1) How should ezboard update their business model to reach their revenue goals? Answer: Revenue Goal – Double revenues each year by turning the company’s essentially free information product into a paid product that would earn enough revenue to satisfy ezboard’s investors. Currently, ezboard is working with a system of unregistered, registered and paid users to their website. In order to reach their revenue goals it is important to determine how to update their business model. Management must pay attention to the key components and elements of a business model.
Firstly and most importantly Ezboard is a B2C model and management must understand that ezboard has been an essentially free product (current business model). Management must establish the ‘Value Proposition’, in other words must understand why customers will subscribe and pay for the ezboard services. In other words management must understand why customers will use ezboard instead of Proboard or any other rivals. Ezboard allows for personalization whereas most of the rivals do not provide this feature. This is an example of Value Proposition. Secondly, management must describe how it plans to earn money and produce return on invested capital by using just a Subscription revenue model and / or Advertising revenue model or a combination of both. Thirdly, management must address the ‘Market opportunity’ and the overall potential financial opportunities available to the firm in the market space. In other words, management must define the revenue potential in each large, medium and small sized discussion board and determine its niches. Management must analyze the competitive environment, various threats and determine the its own competitive advantage in the market. Competitive advantage will help promote the business and the market strategy and organizational development. Finally, management must consider the required training to its staff and rehire if necessary to ensure they can redefine the business and make the business model work. Updating the current business model to make it a paid product and increase revenue will cause changes in subscription rates and in the minds of the customers. Given that ezboard has had several unhappy customers due to software problems (from old technology), management must plant its’ seeds slowly in order to attain long-term success. Although adopting the big bang approach and introducing the new subscription model to all of its customers would launch the updated business model across the board and that management can refocus attention and cash reserves on generating other revenue streams. If all things fall in place per plan the launch will be a success, however if one thing fails then the updated business and the subscription model will be unsuccessful jeopardizing the company’s future. If the big bang approach does not work out then ezboard may end up spending numerous hours and resources fixing the errors in the launch and may have to revamp its strategy all over again. Every mistake will cost users and boards to some degree. However, with the go slow approach which showed less concern for quick subscription conversions and an unsuccessful subscription model, management can weigh various options such as high revenue generating discussions boards, small and medium sized boards, renewal rates and then test launch the updated business model on a select few boards. If the roll out does not work out then the cost of fixing it will be lower as compared to the big bang approach. More than the cost, management must pay attention to its reputation among the existing customers. Therefore, management must opt for the go-slow approach and launch the business model on different customer pools. They may choose few large boards, medium and small sized boards for test launch. Although management may not see higher revenues immediately, the go slow approach will allow them to do any course corrections as needed prior to the full scale roll out. Using this approach, management can also test the new software functionalities as needed prior to the big rollout.
As part of updating the business model, management must also determine how much content unregistered and registered users could view on its discussion boards. Given that ezboard is not a new website and already has many customers worldwide, management must be very cautious in each step when they update the business model. The right rollout strategy at launch time and an effective subscription scheme will offer ezboard its best chance to squeeze as much revenue out of the discussion board business as possible. Before the rollout management must start preparing administrators and users well before the launch date (a tactic that worked well in March 2001). As mentioned in the case, board subscription models brought lumpy revenues in 2001 and 2002 and user subscriptions only brought in $5 or $10 per user. Until software problems arose at the end of 2002, users subscriptions actually doubled when management increased the gap between the pleasure experienced by subscribers and the pain encountered free riders. Therefore, management must continue to offer more features to paid users. Management must focus on the Gold Community plan (paid boards) as it accounted for 75% of total subscription revenues at the end of 2004. Gold boards represented 65% of page views on the website. Of 75,000 active discussion boards, 15,000 to 17,000 of them subscribed to Gold community. However, ezboard must consider revamping the pricing terms for gold board subscriptions and ensure they are competitive to generate the targeted revenue and still attractive to customers. The pricing terms had changed little since ezboard launched the Gold Community in 2001. Subscription rates started at $5 and grew with traffic levels (Exhibit 7,8 & 9). Management must implement the revised rates during the test launch. Ezboard must offer competitive rates to small boards as they generated higher profit margins and took up less space on the server. Most importantly, small boards were easy to maintain and required less customer service.
