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Chapter 3 Enhanced Version Business Models Exhibits and Tables October 18, 2000

Chapter 3 Enhanced Version Business Models Exhibits and Tables October 18, 2000. Exhibit 3-1: Components of a Business Model. Value Cluster. Marketspace Offering. Resource System. Financial Model. Supporting Slide 3-A: Point-Counterpoint: Single Vs. Cluster of Benefits.

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Chapter 3 Enhanced Version Business Models Exhibits and Tables October 18, 2000

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  1. Chapter 3 Enhanced Version Business ModelsExhibits and TablesOctober 18, 2000

  2. Exhibit 3-1: Components of a Business Model Value Cluster Marketspace Offering Resource System Financial Model

  3. Supporting Slide 3-A:Point-Counterpoint: Single Vs. Cluster of Benefits

  4. Exhibit 3-2: Shattering Myth That Consumers Care Only About Prices On-line PERCENTAGE OF CUSTOMERS WHO CARE ABOUT ATTRIBUTE ATTRIBUTE Source: JP Morgan Report: etailing and the five Cs

  5. Table 3-1: Consumer Decision Process — Flower Example Problem - Recognition Information Search PRE-PURCHASE Evaluation of Alternatives Purchase Decision PURCHASE Satisfaction POST-PURCHASE Loyalty Disposal

  6. Supporting Slide 3-B: Consumer Decision Process — Flower 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 on-line and off-line 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 sales perks

  7. Exhibit 3-3: 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 • Best sellers 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-Sales Support • Order receipt email • eQ&A online customer service • FAQ • Customer service inquiry form • Post Sales 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 with flower purchases • Member specials • Message Selection • Purchase Decision • Shopping basket • E commerce transaction • Special shopping features • Delivery outside U.S. • 1-800-lasfloras.com • Gizmo fully-animated greeting cards • Physical cards in gifts

  8. Exhibit 3-4: 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 Web Site Garden Works Integrated Partner Offers Telephone 3,000 Affiliates Plow & Hearth On-line 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 on-line off-line systems AOL MSN = Capabilities

  9. Supporting Slide 3-C: Benefits and Challenges of Hybridization Benefits Challenges • Persistent connection with customers • New value for customers • Acces to new customers • Scalability • Cannibalization • Channel conflict • Customer confusion • Investor confusion

  10. Exhibit 3-5 : On-line/Off-line Egg Diagram for 1-800-flowers.com • Prompts on toll free number recording • Suggestions from CSRs* in stores and via phone • Special events and educational workshops held at stores • Prompts on toll free number recording • Suggestions from CSRs* in stores and via phone • Brochure • Gift reminder service • Holiday specials • Everyday celebrations suggestions • Special occasion suggestions Ideas and Information Off-line Product Offering • Floral ideas • Garden ideas • Home ideas • Gift ideas • Gourmet ideas • Store locator • Recommendations by budget • Best sellers • “Care and handling” • “Do it yourself” Flower / Gift Decision Process • Need Recognition On-line 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-Sales Support • In-store customer service • Customer servifce on toll-free number • Order receipt email • eQ&A online customer service • FAQ • Customer service inquiry form • Post Sales 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 with flower purchases • Member specials • Message Selection • Purchase Decision • Shopping basket • E commerce transaction • Special shopping features • Delivery outside U.S. • 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

  11. Supporting Slide 3-D: On-line and Off-line Integration for the 1-800-FLOWERS 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 Web Site Garden Works Integrated Partner Offers Telephone 3,000 Affiliates Plow & Hearth On-line Customer Service Widespread, Easy Access Great Foods Multiple Contact Points Franchise Stores Integrated on-line off-line systems Catalog Technology Strong Brand Name Wide Reach to Customers Customer Service Centers = On-line Activities & Assets SNAP Starmedia = Off-line Activities & Assets Integrated on-line off-line systems AOL MSN

