around from their core product; we intend to counter this by providing the DIY packaging creating an online community to display designs resulting in repeat sales of our Eco-farm accessories and columns. I recommend producing a competition model across all areas of the decision process. Our example is shown below in Figure 3:
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Figure 3- Competitor Model
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Business Strategy: Customer Segmentation and Value propositions Now you know the market opportunity you wish to pursue you must now look further into the business strategy especially customer segmentation and value propositions. You can see our example below and how we segmented our target market. As acknowledged by Jobber, D and Ellis-Chadwick, F (2013) they found that in terms of personal profiles internet shoppers are likely to be similar to offline counterparts. They reported that internet shoppers desired convenience, are more wealthy and heavy users of email and the internet. With this in consideration Eco-Farms combines various segmentation variables which respond in the same way. As highlighted in Appendix 1 our customer segmentation is based on: 1. Profile: Aged between 25 – 40, male and females. However our most desirable customers are women with the value proposition differing depending on their gender underlined below in Figure 4. 2. Behavioural: Beliefs and Values and Image Seekers The consumer wants to contribute to society shown already in France’s 75% recycling rate yet they still care extremely about fashion and interior. Providing the feeling of prestige and status linking directly with our high prices and quality service provided 3. Psychographic: Upper socio economic class, fashion and design conscious in central Paris. Highlighting why we are in partnership with Createurs D’Interieur Paris a high end interior design magazine in Paris, we want to give a new edge to ‘gardening’ hence the incorporation of fashion and interior design magazine. What is the Value proposition you will provide, what are your customers wants and needs, in our example we had different value propositions for your gender. Consider your segment choice, benefit choice and resource. Female Segment choice: High end market, upper socio economic class looking for convenience. Benefit choice: High quality product which with a reliable service and an extra interior accessory for free. Resource choice: Located in Paris, strong distribution links with TNT and media partnerships with Createurs D’Interieur. Figure 4- Value Proposition Table
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Male Segment choice: High end market, upper socio economic class looking for convenience. Benefit choice: High quality product which with a reliable service. High price indicating high quality product linking with image seeker. Resource choice: Located in Paris, strong distribution links with TNT.
Eco farms value proposition shown in Figure 4 will be differentiated by gender, we split up our market by gender because of their different wants and needs in the market. Females benefitting more from the cardboard packaging accessory whereas males prefer the benefit of high price, the quality and ‘image seeker’ status they receive from this. Brynjolfsson, E and Simester, D (2011) found that 51% of shoppers did not choose the lowest price item and they were willing to pay 3.1% more for a brand name and interestingly in the 1999 study by J.P Morgan 19% of those studied cared about price influencing their purchasing decision. Starkey, R and Welford, R (2001) suggested that companies should command a higher price. These reports influenced our decision to charge more than our competitor especially with European customers’ needs currently unmet. Use diagrams to help you visualise what you are trying to achieve below is a Perceptual map of our business compared to our nearest competitor.
High Price
Low Quality
High Quality Window Farms store Figure 5- Perceptual map Mapping
Low Price
Business models Online Offering Now your value propositions have been articulated you must consider the online offering taking into consideration: 1. Scope of offering 2. Customer decision process 3. Mapping- (Rayport, J and Jaworski, J 2003) Eco Farms solely sells hydroponic indoor gardens therefore our scope of offering is ‘category-specific’ referring to our ability to focus exclusively on one product category. However we are providing a minor complementary product with the packaging resulting in slight cross category dominance. Originally suggested by Davis, J (1994) and further backed up by Roberts, P (1995) they proposed that if packaging was re-useable and businesses aimed to minimise waste they would become more environmentally accepted. This concreted our decision to provide the packaging by-product helping solidify our brand as environmentally acceptable.
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The second step in the online offering is the customer decision process highlighted in Figure 6 this process can be divided into three stages. Pre-Purchase
Purchase
Post Purchase
Figure 6- Customer Decision Process
Again I would recommend representing this visually the egg diagram is a great way to show this again, helping visually show your product offering link with the customer decision process.
