Business Model Canvas-BMGT 289E Exam 1

Types of Revenue Streams (7)

-Asset sale (selling ownership rights to a physical product) -Usage fee (the use of a particular service. minutes on phone, nights at hotel) -Subscription fees (selling continuous access to service-gym) -Lending/Renting/Leasing (temporarily granting someone the exclusive right to use a particular asset for a fixed period in return for a fee) -Licensing (giving customers permission to use protected intellectual property in exchange for licensing fees. Media industry.) -Brokerage fees (intermediation services performed on behalf of two or more parties. Credit card providers, real estate agents, brokers) -Advertising (fees for advertising a particular product, service, or brand) A U S L L B A

Is your business more...

-Cost driven: (leanest cost structure, low price value proposition, maximum automation, extensive outsourcing) *Focus on minimizing costs wherever possible. This approach aims at creating and maintaining the leanest possible cost structure, using low price value propositions, maximum automation, and extensive outsourcing. ex. southwest -Value driven: (focused on value creation, premium value proposition) *Some companies are less concerned with the cost and instead focus on value creation. Premium value propositions and a high degree of personalized service usually characterize value-driven business models. ex. luxury hotels

Fixed costs

-Costs that remain the same despite the volume of goods or services produced ex. salaries, rents, and physical manufacturing facilities

Sample Characteristics of Cost Structure

-Fixed Costs (salaries, rents, utilities) -Variable costs -Economies of scale -Economies of scope

Pricing mechanisms

-Fixed menu pricing -Dynamic pricing

Revenue Streams

-For what value are our customers really willing to pay? -For what do they currently pay? -How are they currently paying? -How would they prefer to pay? -How much does each Revenue Stream contribute to overall revenues?

Customer Segments

-For whom are we creating value? -Who are our most important customers? -What are the criteria for segmentation (gender, age, income, geographic, needs, wants, behavior)? -What are potential customers - know but not reached or addressed? -What are future customers - existing groups not yet on the radar?

Customer Segments examples (5)

-Mass Market (don't distinguish between different customer segments. Focus on one large group of customers with broadly similar needs and problems-consumer electronics) -Niche Market (cater to specific, specialized customer segments) -Segmented (Distinguish between market segments with slightly different needs and problems) -Diversified (serves two unrelated customer segments with very different needs and problems) -Multi-sided Platform (serves two or more independent customer segments) M N S D Multi

Value Proposition Characteristics (11) (things that contribute to customer value creation)

-Newness (satisfy an entirely new set of needs that customers previously didn't perceive because there were no similar offerings. Usually tech related-cell phones) -Performance (improving product or service performance) -Customization (tailoring products and services to the specific needs of individual customers or customer segments) -"Getting the Job Done" (Helping customers get certain jobs done) -Design (a product may stand out because of superior design) -Brand/Status (customers find value in wearing a brand) -Price (similiar value at a lower price) -Cost Reduction (helping customers reduce cost) -Risk Reduction (reducing risk they incur when purchasing products or services)-1 yr service guarantee -Accessibility (making products/services available to customers who previously lacked access to them) -Convenience/Usability (making things more convenient or easier to use) NPCG DBP CR AC

5 Motivations for partnerships

-Optimization and economy of scale (Buyers and suppliers work together to optimize the allocation of resources and activities. It is illogical for a company to own all resources or perform every activity by itself. Used to reduce costs and often involve outsourcing or sharing infrastructure) -Reduction of risk and uncertainty (partnerships can reduce risk in a competitive environment characterized by uncertainty. -Acquisition of particular resources and activities (companies extend their own capabilities by relying on other firms to furnish particular resources or perform certain activities. Such partnerships can be motivated by needs to acquire knowledge, licenses, or access to customers) -Obtaining entry to closed market space -Improving reputation by aligning with strategic partner ORAGI

Customer Relationships Examples (6)

-Personal assistance (relationship based on human interaction. The customer can communicate with a real customer representative to get help during the sales process or after the purchase is complete) -Dedicated Personal Assistance (Dedicating a customer representative specifically to an individual client. The deepest and most intimate type of relationship and normally develops over a long period of time) -Self-Service (a company maintains no direct relationship with customers. Provides the necessary means for customers to help themselves) -Automated Services (Mixes customer self-service with automated processes. Automated services can recognize individual customers and their characteristics and offer information related to orders or transactions) -Communities (maintain online communities that allow users to exchange knowledge and solve each other's problems) -Co-creation (companies co-create value with customers. Writing reviews, assisting with the design of new products, having customers create content on Youtube) P D S A C C

Types of resources (4)

-Physical (physical assets such as manufacturing facilities, buildings, vehicles, machines...) -Intellectual (intellectual resources such as brands, patents, copyrights, data) -Human (human resources are crucial in knowledge-intensive and creative industries) -Financial (financial resources such as cash, lines of credit, or stock option pool for hiring key employees) P I H F

Examples of key activities (3)

-Production (designing, making, and delivering a product in substantial quantities and/or of superior quality. Production activity dominates the business models of manufacturing firms) -Problem Solving (coming up with new solutions to individual customer problems) -Platform/Network (Business models with a platform as a key resource are dominated by platform or network-related key activities. Networks, matchmaking platforms, software, and even brands can function as a platform.

