An exploration into the characteristics of accessibility based business models and its related difficulties of companies operating in B2C markets.

Bos, Koen van den (2012) An exploration into the characteristics of accessibility based business models and its related difficulties of companies operating in B2C markets.

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Abstract:A transition from ownership towards accessibility takes place in an increased number of markets. With accessibility is meant that a consumer has temporary access to a product, but never fully owns it. Next to this transition, the interest of scholars and practitioners in the concept of business models has risen dramatically. Nevertheless, literature on accessibility based business models of companies operating in business-to-consumer markets and the accessibility related difficulties these companies have to deal with is scarce. This leads to the following research question: “What are typical characteristics of accessibility based business models of companies operating in B2C markets, and what main accessibility related difficulties do these companies have to deal with?” Because of the explorative nature of the research question, multiple case studies were used as a research strategy. A questionnaire has been prepared based on Osterwalder’s (2004) business model ontology and a limited number of articles on accessibility based business models and the related difficulties. The business models of twelve companies were first analyzed individually, followed by a cross-case-analysis for each of the business model’s elements. The research concludes that typical accessibility based characteristics exist for eight out of nine business model elements. The most relevant characteristics are described subsequently. As part of the value proposition of accessibility based business models, products are offered at: lower costs, increased trialability, reduced risk, and less responsibilities, compared with ownership. This is possible because these products are only accessible for a certain period, leading to lower costs and trialability. Because companies stay owners they take over the risk and responsibility. As part of the target customer element, for more expensive products made accessibility for longer periods, customer groups are targeted for which the likeliness of damages or not paying is low. As part of the distribution channel, products are returned to a physical location, and for some companies, mechanics check and repair products at the customers’ location. With ownership, customers keep products and so do not need to return them, and as the company does not own the product it also does not check or repair it. All companies focus on customer acquisition and retention, and the relationship with customers is long-term based. This is obvious in case of long-term accessibility based contracts, however, also for shorter periods of access the relationship is long-term based. Additionally, because products are e.g. returned etc., many more contact moments exist. Moreover, some important capabilities and key resources have been identified which are different for business models based on ownership. First and most obvious is the capability to maintain and repair products, which is not necessary in case of direct sales. Also the customer service is even more important because of the long-term relationships that have to be established. Although planning is also important for many selling companies, for accessibility based companies this is crucial. Products should not only be delivered to customers in-time, it should also be managed where they are, when they will be returned, and when they can be e.g. rented out to the next customers. Especially for the maintenance and repairs, human resources are used which are not part of a business model based on ownership. Also the software is a key resource and different planning software is used in case of ownership. Lastly, more financial resources are needed for e.g. the products. Accessibility based companies have to deal with specific activities before products are made accessible (i.e. select and create products suitable for accessibility, (more complex) planning, and check customers’ financial II situation), while customers make use of products (i.e. informing customers, make customers pay, maintain and repair products, and providing information about extending the contract), and after products are used (i.e. pick up the product, check the product, return deposits, and clean and repair products, and purchase new parts). Additionally, the product availability is higher because customers often want access for a specific period. Only for the partnership element no characteristics could be identified which are typical for accessibility based companies, and differ with ownership. As part of the revenue model, some revenue streams create temporary access namely; pay-per-use, rental, subscription, financial lease, and operational lease. For all of these revenue streams it takes longer to earn the total revenues than in case of direct sales. Lastly, some cost groups are especially high for accessibility based companies. First, investments in products are higher because also the products already in use by customers are paid for. Second, as mentioned before, more human resources are necessary for e.g. the customer service and maintenance and repairs. Third, a more comprehensive software program is needed. Fourth, the insurance costs are higher (for expensive products) because also products in use by customers are insured. Lastly, the transportation costs are higher because products are returned. The software and transportation costs are relatively small for larger firms. It can also be concluded that relationships between the business model elements exist. As part of the value proposition, products are offered based on accessibility. This means that, for example, only revenue streams are used for which the total revenues are not earned directly as with sales, however, over a longer period. This in turn effects the cost structure, and makes investments in products a large cost group. Also the main accessibility related difficulties have been identified. First, it was expected that the diffusion would be difficult for accessibility based companies because although the same products are offered, they are offered in a new way for consumers. However, it can be concluded that the diffusion does not seem to be a general difficulty for accessibility based companies. The value proposition and especially the lower cost and higher trialability even increase the diffusion. Accessibility based business model difficulties, however, could be identified. Twelve different difficulties have been described, the ones mentioned by most interviewees are shortly repeated subsequently. For a lot of companies it is difficult to acquire enough financial capital although this is important due to the high investments especially in products. Companies offering expensive products for longer periods, have difficulties with deciding which customers will pay in the future. Furthermore, it is difficult for companies to make customers return the (complete) product and pay for it in time, and to decide what deposits should be returned to customers in case of damages. The difficulties can be linked directly to part of the business model elements, most of them are directly related to the value configuration/activities element. Lastly, it can be concluded that the main difficulty companies have to overcome in case of a transition towards an accessibility based business model is to convince sales representatives and advisors of its advantages, and make them promote the offering.
Item Type:Essay (Master)
Clients:
Capgemini Consulting
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/62088
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