New Technology Applications Design & Business Models (NTADBM)

IIM NID joint course July to September 2011

Group 9 Chetan Patil Siddartha Prasad Aanchal Sood Manasi Agarwal

CONTENTS

1. Objective Of The Report ....3

2.

Research
2.1. Overview Of The Mobile Industry...4 2.2 .Trends In Mobile Industry.....8

3.

Application
3.1. Introduction To Shopmates10 3.2 Detailed Working11 3.3 User Interface Design....12

4.

Business Model
4.1 Components..14 4.2 Arena..17 4.3 Ecosystem Needed For The Application.................18 4.4 Complimentary Assets19 4.5 Value Proposition and Differentiators.20 4.6 Marketing Plan And Financials.22 4.7 Business Risk And Future Improvement24

OBJECTIVE OF THE REPORT

OBJECTIVE OF THE REPORT

The report aims to provide the Business Model for our application ShopMatess. A brief overview of the industry is provided first which will help in understanding the current ecosystem in which we propose to launch the application. After this we provide the various aspects of our business model (Marketing Plan, Financial forecasts, Competitive analysis, Value proposition)

Research: OVERVIEW OF MOBILE INDUSTRY

Mobile industry primarily consists of two types of players: Hardware providers: These are the players which provide the handset and all the hardware (chips, handsets, battery, chargers). E.g. of such player are Samsung, Apple, LG. A mobile phone can be categorised into following category

Basic Mobile Phone: These phones provide the basic features of calling, messaging, radio application. Installation and configuring of new software is not feasible. These are apt for basic needs. E.g. Nokia 1100
Smartphones: These phones are for those who want a single gadget to be fully loaded so that it can serve any and every purpose - from communication to computing and from entertainment to productivity. E.g. iPhone, Nokia E-series PDA Phones: Personal Data Assistant phones are the favourite companion of business executives. Running on operating systems like MS Mobile Pocket PC and Palm OS these are offered by HP, PalmOne and the likes. In fact the mobile phone market has become so demanding, dynamic and competitive that the line that divides smartphones from PDA phones is fast fading.
http://www.tolmol.com/bp/mobile-phones/types-of-mobile-phones.htm

Software providers: These players provide the application, operating system and such other software (games, utilities, browsers) which makes the handset interact with the user.

The structure of the industry is such that lot of Hardware providers are also software providers. Essentially if we study the suppliers of industry heavy weights like Apple we see that there are similar suppliers for multiple handset makers. For e.g. Samsung is a major player in the handset industry and is a supplier of Apple also. Moreover bulk of the manufacturing happens in locations like China and Taiwan primarily because of their cost advantage and their expertise with hardware development which leads to shorter development cycle.

OVERVIEW OF MOBILE INDUSTRY

As a result of the above industry structure we find that the difference between the hardware capabilities of the handset provided by various companies is not significantly different (looking at the mobile phone in same price category). Hence to create a significant differentiator and retain customers we see that companies along with hardware are also concentrating on software development to sell their mobile phone. Moreover this trend has catapulted the development of an entire ecosystem of developers and partners, which has directly impacted the convenience and benefits that a mobile user can get. The trend has been so impact full that economist view the development of mobile industry as one of the crucial indicators to economic development.

COMPONENTS OF MOBILE APPLICATION DEVELOPMENT INDUSTRY

Since this report is focussed on providing a business model for software application we would analyse various components of the mobile application development industry.

Components

Remarks
The supplier network consists of both small players and large players. There are suppliers for operating system e.g. Google for Android, Nokia for Symbian. Few suppliers have their product as opensource where people can make enhancements e.g. Android.

Bargaining Power
Bargaining power is moderate. Due to the presence of multiple players the suppliers need to keep in mind the needs of the application development industry if it wants the suppliers platform is adopted. Once the platform is adopted the power shifts more. Bargaining power is low.

Supplier

Substitutes

There is no major threat of substitute to mobile applications. The closest is a software application on the web. This in a way compliments the mobile application. Buyers range from large customers (business) to individual customers. Initially the requirement of the two groups were viewed differently. The earlier group was seen to have requirements around the office assistant and managing their connectivity with the office. The later was seen as having the needs around gaming and entertaining. However as of late the needs of both the group are seen to merge. The barriers to the entry are very low in this industry. in terms of capital requirement, regulatory framework, technology, infrastructure needs and human resources the availability is easy and hassle free Because of the above argument the industry is very competitive

Buyers

Buyer power is high. The high amount of alternatives available to customers ensures that companies have to constantly innovate to retain customers.