Post-test launch, management must survey the respective members that were part of the launch and do any course corrections as needed to the rollout strategy and the new software before the full-scale rollout.
2) What services should they consider offering with the new Version 8.0 software? Answer: In order for Ezboard to transition it’s product from a mostly free service to a paid product one of the most important things it needed to do is to make its product as good or better than others such as script products. The product offering must challenge the competitive environment and succeed in the years to come. The new software version 8.0 must be flexible enough that a user with minimal software development expertise could manage its features with little effort. Ezboard must continue to offer its current services that are welcomed by users (most specifically in the small and medium sized discussion board market) and may consider offering the following services with the new version software:
Ø Offer social networking features - In order to meet the existing customers preferences (from the recent survey Exhibit 13), ezboard must blend selected functions from blogging, photo sharing and social networking into its discussion boards. For example, few customers wanted the ability to create a friends list for sending messages easily, which was just one element of social networking. Likewise, they must look at selected features and their functionalities at other competitive sites such as yahoo, msn, Proboards and other sites that attract people. This will meet the current users needs, attract new members and will also help retain them. Ø Provide customization options - Although ezboard is not a script product, with Version 8.0 they should try to offer some level of user customization options in order to meet the competition from other script products such as phpBB. However it is important that the software does not require users to have any special technical expertise to avail this service. By offering some degree of customization with version 8.0 software, ezboard can make the case more effectively to customers and challenge the competitive environment. Ø Continue to allow for personalization of discussion boards - Version 8.0 must continue to allow users to personalize their discussion boards and user identities or to opt out of seeing advertisements for a fee. Given that the users enjoyed this privilege with the old SmallTalk software it is important they continue to provide this to their customers. Ø Provide adequate support personnel - Ensure Version 8.0 does not have the same capacity limitation as the old technology. Ezboard must ensure they have adequate personnel during crunch time to manage any system issues and / or crashes. In other words, if something went wrong and if the system goes down they should have the talent in-house to figure it out. The staff must have the capability to take its flat file database to a more flexible relational database (which was not the case with the old technology). Ø Track user preferences & introduce additional features on an ongoing basis- Using Version 8.0 software features, ezboard must track more information about members’ preferences. Using this information ezboard can conduct more frequent surveys, understand customers’ needs in a better way and meet their expectations. Ø Provide round a clock customer service & online support– As mentioned earlier, ezboard must make its product look better with the rollout of software version 8.0. Given that they are transitioning from a free product to a paid product it is important they offer something different and put greater distance between their new website (with new software) and their old site (with old technology). Ezboard must utilize their software administrators to offer round a clock customer service (based on different time zones), by this way they can take care of system issues at any point during the day. This will allow for happy customers due to increased customer service, increased activity and eventually will also have a positive impact on the number of page views per month. Ø Allow for easy registration and subscription for new users – Version 8.0 must be user friendly and must allow for easy registration and subscription process. New users with minimal technical expertise must not be let to shoot in the dark, the new software must clearly walk them through the processes and the benefits of signing up in the website. Ø Offer direct sale advertising in addition to ring ads– In addition to the ring ads (which worked well and increased revenue), ezboard must try to sell advertising spots on its site directly to advertisers by this way they can continue to make advertising revenue and attract more users to their site. Given that the discussion boards were dominated by age groups between 18 – 45 years old, the direct sales must be targeted towards these members to get the most gains. Ø Reward members that provide referrals – Ezboard must reward members who bring in new users to the website and the discussion boards. In addition to rewarding the members they must also publish their names in the site and recognize them for their referral efforts. This will allow for positive motivation and acknowledgement.
P2P Case Who will win the competitive battle between P2P file sharing networks and iTunes over the long run and why? Introduction P2P vs. iTunes P2P - P2P file sharing programs became famous with the release of Napster in 1999. Since Napster’s release, a host of other software programs have emerged allowing users to download their favorite music, videos, images and other files. As stated in the article, Napster was a small program and allowed only music files to be shared. However, P2P adoption has grown quickly since the introduction of Napster and several other programs (Fast Track and Gnutella) have emerged allowing users to exchange different types of files. Therefore, p2p technologies emerged and quickly became the dominant mechanism for online music distribution at no cost.
