Components of a Business Model

1. Components of a Business Model Value Cluster Marketspace Offering Resource System Financial Model

2. Point-Counterpoint: Single vs. Cluster of Benefits Point - Counterpoint Single Benefit Cluster of Benefits · · Clear, non - contradictory communication to Customers rarely desire one benefit customer · In the online world, back - office systems can · Partnerships can be assembled with “like - easily be reconfigured for different benefits minded” firms · With an online presence, a firm can provide · Back - office systems must be tailored to distinct multiple benefits -- with no tradeoff of benefits performance (e.g., provide broadest selection and low price) · Focuses employee hiring and retention n Examples of firms that offer multiple benefits o · Focuses the enterprise include portals (i.e., Yahoo!), ISPs (i.e., AOL), product sites (i.e., BN.Com) and information services (i.e., WSJinteractive)

3. Shattering the Myth That Consumers Care Only About Prices Online Percentage of Customers Who Care About Attribute Attribute Source: JP Morgan Report: etailing and the five Cs

4. Consumer Decision Process Problem - Recognition Information Search Pre-Purchase Evaluation of Alternatives Purchase Decision Purchase Satisfaction Post-Purchase Loyalty Disposal

5. Consumer Decision Process — Flower Purchase Example Problem - Recognition Information Search Pre-Purchase Evaluation of Alternatives Purchase Decision Purchase Satisfaction Post-Purchase Loyalty Disposal Flowers • Need recognition, potentially triggered by a holiday, anniversary or everyday events • Search for ideas and offerings, including: • Available online and offline stores • Gift ideas and recommendations • Advice on selection style and match • Evaluation of alternatives along a number of dimensions, such as price, appeal, availability, etc. • Purchase decision • Message selection (medium and content) • Post-sales support • Order tracking • Customer service • Education on flowers and decoration • Post-sale perks

6. Egg Diagram for 1-800-flowers.com • Gift reminder service • Holiday specials • Everyday celebrations suggestions • Special occasion suggestions Ideas and Information • “Care and handling” • “Do it yourself” • Special events and educational workshops held at stores • Floral ideas • Garden ideas • Home ideas • Gift ideas • Gourmet ideas • Store locator • Recommendations by budget • Bestsellers Flower / Gift Decision Process • Need Recognition Product Offering Gift Recommendations • Education on Flowers and Decoration • Search for Ideas and Offerings • Gift guru • Favorite gifts • Gift frequency • Gift impossible • Gift baskets • Corporate gift services Post-Sale Support • Order receipt e-mail • eQ&A online customer service • FAQ • Customer service inquiry form • Post-Sale Support and Perks • Evaluation of Alternatives • Product price • Product picture • Product description • Delivery information • Delivery availability Perks • Miles earned with flower purchases • Free gifts • Discounts at AOL & BN.com with flower purchases • Member specials • Message Selection • Purchase Decision • Shopping basket • E-commerce transaction • Special shopping features • Delivery outside US • 1-800-lasfloras.com • Gizmo fully-animated greeting cards • Physical cards in gifts

7. 1-800-flowers.com Resource System BloomNet Network Third-Party Contractors Address Book Strong Distribution Network Gift Recommend- ations Fulfillment Center Stores Online Gift Center Gift Reminder Broad Assortment of Gifts High Quality of Flowers Rich Content Personalization Capabilities Popular Website Garden Works Integrated Partner Offers Telephone 3,000 Affiliates Plow & Hearth Online Customer Service Widespread, Easy Access Great Foods Multiple Contact Points Franchise Stores Catalog Technology Strong Brand Name Wide Reach to Customers Customer Service Centers = Core Benefits Snap Starmedia = Activities & assets Integrated online offline Systems MSN AOL = Capabilities

8. Benefits and Challenges of Hybridization Benefits Challenges • Persistent connection with customers • New value for customers • Access to new customers • Scalability • Cannibalization • Channel conflict • Customer confusion • Investor confusion