Bargaining power is low.

Potential Entrant

Industry competition

Bargaining power is low.

Overview of Mobile Industry

Research: TRENDS IN THE INDUSTRY

Mobile devices sales rose in 2010, with smartphones showing strongest growth. Feature phones sales (let alone ownership) still outnumber smartphones 4:1. If your mobile strategy doesnt include feature phones, it doesnt include most of your customers. Half a billion people accessed mobile Internet worldwide in 2009. Usage is expected to double within five years as mobile overtakes the PC as the most popular way to get on the Web.

Android is expected to become the top OS for new smartphones in 2011.

Web-enabled handsets - by 2011, over 85 percent of new handsets will be able to access the mobile Web. In US and W. Europe, it is already surpassed that. Lots of new handsets support 3G (fast Internet).

There are 5.3 billion mobile subscribers (that's 77 percent of the world population). Growth is led by China and India.
Mobile ad spend worldwide is predicted to be US$3.3 billion in 2011 sky rocketing to $20.6 billion in 2015, driven by search ads and local ads. In the US over half of U.S. mobile ad spending is local. 71 percent of smartphone users that see TV, press or online ad, do a mobile search.

Over 300,000 mobile apps have been developed in three years. Apps have been downloaded 10.9 billion times. But demand for download mobile apps is expected to peak in 2013

Paying by mobile i.e. m-payments will be worth US$240 billion in 2011 and could be over US$1 trillion by 2015.

http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats

TAKE AWAY FROM THE ABOVE INDUSTRY TREND

The above statistics reemphasizes the growing importance of smartphone as a media. The trend predicts the potential dominance of android as the platform of choice for application development. Consumers are growing more comfortable with making financial transaction on the mobile phone. Consumers are increasingly looking to applications for their convenience and saving time. There is a growing potential to earn revenues by way of application download fees, getting a share in advertising spend by corporate by a company which comes in mobile application development space. The above positive trend spreads throughout the world and is not concentrated in any pocket.

INTRODUCING
In the reported environment where people are willing to try out new applications and would stick with the application if they find significant benefit we propose to launch an application ShopMatess. Shopping is a necessary exercise in our daily lives. However our daily shopping might become a wearisome chore on some occasions. Do you live miles away from the marketplace, stuck without a reliable transport system? Do you find that shopping cannot fit into your busy schedule? Would you consider a more sustainable way to buy your everyday goods? ShopMatess is aimed at addressing the above problems. ShopMatess is an easy community based smart phone application that makes daily shopping a simple and incentivised process.

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DETAILED WORKING

Update transaction amount to ensure trust parameters

The shopper will notify the buyers within his/her group through the app about his shopping plan at least 30 minutes before his purchase. The shopper will also have to enter a to/from destination and the store/area he wants to shop at for himself. The buyers will have a list of things that need to be bought (which can be continuously updated) , which they will upload on the application/websites live page. According to this information in the notification, buyers will send requests to the shopper to buy them items on their list. The shopper can choose the people he wants to shop for, and the items within their list that he thinks he can manage to transport/buy with ease. This information will reach the buyers instantaneously.

Money transfer is done physically before the shopping and bill transfer and exchange
transfer also done physically.

Post buy the each shopper and buyer would need to update the amount of his
last transaction. This step would again be mandatory. If the price does not remain
within correct band then trust parameter would be decreased. A rating system for each of the people in the group will ensure honesty in transactions. Buyer can add people to the network. (phone number and social networking site). This would be in groups like google groups. The system works on trust within small communities and groups of people; preferably located in the same geographical location. 11

DETAILED WORKING
FLOW CHART FOR THE APPLICATION

USER INTERFACE DESIGN:

The Product Logo

The four main tabs on the product home page.

The options provided on the groups pages which helps a user manage his network. A person can be present in multiple network.

This UI highlights the way a user can search for people to add to his network from existing network (gmail, facebook, phonebook)

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USER INTERFACE

The user can also view people who are present on the network.

The shopping tab leads to page which gives a user to act as a shopper / place request (offline /online)/view history.

The shopping page helps the shopper specify the time, destination and which all networks/users he want to intimate.

The notification tab on the home page gives information about shopper/buyer activities.

If a user is going to act as a shopper he can accept or reject a request from a buyer.