An organization can choose between reaching its customers through its own Channels, through partner Channels, or through a mix of both.

-The trick is to find the right balance between the different types of channels, to integrate them in a way to create a great customer experience and to maximize revenues

Channels

-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? -Are there new channels that we haven't used in the past to reach them?

Business Model Canvas The 9 building blocks are...

-Value proposition -Customer Segments -Customer relationships -Channels -Revenue Streams -Key partnerships -Key activities -Key resources -Cost structure VCCC RKKK C (9 components) ~Key trends, industry forces, market forces, macro economic forces

Key Activites

-What Key Activities do our Value Propositions require? -Our Distribution Channels? -Customer Relationships? -Revenue streams?

Key Resources

-What Key Resources do our Value Propositions require? -Our Distribution Channels? -Customer Relationships? -Revenue Streams? V D C R

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?

Customer Relationships

-What type of relationship does each of our customer segments expect us to establish and maintain with them? -Which ones have we established? -How are they integrated with the rest of our business model?How costly are they?

Value Proposition

-What value do we deliver to the customer? -Which one of our customer's problems are we helping to solve? -What bundles of products and services are we offering to each Customer Segment? -Which customer needs are we satisfying?

Key Partnerships

-Who are our Key Partners? -Who are our key suppliers? -Which Key Resources are we acquiring from partners? -Which Key Activities do partners perform?

4 different types of partnerships

1) Strategic alliances between non-competitors 2) Coopetition: strategic partnerships between competitors 3) Joint ventures to develop new businesses 4) Buyer-supplier relationships to assure reliable supplies S C J B

Channel phases

1. Awareness: How do we raise awareness about our company's products/ services? 2. Evaluation: How do we help customers evaluate our organization's Value Proposition? 3. Purchase: How do we allow customers to purchase specific products and services? 4. Delivery: How do we deliver a Value Proposition to customers?5. After sales: How do we provide post-purchase customer support? A E P D A

Economies of scale

Cost advantages that a business enjoys as its output expands

Economies of scope

Cost advantages that a business enjoys due to a large scope of operations. -In a large enterprise, the same marketing activities or distribution channels may support multiple products

Variable costs

Costs that vary with the amount of goods or services produced Ex. music festivals

Channels-textbook definition

How a company communicates with and reaches its customer segments to deliver a value proposition

Fixed menu pricing (4)

Predefined prices are based on static variables -list price: fixed prices for individual products, services, or other value propositions -product feature dependent: Price depends on the number or quality of value proposition features -customer segment dependent: Price depends on the type and characteristic of a customer segment -Volume dependent: Price as a function of the quantity purchased L P C V

Dynamic Pricing (4)

Prices change based on market conditions -Negotiation (bargaining): Price negotiated between two or more partners depending on negotiation power of/or negotiation skills -Yield Management: Price depends on inventory and time of purchase (normally used for perishable resources such as hotel rooms) -Real-time-market : Price is established dynamically based on supply and demand -Auctions: Price determined by outcome of competitve bidding NYRA

Revenue Streams-definition

Represents the cash a company generates from each customer segment

Cost structure definition

The cost structure describes all costs incurred to operate a business model -Creating and delivering value, maintaining customer relationships, and generating revenue all incur costs. Naturally, costs should be minimized in every business model. But low cost structures are more important to some business models than to others.

Customer Segments textbook definition

The different groups of people or organizations an enterprise aims to reach and serve -In order to better satisfy customers, a company may group them into distinct segments with common needs, common behaviors, or other attributes -Once a business decides which segments to serve and which to ignore, a business model can be carefully designed around a strong understanding of specific customer needs

Key resources definition

The most important assets required to make a business model work -These resources allow an enterprise to create and offer a value proposition, reach markets, maintain relationships with customer segments, and earn revenues. Key resources can be physical, financial, intellectual, or human. They can be owned or leased by the company or acquired from key partners

Key activities definition

The most important things a company must do to make its business model work

Key Partnerships Definition

The network of suppliers and partners that make the business model work Companies create alliances to optimize their business models, reduce risk, or acquire resources

Customer Relationships Textbook Definition

The types of relationships a company establishes with specific customer segments -a company should clarify the type of relationship it wants to establish with each customer segment -customer relationships can range from personal to automated -Customer relationships may be driven by the following motivations *Customer acquisition *Customer retention *Boosting sales (upselling)

Value proposition-textbook definition

Value propositions describe the bundle of products and services that create value for a specific customer segment -The value proposition is the reason why customers turn to one company over another -It solves a customer problem or satisfies a customer need -The value proposition is an aggregation or bundle of benefits that a company offers customers

partner Channels

are indirect and span a whole range of options, such as wholesale distribution, retail, or partner-owned websites *Lead to lower margins, but they allow an organization to expand its reach and benefit from partner strengths ex. (indirect) -partner stores -wholesaler

Owned Channels

can be direct, such as an in-house sales force or a website, or they can be indirect, such as retail stores owned or operated by the organization. -Have higher margins, but can be costly to put in place and operate ex. (direct) -sales force -Web sales