A Reverse Auction-Based E-Business Model for B2C Service Markets

A Reverse Auction-Based E-Business Model for B2C Service Markets

Tobias Kollmann (University of Duisburg-Essen, Germany)
DOI: 10.4018/978-1-60566-154-4.ch011
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Abstract

LetsWorkIt.de is a German B2C platform for different kinds of service and handcraft orders. Based on the concept of reverse auctions, demanders compose descriptions of the required services to place orders on the platform. The supplier bidding lowest at the end of the auction obtains the right to carry out the order. Drawing upon and widely confirming existing theories on e-marketplaces, this chapter examines the underlying e-business model and the competitive strategy of LetsWorkIt. The case provides evidence that the reverse auction-based intermediation of handcraft and service orders is suitable to form the basis of an e-marketplace and points out that for such ventures, a combination of public relations, performance marketing, and cooperation, represents an ideal strategy to increase the number of demanders and suppliers. Moreover, the case suggests that, depending on the business model, it may be feasible to concentrate marketing activities on one of these two customer groups, since LetsWorkIt has managed to achieve a significant number of successful, high-quality auctions by primarily aligning its competitive strategy with the demand side.
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Company Overview And History

In early 2004, Alexander Bugge, Carsten Seel and Jörg Holtmann were wondering whether, in spite of the burst of the dot com bubble, an Internet-based business could become the center of their professional life. At that time, the idea of LetsWorkIt.de, a German business-to-consumer (B2C) auction platform for different kinds of service and handcraft orders, was born. Service auctions to be placed on the platform would include, for instance, gardening, wallpapering a flat, repairing a car, or printing advertising brochures. Although there was already a first-mover offering such auctions, the corresponding market was hardly existent and the publicity for placing service and handcraft orders on the web was still low. Bearing in mind the success of eBay and the fact that the target group of craftsmen was becoming increasingly affine to the World Wide Web, the three entrepreneurs began to develop their business idea and formulated their mission: “to become the leading electronic marketplace for service and handcraft orders and to provide our customers a high level of quality at a fair price.”

According to their respective competencies, Bugge, holding a degree in business administration, took over the areas of finance and marketing, whereas Seel, an experienced web developer with a degree in communication science, was responsible for the technical implementation issues and content management. Holtmann, also holding a degree in communication science, would focus on customer relations and PR work. However, having these highly complementary skills would not guarantee LetsWorkIt’s activities from a liquidity point of view. On the one hand, there was a significant need for investing in technology and in establishing the company; whereby, on the other hand, the free-cash-flow could not be too negatively influenced. Consequently, the founders decided to manage without salary in the beginning phase, and each of them subscribed a limited amount of capital. Moreover, they were supported by a business angel, an external expert on e-marketplaces who helped them from both a financial and a professional point of view.

In order to minimize development costs, Seel went for conducting the technical implementation of LetsWorkIt.de and the underlying database on his own, while his two colleagues carefully designed the electronic business processes to be implemented. For the server-side programming of the platform, Seel applied Microsoft’s ASP technology. “Concerning hardware, we decided to fall back on a quality service provider ensuring that the platform would be available twenty-four-seven”, Seel remembers.

After less than half a year of exhaustive work, LetsWorkIt.de went online on July 1st, 2004. The main concept is as follows: demanders position orders in form of reverse auctions and compose descriptions of the required services. The duration of an auction can be between one day and six weeks. Suppliers then bid on these orders. The supplier bidding lowest at the end of the auction obtains the right to carry out the order – and is legally obliged to do so since there is a legally binding contract (i.e. a work or services contract) between demander and supplier. This contract is based on the description of the demander and the price of the supplier. Demanders include private persons, enterprises and tradesmen. Suppliers, however, are required to be enterprises or registered craftsmen and have to verify their accreditation.

“LetsWorkIt provides some obvious advantages for both demanders and suppliers”, Holtmann states. For the demander, these advantages include:

  • Saving money when placing handcraft and service orders,

  • Being sure to pay the lowest price,

  • Finding a service provider or craftsman very easily and quickly,

  • Avoidance of unpleasant negotiations, and

  • Reaching a wider range of service providers or craftsmen.

Advantages for the supplier include:

  • Acquiring orders in a simple and innovative way,

  • Increasing the workload of the own business, and

  • Saving advertising and distribution costs.