The list page helps a user to place order by specifying the item name, quantity.

A user can also specify when he wants to make the payment.

The user has the option to save the list he created and update it later or send it again.

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COMPONENTS OF THE BUSINESS MODEL

Comparison With Other Product (Price, Quality) Shopsavy Shopnearby Redlase Amazonsave Benjis Compareme Checking The Availability Of The Product At Stores Direction Mapping For The Store Helps In Physical Shopping At The Store

Product Review

Shopsavy SaveBenjis SnapTell Compare Everywhere Buzzillions Slifter

ShopNearby

Compare Everywhere Holiday Gift Guide Socio-economic Info About Products (Carbon
Footprint, Celerity)

Point Inside Slifter

Online Shopping

Promotions

Pooled Shopping

Product Suggestions Holiday Gift Guide

Shop Nearby

Coupon Sherpa Mobiqpons

Community Shopping Guide

Goodgude Be Nice To Business

COMPETITIVE ANALYSIS:
Competitive analysis of top 10 shopping advertisement: 10 competitors information got from http://www.dailyfinance.com/2010/10/20/love-to-shop-10-hot-shopping-apps-for-smartphones/ : Current Competitive landscape provides the services provided by existing smartphone application. This understanding of the competitive landscape also gives us ideas about the short term and long term areas to which our application can expand to. ShopMates closet competitor currently would be Community Shopping Guide, MobiQpons and Coupon Sherpa. Community Shopping is just a google spread sheet with no significant features and UI which we plan to develop. Coupon Sherpa and MobiQpons have the disadvantage that there source of information about the discounts come from supplier, store owner rather than from the customers. In our product we can get information offer which would be more relevant for the users and more customized as friends would be providing the information. The above competitive landscape can be broadly categorized into three areas Applications which provide online shopping Applications which provide product information Applications which help in doing physical shopping

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Perceptual Map:
Looking at the positioning of the ShopMates with the help of perceptual Map. Two 2 dimensional perceptual maps are drawn (on the following page) Online shopping vs Product Information Help in Physical shopping vs Product information

Perceptual Map: Online Shopping vs Product Information

Perceptual Map: Helps In Physical Shopping Vs Product Information 15

TAKE AWAY FROM PERCEPTUAL MAP:

These maps gives us the current positioning of ShopMates and also tells which news areas can it move to. From Perceptual Map 2 we can figure out that if we can move to 1st quadrant in the long run by providing more product related information then we would face less competition and improved range of services.

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ARENA
Customers Android Smartphone Users Busy people Students in hostels People seeking convenience The above customer segment is in line with the basic purpose of our application, which is to provide convenience to people. This is the primary customer segment for us. In long run we expect that with introduction of more features it might have a rub off effect on our consumers. Based on availability of internet everywhere Focus on USA, Japan, Germany, France, India, China (Developed and Developing markets), below, the two tables show the potential segmentation of the market from ShopMates point of view. We would target the customers which are shaded. There is a possibility that the 2 customers segment overlap.

Segment 1 of Customer

Segment 2 of Customer

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ECOSYSTEM NEEDED FOR THIS APPLICATION

The success of any application is not only dependent on the main product but also is dependent on the supporting ecosystem which the application/business needs to be successful. For our application the complimentary assets needed would be: 3rd party payment gateway: In order to enable the user to make payment for registration and pay the download fee a payment gateway is needed. PayPal is one of the strong contenders. Appropriate gateway selection would depend on its Cost of application Ease of integration with our code Security of the product Up-gradation and customer service provided Support on various platform

Mobile Hardware Platform: This is the platform on which ShopMates would run. The application should support maximum number of Hardware platform in the long run. The application needs to keep in mind the limitations of hardware whose processing power although growing rapidly have still got certain limitation. Application constantly needs to upgrade itself to benefit from the increased hardware capabilities and opportunities provided as a result of this. Mobile Software platform: Current platform for development for ShopMates would be Android. Being an open architecture this would help us in rapid development and make use of other similar code base of other application. In long run we intend to provide our application both on Android and iPhone. Store Owner Network/Distribution Channel: Distribution Channel of the application would majorly be online medium through Android application distribution network and late iPhone application distribution network. Server Hosting services: This service should be scalable and flexible. After sale support: Feature upgrades and bug fixing for the application would be prompt to meet the evolving user expectation from the application.