ITunes - IPod the digital music player was released in 2001 when p2p dominated the market. IPod used its own DRM and encrypted the songs thereby protecting musicians’ copywrights. Apple’s iTunes website provided music lovers the opportunity to download songs at $0.99 each in addition to offering iTunes software for free download. ITunes got agreement from all of the “big five” and provided revolutionary rights to music consumers. ITunes has the backing of the media and film industry. Based on the article, iTunes is not about selling songs however it’s about selling more iPods. (iTunes has sold only enough songs to account for about 1.5% of the 30 billion songs).
Who will win & why? P2P vs. iTunes – Who will win the battle is a debate. Based on the information presented in the article, it is clear that P2P will win in the short run due to its current strengths and that it has been in the market for a while however if iTunes adopts the right strategies to tap the market then no doubt it will win in the long run as it will have a better leverage. Although P2P networks offer a variety of content with no restrictions on content for free of cost and is constantly improving its technology by adding new features, there is also downside to this. Firstly, P2P is constantly being attacked by the media/film industry. Secondly, although it is free it is not free of “spoof files”. As cited in the article, down loaders encountered “spoof” files 50% of the time when trying to download more popular tracks. This is pretty significant for any average user. As an example, if I want to download a popular track I would rather pay a fee to download it without any ad ware or spy ware that will save my computer from any viruses and most importantly save me time. Thirdly, at times downloading songs from P2P had congestion issues and were unreliable due to slow performance. The article cites that the reliability of Gnutella was not always great and predicted that 50% of requests were never fulfilled because users often connected and disconnected sporadically. Therefore, although it is free it may keep users in the short run but not in the long run as unreliability, performance issues and other issues will end up causing frustration to music lovers. Fourthly, iTunes is legal, receives major support from industry players and is easy to use. Legal consideration is pretty important as the article cites that many p2p users have been sued by music industry. The RIAA had been at the center of the battle against p2p networks. While RIAA ended up losing some of the suits, it was quite successful with a few lawsuits. ITunes also has the support of over 200 music industry technology companies whose main goal was to protect copyrights. Fifthly, it facilitates easy and faster downloads with high reliability as opposed to p2p. Download times in iTunes does not depend on the number of users in the network. So, an average consumer is better off purchasing in iTunes as he will enjoy faster downloads. iTunes works well with iPods, meaning after purchasing the songs the listener can enjoy the songs in iPod or load it in his computer. Finally, although users had to pay a fee of $0.99 in iTunes they did not experience any congestion problems (as any other p2p website). In the long run, this eventually will increase quality and the customer experience.
Based on the above it is clear that although p2p file sharing is free it is not free of any legal, copyright issues and any other costs associated with that. Although an average user will enjoy free downloads he may end up paying dollars if he is sued at any point. In order to be successful in the market and to win in the long run, Apple may consider the following to have a better leverage than p2p and win the battle:
§ In p2p consumers can download for free. So, iTunes must offer something that will make consumers’ pay rather than downloading it for free. It could be in the form of additional discounts, added features to the iTunes website that makes downloading experience even more enjoyable. In other words, an average consumer must think of iTunes if he wants to download his favorite music track. This will require lots of marketing and newer strategies by Apple. § Secondly, pricing plays an important role in marketing the iTunes product. Both the music industry and Apple must consider better pricing strategies to attract a p2p user. Given, that both record companies and the rights collection agencies share a major percentage of the profits they must be actively involved in pricing and marketing iTunes. They must consider the competition from p2p very carefully and determine how the price will produce a superior return on invested capital. Perhaps, initially to attract the free users in p2p they may decide to price it low in the beginning and once iTunes proves that is a better product and is ‘value for money’ and they may be in a better position to increase the price. § Retaining iTunes customers is another way to win the battle in the long run. Apple may come up with a referral program where the existing customers get new clients and may reward the customers for generating traffic. By this way iTunes can get new traffic in addition to keeping the existing customer base happy.
1) How should ezboard update their business model to reach their revenue goals?