Complete Chapter List

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International Advisory Board
Table of Contents
Preface
In Lee
Chapter 1
Keith F. Ward, Erik Rolland, Raymond A. Patterson
Proponents of Customer Relationship Management (CRM) suggest that a firm can develop a value creation relationship, such that an increase in... Sample PDF
Managing the Customer Relationship: A Framework for E-CRM Analysis
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Chapter 2
Soumaya Ben Letaifa
This chapter examines how e-CRM has affected both organizational and individual behavior in a leading Canadian bank. The innovative and... Sample PDF
A New Conceptual Framework for Greater Success with Integration of E-CRM
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Chapter 3
Tim Coltman
Most sectors of industry, commerce, and government have reported variation in the performance payoff from electronic customer relationship... Sample PDF
Managerial Discretion and E-CRM Performance
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Chapter 4
Patricia T. Warrington, Elizabeth Gangstad, Richard Feinberg, Ko de Ruyter
Multi-channel retailers that utilize an e-CRM approach stand to benefit in multiple arenas by providing targeted customer service as well as gaining... Sample PDF
Multi-Channel Retailing and Customer Satisfaction: Implications for E-CRM
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Chapter 5
Veronica Liljander, Pia Polsa, Kim Forsberg
Not until very recently has mobile phone technology become sophisticated enough to allow more complex customized programs, which enable companies to... Sample PDF
Do Mobile CRM Services Appeal to Loyalty Program Customers?
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Chapter 6
Michael Shumanov
While the managerial rationale for adopting customer relationship management (CRM) has been fairly well articulated in the literature, research on... Sample PDF
Developing a Global CRM Strategy
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Chapter 7
John Gallaugher
This article synthesizes and leverages two strategic frameworks when analyzing the true nature of strategy and the Internet: (1) the concept of... Sample PDF
Strategic Positioning and Resource-Based Thinking: Cutting Through the Haze of Punditry to Understand Factors Behind Sustainable, Successful Internet Businesses
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Chapter 8
Savvas Papagiannidis
This chapter covers the concept of e-business models and how they relate to the music video and television environments. After identifying the value... Sample PDF
A Tale of E-Business Models: From the Music to the Television Industry
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Chapter 9
Kirill M. Yurov
Healthcare technology markets have been recently identified as potential investment targets. Having survived a major environmental shock, the... Sample PDF
Strategic Maneuvering in Healthcare Technology Markets: The Case of Emdeon Corporation
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Chapter 10
Olli Kuivalainen
The aim of this chapter is to provide a holistic exploration of the development of the business model of a magazine Web site, and of the factors... Sample PDF
Complementary Role of Website in Business Model Development
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Chapter 11
Tobias Kollmann
LetsWorkIt.de is a German B2C platform for different kinds of service and handcraft orders. Based on the concept of reverse auctions, demanders... Sample PDF
A Reverse Auction-Based E-Business Model for B2C Service Markets
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Chapter 12
Denis Caro
The 21st century continues to witness the transformation of organizational systems globally through the deployment of Information and Communication... Sample PDF
Evolving E-Health Systems: Symbiotic Constructs Between Corporate and E-Healthcare Worlds in International Space
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Chapter 13
Karl Knapp, Sushil K. Sharma, Kevin King
Offshore information technology (IT) outsourcing has been becoming mainstream alternative to inhouse operations. While offshore development is a... Sample PDF
Socio-Economic Impacts of Offshore Outsourcing of Information Technology
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Chapter 14
Indrit Troshani
The eXtensible Business Reporting Language (XBRL) is an emerging XML-based standard which has the potential to significantly improve the efficiency... Sample PDF
Towards Theory Development for Emergent E-Business Innovations: Using Convergent Interviewing to Explore the Adoption of XBRL in Australia
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Chapter 15
Bill Vassiliadis
Copyright protection is becoming an important issue for organizations that create, use, and distribute digital content through e-commerce channels.... Sample PDF
An Introduction to the Management and Protection of Intellectual Property Rights
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Chapter 16
Tagelsir Mohamed Gasmelseid
The unprecedented advancements witnessed in the field of information and communication technology over the last couple of years are significantly... Sample PDF
Intelligent Contracting: An E-Supply Chain Management Perspective
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Chapter 17
Jaeki Song, Eric A. Walden
In this work, we examined the boundary of the applicability of network effects theory. We theorized that when adoption is cheap, the cognitive... Sample PDF
The Applicability of Network Effect Theory to Low-Cost Adoption Decisions: An Investigation of Peer-to-Peer File Sharing Technologies
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Chapter 18
Wen-Jang Jih
Two mutually reinforcing forces currently are at work to propel an upward spiraling in the business arena. As wireless communication technology... Sample PDF
An Empirical Analysis of Cellular Phone Users' Convenience Perception and Its Impact on Shopping Intention in Mobile Commerce
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Chapter 19
Fang He
Along with the exponential increase in online business transactions, the online payment system has gained in popularity because vendors and... Sample PDF
The Effects of System Features, Perceived Risk and Benefit, and Customer Characteristics on Online Bill Paying
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About the Contributors