Figure 7- Customer Decision Process
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Resource System Now with an established value proposition and offering specification this will help dictate the resource system of Eco-Farms. The resource system will enable us to deliver the benefits of the value propositions as well as other core benefits necessary to support the offering and the business. The four stage process adapted from Rayport, J and Jaworski, J (2003) is shown below. Step One- Core Benefits of value propositions: The core benefits of Eco Farm are shown in the Osterwalder, A and Pigneur, Y (2002) business model illustrated in Appendix 1 and in more detail in Figure 4. Step Two- Identify Resources that relate to each benefit: Demonstrated in Figure 8 the resource chart highlights what resources are required in the delivery of the three main benefits. To achieve a reliable service we have acquired a strong distribution network, partnered with TNT delivery and local storage with Shurgard Self storage helping fulfil our value proposition resource choice. Strong Distribution Network
Strong Brand Name
= Core Benefits
Reliable service to Paris
High Quality
Multiple Contact points
= Resources Core Benefits
Technology
Free interior cardboard accessory
Partnerships- Shown in Figure 9
Figure 8- Resource System
The diagram helps to show how you will link your resources and core benefits again I recommend producing a similar diagram. Step Three- Identify to what degree you can deliver each benefit: It is clear from the resource chart above that we are unable to provide each benefit ourselves therefore we must outsource and partner to gain the missing resources. Must noticeably media partnerships with Createurs D’Interieur and product partnerships with Hydroponica, Park Seed and Pack Discount are required in order to provide an effective system. Step Four- Partners who can complete resources: Figure 9 shows our partnerships split into media, distribution and product categories across the whole resource system. Media and Distribution Partnerships 9
Product Partnerships
Createurs D’Interieur TNT Delivery Shurgard Self Storage PayPal
Hydroponica Park Seed Wholesale Pack Discount
Figure 9- Partnerships Table
Partnerships are helping Eco Farms provide an excellent, incomparable service to competitors; most excitingly promotional agreements with Createurs D’Interieur will enable us to create brand loyalty and customer retention. Reichheld, F, F and Earl Sasser Jr, W (1990) reported that one can boost profit by almost 100% by retaining just 5% more of their customers. Customer retention will be further discussed in the metrics. Appendix 3 provides an in depth overview of the types of online products and services we provide and how the resource system is interlinked with our offering to the customer. Illustrating how dominantly we rely on online services and partnerships.
Communicating value and marketplace development Customer Interface When designing a customer interface you must take into consideration the brand, competitors, legal, value, information, functionality and usability. To fulfil this criteria we followed Rayport, J and Jaworski, J (2003: 151) 7C’s framework shown below in Figure 9 highlighted is the section we aim to provide for each category. Context Content
Aesthetically Dominant Product dominant
Community Customisation
Non-existent Generic
Communication
One to Many, nonresponding user
Functionally dominant Information dominant Limited Moderately customised One to many, responding user
Connection Commerce
Destination Low
Hub Medium
Integrated Service-Dominant Strong Highly customised One to one nonresponding user Portal High
One to one, responding user
Figure 10- The 7C’s of the Customer Interface
Eco farms considers the customer interface of utmost importance to the success of the business especially in achieving our value propositions, particularly our benefit choice. Oz, E (2002) found that 77 out of 100 people used the internet to find information and the internet has changed shopping habits; retail sales were $10.5 billion in 2004. Illustrating the importance to create a strong customer interface. Highlighted in depth in Figure 11 is our site map. It demonstrates how the 7C’s have been implemented effectively, for example; it is aesthetically dominant with each circle representing a different part of the purchasing process creating an efficient, memorable and satisfactory interface, key to producing a better interface according to Nielsen, J (1993) usability criteria. The site will also create a strong community classification ensuing characteristics such as cohesion, group identity and help are fulfilled. Another important component of the 7C’s is content, our website is a product dominant website, by taking a ‘category killer’ approach; exclusively concentrating on one product category we are more likely to fulfil our value propositions and provide a high quality, 10
reliable product. By partnering with lineofsite.co.uk we are able to provide a ten page website, with an email, unique design and visitor tracker. The website will originally be available only in French, this is due to our advertising and distribution only channelled to Paris.
Figure 11- Site Mapping
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Branding Once you have completed the other stages it is time to start considering your branding. Remember this must be consistent across your whole company. If you do have an offline presences keep it inline and constant. Consider how you will market the value propositions you chose at the start of this document. Our branding is shown below: The core element of our brand is providing a hydroponic plantation system for indoor use. This is our main source of achieving the benefit value proposition. However with Windowfarms offering a similar service to us we needed to create a wraparound to help retain and create ‘brand loyal’ customers. Our three main wraparounds are shown in Figure 12 however the most important is the niche packaging customers will receive with their products. The ability to transform this into an interior product and the community forum online will help engage and retain our customers, hopefully resulting in repeat purchases.
Brand Value
Online advertising- Partnership with Createurs
D’Interieur Paris.
Market Communications
Website page dedicated to packaging designs and
social interaction of customers.