ReplyDeleteAnswer: Revenue Goal – Double revenues each year by turning the company’s essentially free information product into a paid product that would earn enough revenue to satisfy ezboard’s investors. Currently, ezboard is working with a system of unregistered, registered and paid users to their website. In order to reach their revenue goals it is important to determine how to update their business model. Management must pay attention to the key components and elements of a business model.
Firstly and most importantly Ezboard is a B2C model and management must understand that ezboard has been an essentially free product (current business model). Management must establish the ‘Value Proposition’, in other words must understand why customers will subscribe and pay for the ezboard services. In other words management must understand why customers will use ezboard instead of Proboard or any other rivals. Ezboard allows for personalization whereas most of the rivals do not provide this feature. This is an example of Value Proposition. Secondly, management must describe how it plans to earn money and produce return on invested capital by using just a Subscription revenue model and / or Advertising revenue model or a combination of both. Thirdly, management must address the ‘Market opportunity’ and the overall potential financial opportunities available to the firm in the market space. In other words, management must define the revenue potential in each large, medium and small sized discussion board and determine its niches. Management must analyze the competitive environment, various threats and determine the its own competitive advantage in the market. Competitive advantage will help promote the business and the market strategy and organizational development. Finally, management must consider the required training to its staff and rehire if necessary to ensure they can redefine the business and make the business model work.
Updating the current business model to make it a paid product and increase revenue will cause changes in subscription rates and in the minds of the customers. Given that ezboard has had several unhappy customers due to software problems (from old technology), management must plant its’ seeds slowly in order to attain long-term success. Although adopting the big bang approach and introducing the new subscription model to all of its customers would launch the updated business model across the board and that management can refocus attention and cash reserves on generating other revenue streams. If all things fall in place per plan the launch will be a success, however if one thing fails then the updated business and the subscription model will be unsuccessful jeopardizing the company’s future. If the big bang approach does not work out then ezboard may end up spending numerous hours and resources fixing the errors in the launch and may have to revamp its strategy all over again. Every mistake will cost users and boards to some degree. However, with the go slow approach which showed less concern for quick subscription conversions and an unsuccessful subscription model, management can weigh various options such as high revenue generating discussions boards, small and medium sized boards, renewal rates and then test launch the updated business model on a select few boards. If the roll out does not work out then the cost of fixing it will be lower as compared to the big bang approach. More than the cost, management must pay attention to its reputation among the existing customers. Therefore, management must opt for the go-slow approach and launch the business model on different customer pools. They may choose few large boards, medium and small sized boards for test launch. Although management may not see higher revenues immediately, the go slow approach will allow them to do any course corrections as needed prior to the full scale roll out. Using this approach, management can also test the new software functionalities as needed prior to the big rollout.
As part of updating the business model, management must also determine how much content unregistered and registered users could view on its discussion boards. Given that ezboard is not a new website and already has many customers worldwide, management must be very cautious in each step when they update the business model. The right rollout strategy at launch time and an effective subscription scheme will offer ezboard its best chance to squeeze as much revenue out of the discussion board business as possible. Before the rollout management must start preparing administrators and users well before the launch date (a tactic that worked well in March 2001). As mentioned in the case, board subscription models brought lumpy revenues in 2001 and 2002 and user subscriptions only brought in $5 or $10 per user. Until software problems arose at the end of 2002, users subscriptions actually doubled when management increased the gap between the pleasure experienced by subscribers and the pain encountered free riders. Therefore, management must continue to offer more features to paid users. Management must focus on the Gold Community plan (paid boards) as it accounted for 75% of total subscription revenues at the end of 2004. Gold boards represented 65% of page views on the website. Of 75,000 active discussion boards, 15,000 to 17,000 of them subscribed to Gold community. However, ezboard must consider revamping the pricing terms for gold board subscriptions and ensure they are competitive to generate the targeted revenue and still attractive to customers. The pricing terms had changed little since ezboard launched the Gold Community in 2001. Subscription rates started at $5 and grew with traffic levels (Exhibit 7,8 & 9). Management must implement the revised rates during the test launch. Ezboard must offer competitive rates to small boards as they generated higher profit margins and took up less space on the server. Most importantly, small boards were easy to maintain and required less customer service.
