Business Models

1 Customer Segments The Customer Segments Building Block defines the different groups of people or organizations an enterprise aims to reach and serve

Customer Segments Customer groups represent separate segments if: Their needs require and justify a distinct offer They are reached through different distribution channels They require different types of relationships They have substantially different profitabilities They are willing to pay for different aspects of the offer

Examples of Customer Segments Mass market Niche market Segmented Diversified Multi-sided platforms (or multi-sided markets)

2 Value Propositions The Value Propositions Building Block describes 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.

Examples of Value Propositions Newness Performance Customization “Getting the job done” Design Brand/status Price

3 Channels The Channels Building Block describes how a company communicates with and reaches its Customer Segments to deliver a Value Proposition

Channels Communication, distribution, and sales Channels comprise a company's interface with customers. Channels are customer touch points that play an important role in the customer experience.

Channels Channels serve several functions, including: Raising awareness among customers about a company’s products 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 – Key Questions Through which Channels do our Customer 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?

Channel phases Awareness: raise awareness about products and services Evaluation: help customers evaluate product Purchase: how do customers purchase? Delivery: deliver the value proposition to the customer After sales: provide post-purchase customer support

4 Customer relationships The Customer Relationships Building Block describes the types of relationships a company establishes with specific Customer Segments Driven by customer acquisition, retention, and upselling

Categories of customer relationships Personal assistance Dedicated personal assistance (bankers for high net worth individuals) Self-service (no direct relationship with customer) Automated service (personal online profiles give access to personalized services) Communities (especially online) Co-creation (e.g., Amazon’s customers write reviews, eBay’s seller ratings)

5 Revenue Streams Transactions from one-off customer payments Recurring revenues from ongoing payments for continuous delivery of value proposition or post-purchase consumer support

Revenue Streams come from Asset sales – sales of a physical product Usage fee – minutes on phone, nights in hotel room Subscription fees – selling continuous access to a service Lending/renting/leasing – temporarily grant exclusive access to an asset Licensing – give customers permission to use protected IP Brokerage fees – intermediation services Advertising – fees for promoting product, service, or brand

6 Key resources Allow the business to create and deliver the value proposition, reach customers, maintain relationships, and generate revenues Physical, financial, intellectual, human ; owned, leased, or borrowed

7 Key activities Actions a company must take to be successful Microsoft – develop software, Facebook – develop platforms, Dell – supply chain management, McKinsey – problem solving Categories: production, problem solving, platform/network

8 Key partnerships Alliances to optimize business models, reduce risk, or acquire resources Four types Strategic alliances between non-competitors Cooperation between competitors Joint ventures to develop new businesses Buyer-supplier relationships to ensure reliable supplies

9 Cost structure The costs associated with the other 8 pieces of the business model Approaches: cost-driven versus value-driven Characteristics: fixed, variable, economies of scale, economies of scope