How to Develop an Business Model for Your Company
If you are at the planning stage of starting your business or when planning to implement new technology, launching a new product or service, the Canvas business model will help you. Read on if you want to find out what business models are, how they can help you grow your business and what the Canvas model is about.
What is a business model and how can it help you?
The business model allows you to organize the information that we have about a given product, allows you to embrace the whole and better describe the process. Thanks to that, the models help in making decisions, that is, they facilitate management. Thanks to the creation and grouping of information that we know about a given process, business models help to understand it better and manage it more effectively.
When looking at a specific business model, you should clearly know where the company is taking money, what it sells, who it sells to when it recognizes that it has achieved success.
When looking at a specific business model, you should clearly know where the company is taking money, what it sells, who it sells to when it recognizes that it has achieved success. This is the purpose of the business model Canvas, which is currently one of the most popular methods of business modeling. You can say that the Canvas model is a business plan on one sheet. Alexander Osterwalder created it and described it in the book entitled “Business Model Generation”, issued in 2010.
Customer segmentation (Customer Segment)
This is the basic element of the model. It’s best to start just by considering us with your potential clients. Why? Without customers, i.e. the demand for your product or service and the money flowing from them, there is no point in starting any action. Customers are the heart of every business model. That is why it is worth paying special attention to their analysis. It’s best to clarify your target group and divide your customers into specific groups. Which customer groups can be distinguished from this method?
1. mass client – mass clients create a large group of clients with similar needs and problems (eg in the food industry), so it is for this group of customers that you will create a uniform value proposition, distribution channels and a type of relationship.
2. niche market – by operating in a niche market your clients create a specialized and specialized segment
3. segmented market – some business models create smaller segments among their client group. Customers then differ slightly from their needs and problems. An example of this is the activity of banks that segment their clients into large groups with fewer assets and fewer, but with more capital. Both types of clients have similar needs and problems, but on a different scale
4. diversified market – such a business delivers its products or services to several groups of clients with diverse needs and problems. A good example is Amazon, known as the largest online bookstore in the world. Using his experience in the field of running a powerful website, Amazon began selling “cloud computing” services. In this way, he began to provide virtual servers and a place for data for companies from the Internet industry.
In summary, you must ask questions: who do you want to create value for? What customer segments can you distinguish? Who is your potential client?
The value proposition is the reason why customers choose one company at the expense of the other. Your product or service should bring real value to the customer’s life. This value is to meet his specific needs or solve problems. The value proposition is a collection of benefits that you offer to your customers when they buy your product or service. The ideal situation is when your offer is innovative and offers benefits that have never been seen before on the market. You can also offer products already on the market, but enriched with a certain feature or attribute. If you want to determine what value proposal your product can offer, ask yourself: what problems or needs does my product / service satisfy?
Value propositions , according to the business model Canvas, can be divided into two groups:
1. Quantitative – eg lower price, shorter service time, cost reduction
2. qualitative – eg comprehensive service, design, positive customer experience in the use of a given product, brand in the case of clothing
The channels provide the customer with knowledge about the company’s products and services, help clients evaluate the product / service, buy products or services of the company and provide after-sales support. Channels are an element that describes how the company communicates and reaches customers to provide added value. These are meeting points for companies with customers, which is why they play an important role in creating consumer experience.
In the Canvas model, the channels can be divided into five phases , but in a specific case only some of them can occur:
1. first phase – providing the customer with information about the company’s products and services so that he / she is aware of their existence
2. phase two – enabling the customer to check the added value that he / she will gain when buying a given product / service
3. third phase – enabling purchase, e.g. via the Internet or stationary in selected stores
4. phase four – product delivery – finding the best way to reach the customer
5. fifth phase – after-sales support – enabling customers to evaluate a given product / service and help in its proper operation
This element describes the type of interaction that the company makes with customers . They can be divided into:
1. personal relationship – common among business customers and contractors, where customer relationships are built up for a long time
2. direct contact – based on direct interaction with the client, eg by designated consultants / guardians for this purpose
3. automated contact – found, for example, in car washes or when renting bikes
4. co – creation – the client co- creates the value with the company, eg by issuing opinions on consumer websites or book reviews in bookstores
The choice of the type of relationship depends to a large extent on the costs to be incurred and how it integrates with the other elements of the business model. For example, it is impossible to sell a product to the mass segment, maintaining a type of personal relationship.
Revenue structure (Revenue Streams)
Osterwalder writes in his book: “If clients can be called the heart of the business model, then the revenue structure is its artery”. This item describes the way in which a company generates revenue from individual customer segments. You have to ask yourself: what value does the client really want to pay for? Mechanisms may be different, based on one-time customer purchase or multiple purchase.
Examples of ways to generate revenue:
1. product sale
2. fee charged for using a service or product
3. subscription fee, that is a fee for access to the service
5. generating financial resources from advertisements
You can combine revenue streams. For example, a car rental company may charge a fee for signing up and for using the car. We can buy a computer game physically in a box and pay extra for the possibility of playing online at other levels.