9. Egg Diagram for 1-800-flowers.com • Prompts on toll-free number recording • Suggestions from CSRs* in-store and via phone • Special events and educational workshops held at stores • Prompts on toll-free number recording • Suggestions from CSRs* in-store and via phone • Brochure • Gift reminder service • Holiday specials • Everyday celebrations suggestions • Special occasion suggestions Ideas and Information Offline Product Offering • Floral ideas • Garden ideas • Home ideas • Gift ideas • Gourmet ideas • Store locator • Recommendations by budget • Bestsellers • “Care and handling” • “Do it yourself” Flower / Gift Decision Process • Need Recognition Online Product Offering Gift Recommendations • Education on Flowers and Decoration • Search for Ideas and Offerings • Gift guru • Favorite gifts • Gift frequency • Gift impossible • Gift baskets • Corporate gift services • Suggestions from CSRs in stores via phone • Brochure Post-Sale Support • In-store customer service • Customer service on toll-free number • Order receipt e-mail • eQ&A online customer service • FAQ • Customer service inquiry form • Post-Sale Support and Perks • Evaluation of Alternatives • Product price • Product picture • Product description • Delivery information • Delivery availability • Information from CSRs in-store and via phone • Brochure Perks • In-store specials • Specials offered via phone • Miles earned with flower purchases • Free gifts • Discounts at AOL & BN.com with flower purchases • Member specials • Message Selection • Purchase Decision • Shopping basket • E-commerce transaction • Special shopping features • Delivery outside US • 1-800-lasfloras.com • Gizmo fully-animated greeting cards • Physical cards in gifts • Select card in-store • Select card via phone • Purchase in-store • Purchase via phone *CSR = Customer service representative

10. Key 1-800-flowers.com Activity System Online Offline Both Introduction of New Product Categories Electronic Greeting Cards Gift Recommendations Gift Reminder Program Broad Product Line Online Gift Center Address Book Nationwide Presence Florist Participation BloomNet Network Partnership With Associated Product Lines Company Offline Stores Company Franchise Stores MSN Multiple Customer Contacts Strategic Alliances Online BN In-Store AOL Alliance With Distribution Carrier Telephone Affiliate Programs

11. 1-800-flowers.com Value System Address Book Gift Recommend- ations Online Gift Center Logistics Gift Reminder Broad Assortment of Gifts Fresh Flowers Sourcing Garden Works Product Partnerships Brand Name Telephone Plow & Hearth Online Reasonable Prices Widespread, Easy Access Great Foods Multiple Contact Points Stores Affiliates Logistics BloomNet Network Media Partnerships = Core Benefits Snap Starmedia = Actions MSN AOL = Capabilities

12. 1-800-flowers.com Value System Address Book Gift Recommend- ations Online Gift Center Logistics Gift Reminder Broad Assortment of Gifts Fresh Flowers Sourcing Garden Works Product Partnerships Brand Name Telephone Plow & Hearth Online Reasonable Prices Widespread, Easy Access Great Foods Multiple Contact Points Stores Affiliates Logistics BloomNet Network Media Partnerships = Core Benefits Snap Starmedia = Activities & assets MSN AOL = Capabilities

13. Competencies vs. Resource Systems Point - Counterpoint Focus on Competencies Focus on Resource Systems · · Organizations can lose focus by not isolating Isolation of a handful of key competencies leads the few key capabilities that differentially lead to to ignoring other key success factors competitive advantage · It is the combination of capabilities -- not · Exceptional competencies provide competitor capabilities in isolation -- that provides advantage since most a ctivities are the “price of competitive adva ntage entry” into a particular online market

14. Alternative Shareholder Value Model

15. Alternative Shareholder Value Models

16. Revenue Growth Choices: 1-800-flowers.com Gardenworks • Plans to branch into a wide variety of product categories Greatfoods.com Plow & Hearth Home Decor New Plants In-Store Seminars Gourmet Treats Greeting Cards Products Existing Corporate Gift Services Existing New Existing New Offline Markets Online Markets

17. Does Profit Matter? Build Profit or Build User Base? Point - Counterpoint Build Profit Build User Base · · Basic financial rules will eventually apply Standards will ultimately dictate success · · Cash flow drives shareholder value Standards require huge investment s in building a customer base · Shareholders will become frustrated as time · passes Once customer base dominates , other firms will concede and eventually large margins will be available

18. Sawhney and Kaplan — B2B Models Paper Logistics Management Chemicals Media Buying Plastics Advertising Steel Energy Management Vertical Hubs Functional Hubs Source: Adopted from Business 2.0, September 1999, page 88

19. RJS Model Summary Single Brand Multiple Brands Forward-Integrated Producer (Walmart.com) Supply-Side Aggregator (Surplusdirect.com) Supply Side Demand-Side Aggregator (Accompany.com) Backward Integrated User (Dellonline.com) - B2B Demand Side Hybrid Integrator (Cisco.com) Hybrid Aggregator (Amazon.com) Sources of Content Origination Focus of Strategy

20. Business Model Choices Must be Consistent With Sources of Competitive Advantage Business Model Options (Not Mutually Exclusive) Forward-Integrated Producer Content Production E-Business Interface Content Utilization Backward-Integrated User Content Production E-Business Interface Content Utilization Content Production Content Production Supply Aggregator E-Business Interface Content Production Content Utilization Content Production Content Production Content Production Content Utilization Content Utilization Content Production E-Business Interface Content Utilization Demand Aggregator Content Utilization Content Utilization Content Utilization