Key Activities – what it takes to get the product out to Key Partnerships – the market; the how network of suppliers & partners that surround the businessKey Resources – the assets required to create the product Cost Structure – expenses related to product/service creation
Relationships – going the Value Proposition – the end extra mile to retain product; meeting the customer loyaltyneeds/demands of the customer Customer Segments – who are your customers Channels – how the brand gets to the customer Revenue Streams – why, what, how customers are paying; Cash generation
Customer Segment: who are your customer?Customer Groups represent separate segments if: – Their needs require and justify a distinct offering – They are reached through different Distribution Channels – They require different types of relationships – They have substantially different profit abilities – They are willing to pay for different aspects of the offer
Customers ‐ for whom are we creating value?Who are our most important customers? – Mass Market ‐ no distinction between segments – Niche Market ‐ specialized Customer Segments – Segmented ‐markets segments with slightly different needs and problems – Diversified ‐ two unrelated customer segments with very different needs and problems
Channels: how the brand gets to the customerDescribes how the company communicates with and reaches its Customer Segments to deliver Value Proposition, the company’s interface with customers. Channels serve several functions: – Raising awareness among customers about a company’s Product and Services – Helping customers evaluate a company’s Value Proposition – Allowing customers to purchase specific products and services – Delivering a Value Proposition to customers – Providing post‐purchase customer support.
Channels: how the brand gets to the customer• Through Which Channels do our Customer segments want to be reached? • How are we reaching them now?• How are our Channels integrated?• Which ones work best?• Which ones are most cost‐efficient? • How are we integrating them with customer routines?
Channels: touch points!Channel Types:• Own / Partner – Direct ‐ Sales Force – Web Sales• Own Stores• Indirect ‐ Partner Stores• Wholesaler
Channels: phasesAwareness – How do we raise awareness?Evaluation – How do we help customers evaluate our proposition?Purchase – How do we allow customers to purchase specific services?Delivery – How do we deliver a Value Proposition to customers?After Sales – How do we provide post‐purchase customer support?
Customer Relations: going the extra mile to retain customer loyaltyA company should clarify the type of relationship it wants toestablish with each Customer Segment Relationships can range from automated to personal and driven by the following motivations: – Customer Acquisitions – Customer Retention – Boosting Sales (Upselling)The customer relationships called for by a company’s business modeldeeply influences the overall customer experience.
Customer Relations• What type of relationship does each of our Customer Segments expect us to establish and maintain them? • Which ones have we established?• How costly are they?• How are they integrated with the rest of our business model?Customer Relationship categories: – Personal Assistance – human interaction, to get help during the sales process or after purchase. – Dedicated Personal Assistance – Dedicating a customer rep specifically to an individual client. – Self‐service – no direct relationship. – Automated Service – mixes a more sophisticated form of customer self service with automated processes. For ex. Online personal profiles gives customers access to customized services. – Communities – user communities – Co‐creation – with customers, engage customers in design.
Customer Relations• For what value are our customers really willing to pay?• For what do they currently pay? • How are they paying?• How would they prefer to pay?• How much does each Revenue Stream contribute to overall revenues?
Revenue Stream: why, what, how customers are paying; Cash GenerationIf Customers are the heart of each business then Revenue Streams are the arteries. A company must ask: For what value is each Customer Segment truly willing to pay?Successfully answering this question allows the firm to generate one or moreRevenue Streams from each Customer segment. Each Revenue Stream may have different pricing mechanisms, such as fixed list price, bargaining, auctioning, market dependent, Volume dependent,or yield management.
Revenue Stream: two methodsA business model can involve two different types of Revenue Streams:• Transaction Revenues resulting from one‐time customer Payments.• Recurring revenues resulting from ongoing payments to either deliver a Value Proposition to customers or provide post‐purchase customer support.
Revenue Stream: two types of pricing mechanismsFixed Menu Pricing: – Predefined prices based on static variables. – List Price – Product Feature Dependent – Customer segment dependent – Volume DependentDynamic Pricing: – Prices change based on market conditions – Negotiation – Yield Management – Inventory and timing (airlines) – Real‐time‐market – supply and demand – Auctions – Price determined by outcome of competitive bid.
Revenue Stream: options to generate revenues streamsAsset Sale – selling rights to physical propertyUsage fee – the more a service is used the more the customer pays. Subscription fees – selling continuous access to a serviceLending/renting/Leasing – temporary grant someone exclusive rights to use a particular asset for a fixed period in return for a feeLicensing – Giving customers the permission to use protected Intellectual property in exchange for licensing fee. Brokerage fees – derived from intermediation services performed on behalf of two or more parties. Advertising – fees for advertising a certain product, service or brand.
Key Resources: the assets required to create the product/service• Most important assets required to make a business model work.• Key resources can be physical, financial, intellectual, or human.• Key resources can be owned or leased by the company or acquired from key partners.
Key Resources: what key resources do our value propositions require? Our Distribution Channel? Customer Relationships? Revenue Streams?Key Resources can be categorized as follows: Physical – Building/Equipment Intellectual – Brand, proprietary knowledge, patents, copyrights, partnerships, customer database. Human – critical in knowledge intensive/ creative industries Financial – cash, line of credit, stock option pool for key employees.
Key Activities: what it takes to get the product out to market; the howThe most important things a company must doto make the business model work.These are required to create and offer a ValueProposition, reach markets, maintain customerrelationships, and earn revenues.
Key Partnerships: the network of suppliers & partners that surround the business• Describes the network of suppliers and partners that make the business model work.• Companies create alliances to optimize their business model, reduce risk, or acquire resources.Four types: – Strategic Alliances between non‐competitors – Co‐opetition – strategic partnerships between competitors – Joint Ventures – to develop new businesses – Buyer‐supplier relationships to assure reliable supplies
Key Partners: who are our key partners? Who are our key suppliers? Which Key Resources are we acquiring from partners?Which Key Activities do partners perform?Three motivations for creating partnerships: – Optimization of economy of scale – the most basic form – Reduction of Risk and Uncertainty ‐ Insurance – Acquisition of particular resources and activities – rely on other firms – to furnish particular resources or perform certain activities.
Cost Structure: expenses related to product/service creation• Describes all the costs incurred to operate the business model• Creating and delivering value, maintaining Customer Relations and generating revenue all incur costs. • Costs can be calculated easier after defining Key Resources, Key Activities, and Key Partnerships. • Some models are more cost‐driven than others, ex. Low cost airlines.
Cost Structure: what are the most important costs inherent in our business model?Which Key Resources are most expensive?Which Key Activities are most expensive?Two broad classes of business model cost structures: – Cost Drive – minimize costs where ever possible – Value Driven – focus on value creation – luxury Cost Structures have the following characteristics: – Fixed Costs – remain despite volume produced. – Variable Costs – vary proportionately with the volume – Economies of Scale – benefit from large volumes – Economies of Scope – cost advantage due to larger scope of business