Wrap Around’s Core Product/Se rvice
Offer niche packaging for customers to interact
with online. Superior service of delivery to Paris Easy to use website, fast loading Hydroponic plantation system, safe and easy to set
up and use. Available in all sizes depending on the customers
size limit. Figure 12- Brand Equity Conceptual Model
Another diagram this time illustrating how you will market, your wrap around (what is your USP) and the core product or service you are providing
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Organisational Design and Start ups Implementation A business must deliver the total customer experience that the brand communication has suggested. Not only must the customer interface work effectively but transactions must be executed correctly through the customer interface. Figure 13 shows a simple management structure for the new enterprise.
Job Roles
Subsidiaries
Product orders Employee 1
Stock level management
Hydroponica
Deliveries
TNT Postal
Cash Flow Management
BNP Paribas
Advertising Employee 2
Createurs D’Interieur Paris.
Website Maintenance Customer Queries
Paypal Line of Site
Figure 13- Management Structure
We will start up with two employees in the business on minimum wage; employee 1 will concentrate on stock inventory levels and finances and employee 2 will manage the marketing and human resources aspect. Talked about in more detail in the resource system we will rely heavily on our partnerships established across the whole business most importantly Hydroponica, Park Seed wholesale and Createurs D’Interieur Paris. “Management have the responsibility to apply the same environmental and social standards wherever they operate.” (Starkey, R and Welford, R 2001) Roberts, P (1995) reported that by implementing environmental policies one could receive: -
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65% improved image 61% financial benefits 40% improved relations 28% competitive advantage
With this in consideration Eco farms has applied to the Eco Labelling scheme, helping promote design, production and marketing with reduced environmental impact.
Metrics A great way to control and report your metrics is to use a balance scorcecard strategy, Kaplan, R, S and Norton, P, D (1996) saw it as the “Cornerstone of a new strategic management system.� .� It looks to incorporate internal objectives, give a better understanding of long term growth and stronger communication links. We do not want to however concentrate solely on the financial perspective but incorporate other domains such as internal processes and customer responses
Figure 14- Balance Scorecard
Highlight your aims, objectives and targets in the four different areas stated. You can then easily measure and report to these targets you set.
Conclusion The conclusion of the example we used is highlighted below- remember to consider: 1. 2. 3. 4. 5. 6. 14
The Market Opportunity Business Strategy- Customer Segmentation and Value Proposition Business Model- Online Offering and Resource System Communicating value and Marketplace Development- Customer Interface and Branding Organisational Design and Start Ups- Implementation Metrics
In conclusion we have developed upon the Osterwalder, A and Pigneur, Y (2002) model shown in Appendix 1; Eco Farms is a great opportunity to undertake especially in the European market. Paris especially has the income levels, values for sustainability and the fashion/interior edge to create an image seeking perception of Eco farms. This is shown in our three value propositions; we believe the European market has no current direct competitors enabling us to harness this and counter act any expansion from Windowfarms. Through creating strong partnerships with Createurs D’Interieur Paris and Hydroponica will enables us to provide a seamless online offering, resource system and customer interface. Our partnerships are key to the success of Eco farms if we are to succeed especially beyond year two.
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Appendices
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References Books BANSAL, P and HOWARD, E., 1997. Business and the Natural Environment. Butterworth Heinemann: Reed Elsevier plc. Group. BRYNJOLFSSON, E, YU (J.) HU and SIMESTER, D., 2011. Goodbye Pareto Principle, Hello Long tail: the effect of search costs on the concentration of product sales, Management Science 57 (8), 1373-86. CHAFFEY, D., 2002. E-Business and E-Commerce Management. Harlow: Pearson Education. DAVIS, J., 1994. Greening Business, Managing for Sustainable Development, John Davis. HUTCHINSON, A and HUTCHINSON, F., 1996. Environmental Business management. ‘Sustainable Development in the new millennium’ McGraw-Hill. JOBBER, D and ELLIS-CHADWICK, F., 2013. Principles and Practice of Marketing. Seventh Edition. New York: McGraw-Hill. NEILSON, J., 1993. Usability Engineering. San Diego: Academic Press. OZ, E., 2002. Foundations of E-Commerce., New Jersey: Pearson Education Ltd RAYPORT, J.F., and JAWORSKI, B.J., 2003. Introduction to e-commerce. 2nd ed. New York: McGrawHill. ROBERTS, P., 1995. Environmentally sustainable business. Paul Chapman Publishing Ltd STARKEY, R and WELFORD, R., 2001. Business and Sustainable Development. Earth scan Publications LTD. STERN, A., 1994., Managing the environment challenge in Europe. The economist Intelligence unit.