Post-test launch, management must survey the respective members that were part of the launch and do any course corrections as needed to the rollout strategy and the new software before the full-scale rollout.
2) What services should they consider offering with the new Version 8.0 software?
ReplyDeleteAnswer: In order for Ezboard to transition it’s product from a mostly free service to a paid product one of the most important things it needed to do is to make its product as good or better than others such as script products. The product offering must challenge the competitive environment and succeed in the years to come. The new software version 8.0 must be flexible enough that a user with minimal software development expertise could manage its features with little effort. Ezboard must continue to offer its current services that are welcomed by users (most specifically in the small and medium sized discussion board market) and may consider offering the following services with the new version software:
Ø Offer social networking features - In order to meet the existing customers preferences (from the recent survey Exhibit 13), ezboard must blend selected functions from blogging, photo sharing and social networking into its discussion boards. For example, few customers wanted the ability to create a friends list for sending messages easily, which was just one element of social networking. Likewise, they must look at selected features and their functionalities at other competitive sites such as yahoo, msn, Proboards and other sites that attract people. This will meet the current users needs, attract new members and will also help retain them.
Ø Provide customization options - Although ezboard is not a script product, with Version 8.0 they should try to offer some level of user customization options in order to meet the competition from other script products such as phpBB. However it is important that the software does not require users to have any special technical expertise to avail this service. By offering some degree of customization with version 8.0 software, ezboard can make the case more effectively to customers and challenge the competitive environment.
Ø Continue to allow for personalization of discussion boards - Version 8.0 must continue to allow users to personalize their discussion boards and user identities or to opt out of seeing advertisements for a fee. Given that the users enjoyed this privilege with the old SmallTalk software it is important they continue to provide this to their customers.
Ø Provide adequate support personnel - Ensure Version 8.0 does not have the same capacity limitation as the old technology. Ezboard must ensure they have adequate personnel during crunch time to manage any system issues and / or crashes. In other words, if something went wrong and if the system goes down they should have the talent in-house to figure it out. The staff must have the capability to take its flat file database to a more flexible relational database (which was not the case with the old technology).
Ø Track user preferences & introduce additional features on an ongoing basis- Using Version 8.0 software features, ezboard must track more information about members’ preferences. Using this information ezboard can conduct more frequent surveys, understand customers’ needs in a better way and meet their expectations.
Ø Provide round a clock customer service & online support– As mentioned earlier, ezboard must make its product look better with the rollout of software version 8.0. Given that they are transitioning from a free product to a paid product it is important they offer something different and put greater distance between their new website (with new software) and their old site (with old technology). Ezboard must utilize their software administrators to offer round a clock customer service (based on different time zones), by this way they can take care of system issues at any point during the day. This will allow for happy customers due to increased customer service, increased activity and eventually will also have a positive impact on the number of page views per month.
Ø Allow for easy registration and subscription for new users – Version 8.0 must be user friendly and must allow for easy registration and subscription process. New users with minimal technical expertise must not be let to shoot in the dark, the new software must clearly walk them through the processes and the benefits of signing up in the website.
Ø Offer direct sale advertising in addition to ring ads– In addition to the ring ads (which worked well and increased revenue), ezboard must try to sell advertising spots on its site directly to advertisers by this way they can continue to make advertising revenue and attract more users to their site. Given that the discussion boards were dominated by age groups between 18 – 45 years old, the direct sales must be targeted towards these members to get the most gains.
Ø Reward members that provide referrals – Ezboard must reward members who bring in new users to the website and the discussion boards. In addition to rewarding the members they must also publish their names in the site and recognize them for their referral efforts. This will allow for positive motivation and acknowledgement.
P2P Case
ReplyDeleteWho will win the competitive battle between P2P file sharing networks and iTunes over the long run and why?
Introduction P2P vs. iTunes
P2P - P2P file sharing programs became famous with the release of Napster in 1999. Since Napster’s release, a host of other software programs have emerged allowing users to download their favorite music, videos, images and other files. As stated in the article, Napster was a small program and allowed only music files to be shared. However, P2P adoption has grown quickly since the introduction of Napster and several other programs (Fast Track and Gnutella) have emerged allowing users to exchange different types of files. Therefore, p2p technologies emerged and quickly became the dominant mechanism for online music distribution at no cost.
