Business Models: Low-Touch and Marketplace

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Questions and Answers

What does the low-touch business model typically require from customers to save costs?

Customers must pay for maintenance services.

Customers need to assemble products themselves. (correct)

Customers should contact customer service frequently.

Customers must purchase additional warranties.

In the pay-as-you-go model, how is the billing determined?

Customers are charged based on actual usage at the end of the billing period. (correct)

Customers pre-pay for a set amount of usage.

Customers only pay during peak usage times.

Customers pay a fixed monthly fee regardless of usage.

What is a primary revenue source for marketplace business models?

Charging for product returns.

Commissions from affiliate marketing.

Selling user data for profit.

Fees collected from successful transactions. (correct)

Which of the following best defines the razor blade business model?

Selling a consumable product at a loss while making profits from the durable product. Signup and view all the answers

What characterizes the reverse razor blade model?

Offering a high-margin product to drive sales of a low-margin complementary product. Signup and view all the answers

A key aspect of the marketplace model is that it provides tools for what purpose?

To connect customers to sellers easily. Signup and view all the answers

In a low-touch business model, companies like IKEA require customers to do what?

Assemble their purchased furniture themselves. Signup and view all the answers

What is a common misconception about the pay-as-you-go model?

It requires upfront payments for services. Signup and view all the answers

What is a key characteristic of the crowdsourcing business model?

It gathers contributions from a large group of people. Signup and view all the answers

Which of the following best describes disintermediation?

Selling products directly to consumers without intermediaries. Signup and view all the answers

What is fractionalization in a business model?

Offering partial ownership or limited-time access to a product. Signup and view all the answers

What is typically NOT associated with the customization business model?

Offering generic products without any changes. Signup and view all the answers

Which of the following describes a low-touch business model?

Requires minimal customer service intervention during transactions. Signup and view all the answers

In what way is the marketplace business model unique?

It primarily facilitates transactions between buyers and sellers. Signup and view all the answers

What is one advantage of disintermediation?

Lower costs for consumers by eliminating middlemen. Signup and view all the answers

Which of the following is NOT typically a feature of the fractionalization model?

Selling complete ownership of a product. Signup and view all the answers

What distinguishes a freemium business model from a free trial?

Freemium allows unlimited access to basic features for free. Signup and view all the answers

In leasing, what is a crucial aspect that differentiates it from fractionalization?

Leasing requires the return of the rented product after a period. Signup and view all the answers

Which statement best describes the low-touch business model?

It lowers prices by reducing the number of available services. Signup and view all the answers

What is a primary characteristic of a marketplace business model?

It connects buyers and sellers without taking ownership of products. Signup and view all the answers

Which of the following is NOT a characteristic of the freemium model?

Requires upfront charges for basic functionality. Signup and view all the answers

In a low-touch business model, companies typically aim to:

Reduce operating costs by minimizing service offerings. Signup and view all the answers

How does leasing fundamentally differ from fractionalization?

Leasing offers temporary access without ownership, unlike fractionalization's perpetual access. Signup and view all the answers

What is an example of a business using a freemium model?

A mobile app offering advanced features for purchase. Signup and view all the answers

Study Notes

Low-Touch Business Model

Customers are encouraged to do some tasks independently or purchase additional services to save costs.
IKEA exemplifies this model by requiring customers to assemble purchased furniture.

Marketplace Model

Allows sellers to list items for sale while providing tools for buyer-seller connections.
Revenue sources include transaction fees, advertising services for sellers, and insurance options.
Common examples are e-commerce platforms like Lazada and Shopee.

Pay-As-You-Go Model

Customers are billed based on actual usage rather than pre-purchasing services.
Predominantly found in home utilities, such as water supply companies.

Razor Blade Model

Products are sold at low prices to drive volume sales of high-margin add-ons.
Gillette illustrates this model with inexpensive razors and costly replacement blades.

Reverse Razor Blade Model

Offers a high-margin primary product while promoting sales of a lower-margin companion product.

Franchising Model

Involves selling the operational framework of a business to entrepreneurs.
Common in the restaurant sector, with Jollibee and 7-11 as prominent examples.

Freemium Model

Basic product or service access is free, with charges for premium features or advanced functions.
Differentiates from free trials by allowing unlimited basic feature use without time restrictions.

Leasing Model

Customers rent products for a specified period, returning them at the lease’s conclusion.
Rent-a-car services exemplify this model.

Concierge/Customization Model

Offers personalized products or services, enhancing the unique value of each transaction.
Customization seen in Nike’s sneakers, allowing buyers to design their footwear.

Crowdsourcing Model

Engages a large audience to contribute content, often paired with advertising revenue models.
Users on platforms like Patreon illustrate effective crowdsourcing.

Disintermediation Model

Eliminates intermediaries in the supply chain, enabling direct consumer sales.
Dell serves as an example, allowing customers to purchase computer parts directly.

Fractionalization Model

Sells portions of a product instead of the whole item.
Disney Vacation Club showcases this model by selling limited-time access to vacation homes.

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Description

Explore the concepts of low-touch business models and marketplace models in this quiz. Understand how companies like IKEA operate under these frameworks and the mechanisms behind platforms like Lazada and Shopee. Test your knowledge on customer independence and seller functionalities within these business strategies.