Additional Sources Journals AAKER, D,A, 1996. Measuring Brand Equity across products and markets, California management review, vol 38. No3. DANTZIG, T., 2005., Bringing e-Business to the world’s largest flower auction. Idea Group Inc. pp. 1938. HILLARY, H 1995. EMAS: A Practical guide, in DoE, Eco management and audit scheme. 1st ed. Doe London: DoE London. 17
KAPLAN, R, S and NORTON, D, P. 1996. ‘Using the balanced scorecard as a strategic management system.’ Harvard Business Review. KIERZKOWSKI, A., S. MCQUADE R. WAITMAN and ZEISSER, "Marketing to the Digital Consumer," The McKinsey Quarterly, Vol. 33, No. 3:4-21, 1996. KIM, W.C., and MAUBORGNE, R., 2004. Harvard Business Review. BLUE OCEAN STRATEGY, 1(1), pp.76-84. OSTERWALDER, A., and PIGNEUR, Y., 2002. 15th Bled Electronic Commerce Conference e-Reality: Constructing the e-Economy. An e-Business Model Ontology for Modeling e-Business, 1(1), pp.1-10. PORTER, M.E., 2008. Harvard Business Review. The Five Competitive Forces that Shape Strategy. 86(1), pp.78-93. REICHHELD, F, F, and SASSER JR, W, E., 1990. Harvard Business Review. Zero Defections: Quality comes to services. pp. 105-111 SAWHNEY, M, 1999. 'Making Newmarket'. While our metamarket switchboard business model is based on, 166-21. Internet Sources Central Intelligence Agency. 2013. [Online] Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/br.html. [Accessed 30 March 2013]. Createurs D’Interieur Paris.2013. [Online] Available at: http://ww.createursdinterieur.com/ [Accessed 24 April 2013] Euromonitor, October 2012. Home and garden. [Online] Available at: http://www.euromonitor.com/home-and-garden-in-france/report [Accessed24 April 2013] Europa Union. 2013. [Online] Available at: http://europa.eu/about-eu/countries/membercountries/france/index_en.htm [Accessed 22 April 2013] Eurostat. 2013. [Online] Available at: http://epp.eurostat.ec.europa.eu/tgm/printTable.do?tab=table&plugin-1&language [Accessed 22 April 2013] Hydroponica. 2013. [Online] Available at: http://www.hydroponica.biz/air-water-pumps.html [Accessed 24 April 2013]
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Insee, Institut National de la statistique et des etudes economiques. 2013. [Online] Available at: http://www.insee.fr/fr/default.asp [Accessed 22 April 2013] JP Morgan, 1999. JP Morgan Chase & Co [online] Available at: https://iblogin.jpmorgan.com/sso/action/federateLogin?URI=https%3a%2f%2fmm.jpmorgan.com%3 a443%2f&msg=+&securityLevel=0&cs=CQTGEw9u03oMm0CWlt9R18JacP0%3d [Accessed 22 April 2013] Line of Site. 2013. [Online] Available at: http://www.lineofsite.co.uk/small-business-websitedesign.htm [Accessed 24 April 2013] Mintel 2007. Gardeners Review- Detailed Demographics- UK [online] Available at: http://academic.mintel.com [Accessed 22 April 2013] Mintel 2007. Gardeners Review- Gardeners by type- UK [online] Available at: http://academic.mintel.com [Accessed 22 April 2013] Pack Discount.fr, 2013. [Online] Available at: http://www.packdiscountemballage.com/epages/packdiscount.sf?ChangeObjectID=6Windowfarms. 2013. [Online] Available at: http://www.windowfarms.com/what-grows-well/ [Accessed 22 April 2013] Park Seed wholesale. 2013. [Online] Available at: http://www.parkwholesale.com/page/wholesale_seedsupply/ [Accessed 24 April 2013] Paypal. 2013. [Online] Available at: https://www.paypal.com/uk/webapps/mpp/home-merchant [Accessed 24 April 2013] Shurgard Self-storage, 2013. [Online] Available at: http://www.shurgard.fr/en/SRPStep1?storeids=2&DisableAll=1 [Accessed 24 April 2013] TNT Delivery, 2013. [Online] Available at: http://www.tnt.fr/public/cliquez_envoyez/choixServciesOptions.do [Accessed 24 April 2012] Conferences Immelt, J, 2012. General Electric, Sustainable Energy Forum Panel. Notre Dame University. Newspaper Articles Bristow, R. "Shifting business models - Jochen Zeitz live Q&A" Guardian Professional Network 17 May 2011: 1. Print.
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