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ANALYSIS OF COMPLIMENTARY ASSETS

Table: Analysis Of Complimentary Assets

The above Table represents the various complimentary assets which would impact our business. The long term and short term view on the dependency is also present. Effective and efficient interaction with these assets is important for successful business. The business would ensure the rapid development of above ecosystem which would ensure higher visibility for ShopMates, increased user adoption.

Vehicles:
In short we intend to grow organically. After turning cash positive we would look at alliances which would help us in growing in shopping space. Our focus would be to build a niche for ourselves in online and real-time shopping experience. We would also look at alliances with development firms having expertise in other platforms and expedite our development process.

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DIFFERENTIATORS AND VALUE PROPOSITION OF SHOPMATES

Value Proposition:
The benefits offered to various stakeholders are mentioned below:

Stakeholders

Value Proposition
The shopper gets and incentive and reward points for providing the service to the user. Furthermore, if the shopper user credit card to make the shopping then the reward points are incentive as well The shopping is done and delivered closer to him, saving him a lot of time, energy and transport money. Get a chance to network with people. Get information about latest offers / deals / discounts /promotions Can promote bulk purchases. Cost effective way of advertisement which focussed reach. Have data about buying behaviour pattern of consumer.

View

Shopper

Long Term, Short Term

Buyer

Long Term, Short Term

Store Owner

Long Term

Long term view primarily addresses the advantage which will come to the business once number of subscriber reaches a sustainable level. The network effect and cross network effect creeps in.

Differentiators:
Only application to promote pooled shopping and provide promotional scheme which are suggested by friends (high chances of the offer being relevant). Incentive provided for shopping for others. Helps to grow your social network.

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SEQUENCE OF ACTIONS
Subsequent to the launch of ShopMates we intend to grow organically. Building capabilities in Application development Marketing our application Our main focus would be to grow the adoption rate of our application.

For developing capabilities for :

Generating advertisement revenue: We intend to do it both organically and becoming part of partner network something like google provides. Going ahead we intend to launch applications in same domain which makes shopping ease. After building core competency in shopping arena we might venture into application development areas which are close to our competencies.

We aim to turn cash positive before taking the above steps.

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MARKETING PLAN AND FINANCIALS

Context
Rapidly growing mobile app market High growth in Android platform user database

38.5% i.e. 180m

22.7%

48.8%, i.e. 310m

Android User Base

3.9%
~0.5% = 1.5m ~20k Shopmates User Base

2009

2010

2011

2015

Network effects necessary for diversion across other electronic gadgets

MARKETING STRATEGY:
Product As mentioned earlier in video Price Download from anywhere @ $0.99 Place Focus on USA, Japan, Germany, France, India, China (Developed and Developing markets) Promotion Initial 10000 downloads with 50% discount as promotional offers Aggressive advertising through Facebook, Google, App Stores and other mobile applications such as games, e-papers, RSS feeds etc Heavy marketing expenses 22

FINANCIALS (Expected Cash Flows, Returns And User Base):

Assumptions:
* the growth of the user base is given the first row. This exponential growth is assumed keeping in mind that the business would be successful and network effect would come in picture. ** Revenue assumed is 99 cents per user. *** Discount is as per mentioned earlier in the business model Advertisement base grows in proportion to user base ^^ We get 10,30, 100 malls advertising rights in the subsequent years. The numbers are again kept exponential keeping in mind the network effect has to kick in for the buisness to be successful Rate assumed is $100 per mall. This is kept low so that small shopp keepers can also avail the service. ^^^ The trend in cost is taken keeping in mind financials of GroupON
http://www.sec.gov/Archives/edgar/data/1490281/000104746911005613/a2203913zs-1.htm

#The trend in cost is taken keeping in mind financials of GroupON 23

BUSINESS RISKS:
There are multiple risks of the business few of them are enlisted below. Ability to get new customers and retain existing customers. Ability to enter into contracts with the store owners. Disruptive technology which makes android market share reduces rapidly. Not able to maintain healthy cash flow which impacts day to day operations.

FUTURE AREA OF IMPROVEMENT:

Other platforms: This application has to be extended to other platforms like iPhone, BlackBerry, Windows 7.
Analytics: This section could be incorporated, which analyzes the buying behaviour of consumers. Search functionality: Helps to search what other people in the network are doing. Green points: Carbon footprint calculator is another area which could be looked into. Other channels of pooling: We can also try pooling online sale something like GroupOn.

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