  12. Supporting Slide 3-E: 1-800-FLOWERS Partnerships • American Airlines® Advantage®, Delta Airlines SkyMiles®, United Airlines Mileage Plus • Earn frequent flyer miles with 1-800-FLOWERS.com purchases • MCI Worldcom • Receive 1-800-FLOWERS.com gift certificates with long distance sign-up • Receive 10% off every 1-800-FLOWERS.com purchase with MCI WorldCom membership • America Online • First agreement signed in 1994 • Exclusive marketer of fresh-cut flowers across key AOL brands until 2003 • One-year exclusive agreement to market gardening products commencing Nov. 1999 • Microsoft Networks • Premier floral partner and anchor in the MSN Home and Garden Department • Products, advertising and links featured on MSN Shopping Channel • Snap.com • One of the 45 premier merchants in Snap shopping service (on-line e-superstore) • Anchor tenant in Snap.Com Flower Shop • To be spotlighted in select Snap.com on-air promotions, scheduled to run on the NBC Television Network during the Valentine’s Day and Mother’s Day periods Source: 1-800-FLOWERS.com website, WR Hambrecht & Co., TheStandard.com. Hoover’s Online

  13. Supporting Slide 3-E : 1-800-FLOWERS Partnerships (Cont.) • Excite@Home • Markets flowers and other gifts through Excite.com and webcrawler.com web sites • Products, advertisments and links featured in the Excite Shopping Channel • Entered second year of marketing relationship in October 1999 • Yahoo! Inc. • Will run banner advertisements throughout the Yahoo! Network, with additional presence in shopping area • StarMedia Network • Developing Spanish and Portuguese language versions of 1-800-FLOWERS.com web site • People PC • Signed one year agreement to become key floral and gift-provider for PeoplePC commencing October 1999 • Zapa.com • Offers selection of online greeting cards on 1-800-FLOWERS.com web site • Greeting cards never deleted by Zapa.com • Users will be able to personalize greetings with their own photos, clip-art or other multi-media creations • Sears, Roebuck and Company • Licensing relationship which enables Sears customers to use their store charge cards when shopping with 1-800-FLOWERS.com Source: 1-800-FLOWERS.com website, WR Hambrecht & Co., TheStandard.com. Hoover’s Online

  14. Key Supporting Slide 3-F:1-800-Flowers Activity System On-line Off-line 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 Off-Line Stores Company Franchise Stores MSN Multiple Customer Contacts Strategic Alliances On-Line BN In-Store AOL Alliance With Distribution Carrier Telephone Affiliate Programs Note: Source:

  15. Supporting Slide 3-G: 1-800-FLOWERS 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 AOL MSN = Capabilities

  16. Supporting Slide 3-H: 1-800-FLOWERS 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 AOL MSN = Capabilities

  17. Supporting Slide 3-I: Point-Counterpoint: Competencies Vs. Resource Systems

  18. Table 3-2: Alternative Shareholder Value Models (Company and User Derived)

  19. Table 3-3: Alternative Shareholder Value Models (Company Derived)

  20. Exhibit 3-6: Revenue Growth Choices: 1-800-flowers 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 OFF-LINE MARKETS ON-LINE MARKETS

  21. Supporting Slide 3-J: Point-Counterpoint: Does Profit Matter? Build Profit Or Build User Base?

  22. Exhibit 3-7: Sawhney and Kaplan — Classification of B-to-B Models Paper Logistics Management Chemicals Media Buying Plastics Advertising Steel Energy Management VERTICAL HUBS FUNCTIONAL HUBS Source: Adopted from Business 2.0, September 1999, p.88

  23. Table 3-4: RJS Model Summary Single Brand Multiple Brands Forward-Integrated Producer (Wal-Mart.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