ITunes - IPod the digital music player was released in 2001 when p2p dominated the market. IPod used its own DRM and encrypted the songs thereby protecting musicians’ copywrights. Apple’s iTunes website provided music lovers the opportunity to download songs at $0.99 each in addition to offering iTunes software for free download. ITunes got agreement from all of the “big five” and provided revolutionary rights to music consumers. ITunes has the backing of the media and film industry. Based on the article, iTunes is not about selling songs however it’s about selling more iPods. (iTunes has sold only enough songs to account for about 1.5% of the 30 billion songs).
Who will win & why?
P2P vs. iTunes –
Who will win the battle is a debate. Based on the information presented in the article, it is clear that P2P will win in the short run due to its current strengths and that it has been in the market for a while however if iTunes adopts the right strategies to tap the market then no doubt it will win in the long run as it will have a better leverage. Although P2P networks offer a variety of content with no restrictions on content for free of cost and is constantly improving its technology by adding new features, there is also downside to this. Firstly, P2P is constantly being attacked by the media/film industry. Secondly, although it is free it is not free of “spoof files”. As cited in the article, down loaders encountered “spoof” files 50% of the time when trying to download more popular tracks. This is pretty significant for any average user. As an example, if I want to download a popular track I would rather pay a fee to download it without any ad ware or spy ware that will save my computer from any viruses and most importantly save me time. Thirdly, at times downloading songs from P2P had congestion issues and were unreliable due to slow performance. The article cites that the reliability of Gnutella was not always great and predicted that 50% of requests were never fulfilled because users often connected and disconnected sporadically. Therefore, although it is free it may keep users in the short run but not in the long run as unreliability, performance issues and other issues will end up causing frustration to music lovers. Fourthly, iTunes is legal, receives major support from industry players and is easy to use. Legal consideration is pretty important as the article cites that many p2p users have been sued by music industry. The RIAA had been at the center of the battle against p2p networks. While RIAA ended up losing some of the suits, it was quite successful with a few lawsuits. ITunes also has the support of over 200 music industry technology companies whose main goal was to protect copyrights. Fifthly, it facilitates easy and faster downloads with high reliability as opposed to p2p. Download times in iTunes does not depend on the number of users in the network. So, an average consumer is better off purchasing in iTunes as he will enjoy faster downloads. iTunes works well with iPods, meaning after purchasing the songs the listener can enjoy the songs in iPod or load it in his computer. Finally, although users had to pay a fee of $0.99 in iTunes they did not experience any congestion problems (as any other p2p website). In the long run, this eventually will increase quality and the customer experience.
Based on the above it is clear that although p2p file sharing is free it is not free of any legal, copyright issues and any other costs associated with that. Although an average user will enjoy free downloads he may end up paying dollars if he is sued at any point. In order to be successful in the market and to win in the long run, Apple may consider the following to have a better leverage than p2p and win the battle:
§ In p2p consumers can download for free. So, iTunes must offer something that will make consumers’ pay rather than downloading it for free. It could be in the form of additional discounts, added features to the iTunes website that makes downloading experience even more enjoyable. In other words, an average consumer must think of iTunes if he wants to download his favorite music track. This will require lots of marketing and newer strategies by Apple.
§ Secondly, pricing plays an important role in marketing the iTunes product. Both the music industry and Apple must consider better pricing strategies to attract a p2p user. Given, that both record companies and the rights collection agencies share a major percentage of the profits they must be actively involved in pricing and marketing iTunes. They must consider the competition from p2p very carefully and determine how the price will produce a superior return on invested capital. Perhaps, initially to attract the free users in p2p they may decide to price it low in the beginning and once iTunes proves that is a better product and is ‘value for money’ and they may be in a better position to increase the price.
§ Retaining iTunes customers is another way to win the battle in the long run. Apple may come up with a referral program where the existing customers get new clients and may reward the customers for generating traffic. By this way iTunes can get new traffic in addition to keeping the existing customer base happy.