Answer

Pupils should be offered guidance on the extent to which you require an analytic response based on a detailed revenue model or a concern of the strategic issues. When a detailed income model is essential, then some additional information will be essential or pupils will need to point out their assumptions.

Essentially this question is around revenue designs and costs, so it requires the students to consider total costs of driving visitors to the site and converting those to sale when compared with revenue resources. Profitability can also be dependent on the long-term capability of the company to find revenue customers.

Students should certainly mention these ingredients of a transformation based income model including: • Total market size for these items based on how big existing financial loans markets. Sub-set of industry who would meet up with Zopas financing criteria.

• Cost of consumer acquisition – this is a competitive industry and it may be difficult to attract visitors to the site, for example , using search engine marketing or perhaps offline promoting. • Expense of servicing product sales – about what extent are phone connections needed to facilitate sales? • Conversion charge from visitor to lead to sale.

• Average income earned coming from each new borrowers that is based on charging borrowers 1 per cent with their loan as a fee, and from commission on any repayment safeguard insurance that the borrower picks.

• Life-time value by customers based upon attrition rates – will borrowers continue to use Zopa or will each uses it like a one-off?

• Flexibility about revenue version – for example , after launch, Zopa has gained extra revenue via lenders.

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