  24. Table 3-5: Implications of “Pure Play” Business Approaches

  25. Exhibit 3-8: Schwab Egg Diagram • Schwab Learning Center • Live Events • Principles of Investing • Understanding Market Cycles • “Did You Know” Q&A Overall • General Goal Planner • Investor Profile • Sample Investment Plans Retirement • Retirement Planner • IRA Analyzer Product Offering Estate • Estate Tax and Probate Calculator • Alternatives Comparison College • College Planner Tax • Tax Strategies • IRS Withholding Calculator On-Line Investment Process • Get educated about investing • Online chat with Customer Service Representatives • Customer Service via phone • Customer Service via email • Customer Service at Branch • My Watch List • Plan investments • Post Investment Support Overall • Quotes and Charts • Analyst Center Stocks and Options • Stock Analyzer Bonds and Treasuries • Schwab BondSource Services CDs and Money Markets • SchwabOne • Perform Research • Margin Loans • Money Transfers • Automatic Investing • Options Service • After Hours Trading • Account Protection • Bill Payment • Perform Investment • Decide on Investment Annuities • Schwab Select Annuity Life Insurance • Insurance Needs Calculator • Schwab Signature Services • Schwab AdvisorSource • Options Service • Global Investing Service

  26. Exhibit 3-9: Schwab Resource System Learning Center Onesource Invest in CSR Training Align CSR Compensation with Quality of Service Center of Knowledge and Innovation Customer Service Innovative Products Superior Service Hire IT Staff Investment in R&D 24x7 Access Train IT Staff Investment in IT Cutting Edge Technology System Reliability Partnerships with Content Providers Multiple Points of Access Optimize Staff in Branches Hoovers Online Lower Prices Streamlined Operations Charge For Value Added Services Phone S&P Media General Branch Provide Lower Commission for Frequent Traders Competitive Commission Rates = Core Benefits = Capabilities = Resources

  27. Exhibit 3-10: Schwab Resource System Learning Center Onesource Hire IT Staff Invest in CSR Training Align CSR Compensation with Quality of Service Capable IT Staff Center of Knowledge and Innovation Well-Trained CSRs Innovative Products Superior Service Investment in R&D Train IT Staff 24x7 Access Investment in IT Cutting Edge Technology System Reliability Partnerships with Content Providers Multiple Points of Access = Company needs to outsource or partner Optimize Staff in Branches Hoovers Online Lower Prices Streamlined Operations Charge For Value Added Services = Company can perform in-house Phone S&P Media General Provide Lower Commission for Frequent Traders Branch Competitive Commission Rates

  28. Supporting Slide 3-K:Schwab Activity System Large investment in R&D Exceptional team of engineers Innovative products Increase in trade volume System able to handle large volume In-house technology development Low price Downsized branch staff Technology Leadership Investment in IT Increase in non-trade revenue 24 x 7 Customer service Large, well trained sales force Superior service High quality Investment Information Hoovers Online Multiple points of access Comprehensive information Partnerships with content providers S&P Comstock On-line Phone Branch Media General

  29. Supporting Slide 3-L:Schwab Value Proposition “Use technology to offer innovative products and superior service at lower prices to investors unwilling to pay for investment advice”

  30. Table 3-6: Partners Give/Get Matrix

  31. Exhibit 3-11: Schwab Revenue Growth Choices Advanced Software Tools After-hours trading International Expansion New International Expansion Learning Center In-Branch Seminars New Online Investment Bank PRODUCTS Existing Existing New Existing New OFF-LINE MARKETS ON-LINE MARKETS

  32. Supporting Slide 3-M: Point-Counterpoint: Who Would You Rather Be? A Dot-Com Or Brick-And-Mortar Business?

  33. Supporting Slide 3-N : Business Model Choices Must Be Consistent With Sources of Competitive Advantage Business Model Options (Not Mutually Exclusive) Forward-Integrated Producer Content Production eBusiness Interface Content Utilization Backward-Integrated User Content Production eBusiness Interface Content Utilization Content Production Content Production Supply Aggregator eBusiness Interface Content Production Content Utilization Content Production Content Production Content Production Content Utilization Content Utilization Content Production eBusiness Interface Content Utilization Demand Aggregator Content Utilization Content Utilization Content Utilization

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