1.1 INTRODUCTION AND KEY CONCEPTS 10.

Increase profit potential by keeping costs down, and in some

BUSINESS MODEL areas enabling you to charge a higher price for your products
• A business model is how a company creates value for itself and services
while delivering products or services for its customers 11. Group your customers by factors such as geographical
BUSINESS MODEL CANVAS location, size and type of organisation, type and lifestyle of
consumers, attitudes and behaviour
• A strategic management and entrepreneurial tool that allows
BUSINESS TO BUSINESS (B2B) SEGMENTATION
you to describe, design, challenge, invent, and pivot your
business model If you are segmenting business markets, you could divide the market
• It is a visual chart with elements describing a firms or product’s by:
value proposition, infrastructure, customers, and finances • What they do – industry sector, public or private, size and
location
• Alexander Osterwalder – initially proposed the business
model canvas • How they operate – technology, use of your products
• The BMC is a tool to quickly and easily define and • Their buying patterns – how they place orders, their size and
communicate a business idea or concept frequency
• How they behave – loyalty and attitude to risk
BUSINESS TO CUSTOMER (B2C) SEGMENTATION
If you are segmenting consumer markets, you could group customers
by:
• Location – towns, regions and countries
• Profiles – such as age, gender, income, occupation,
education, social class, attitudes and lifestyles
• Buying behavior – including product usage, brand loyalty
and the benefits they seek from the product or service
VALUE PROPOSITION
• Where your company’s product offer intersects with your
customer’s desires
• Mapping the business model of a new product or service is
one of the most important parts of building a business strategy
• Fundamental concept of the exchange of value between your
business and your customer/clients; foundation of any
1.2 BUSINESS MODEL CANVAS I business/product
CUSTOMER SEGMENTATION • Value is exchanged from a customer for money when a
• Grouping together of customers based on similarities they problem is solved or a pain is relieved for them by your
share with respect to any dimensions you deem relevant to business
your business
• Practice of dividing a customer base into groups of individuals
that are similar in specific ways, such as age, gender,
interests, and spending habits
• The key is for you to determine how to segment (or group)
your customers in a way that will have the biggest impact on
your business
• Goal-directed segmentation – only segmentation worth
pursuing
• You must first define what you want the segmentation to “do
for your business”
COMMON SEGMENTATION OBJECTIVES
1. Develop new products
2. Create segmented ads and marketing communications
3. Develop differentiated customer servicing and retention
strategies
4. Target prospects with the greatest profit potential 1.3 BUSINESS MODEL CANVAS II
5. Optimise your sales-channel mix CUSTOMER RELATIONSHIPS
ADVANTAGES OF CUSTOMER SEGMENTATION • How a business interacts with its customers (can take various
1. Identify your most and least profitable customers forms, such as in-person meetings, third-party contractors,
2. Focus your marketing on the customers who will be most likely online interactions, and more)
to buy your products or services PERSONAL ASSISTANCE
3. Avoid the markets which will not be profitable for you • Assistance in a form of employee-customer interaction
4. Build loyal relationships with customers by developing and • Such assistance is performed either during sales, after sales,
offering them the products and services they want and/or both
5. Improve customer service DEDICATED PERSONAL ASSISTANCE
6. Get ahead of the competition in specific parts of the market • The most intimate and hands on personal assistance where a
7. Use your resources wisely sales representative is assigned to handle all the needs and
8. Identify new products questions of a special set of clients
9. Improve products to meet customer needs
SELF SERVICE
• The type of relationship that translates from the indirect Example: UPS
interaction between the company and the client SUBSCRIPTION FEES
• An organisation provides the tools needed for the customers • Revenue generated by selling a continuous service
to serve themselves easily and effectively • Companies may offer access to premium
AUTOMATED SERVICES content/products/services through a subscription model, such
• A system similar to self-service but more personalised as it as monthly or yearly payments
has the ability to identify individual customers and his/her Example: Netflix
preferences LENDING/LEASING/RENTING
Example: Amazon.com making book suggestion based on the • Giving exclusive right to an asset for a particular period of time
characteristics of the previous book purchased Example: Leasing a Car
COMMUNITIES LICENSING
• Creating a community allows for a direct interaction among • Revenue generated from charging for the use of a protected
different clients and the company intellectual property
• The community platform produces a scenario where • Companies may generate revenue by licensing their products,
knowledge can be shared and problems are solved between technology, or intellectual property to other companies
different clients Example: Playing a song at a public event/venue
CO-CREATION BROKERAGE FEES
• A system similar to self-service but more personalised as it • Revenue generated from an intermediate service between 2
has the ability to identify individual customers and his/her parties
preferences
Example: Broker selling a house for commission
GET-KEEP-GROW STRATEGY OF CUSTOMER
ADVERTISING
RELATIONSHIPS
• Revenue generated from charging fees for product advertising
• You have to consider is the strategies you want to follow for
• Companies may generate revenue by selling ad space or by
customer acquisition and retention
promoting other companies’ products
Example: Apple uses data integration as a retention strategy by
making it very difficult to shift your information out of Apple's Example: Ads shown before/during YouTube clips and videos
environment - that links to the cross product patents and design DIRECT SALES
and works everything through iTunes as a platform. • Companies may sell their products/services directly to
customers through their own e-commerce platforms or brick-
Example: Kiva (the social lending platform) relies on the network and-mortar stores
effect for acquiring in new lenders, i.e. lenders engaging other FREEMIUM
lenders to be involved. This makes the community of lenders a • Companies may offer basic services or content for free, but
critical. As part of their retention strategy to keep you involved they charge a premium for more advanced features or content
provide ongoing reports on the money you lent, business success
and payback. 1.4 BUSINESS MODEL CANVAS III
CHANNELS KEY ACTIVITIES
• Channels includes entities you use to communicate your • Activities we need to complete in-order to build our value
proposition to your segments, as well as entities through which proposition for our customers and partners
you sell product and later service customers • When defining key activities, it is important to assess your
• Output – a list of important channels, linked to business in terms of:
personas/segments if they differ substantially — Distribution Channels
• Effective channels will distribute a company’s value — Customer Relationships
proposition in ways that are fast, efficient and cost effective. — Revenue Streams
• An organization can reach its clients either through its own Example: Facebook's key activities include designing and
channels (storefront), partner channels (major distributors), or developing their platform, hosting and serving data to their users,
a combination of both. and managing their advertising business.
• Avenues through which your customer comes into contact
with your business and becomes part of your sales cycle Example: Airbnb's key activities include developing their platform,
Example: Coca-Cola uses traditional advertising channels such curating and managing their hosts and properties, and managing
as television commercials and billboards to reach their customers. their payment and review systems.
KEY RESOURCES
Example: Dollar Shave Club uses a combination of social media • All the resources needed to build our value proposition for our
and video advertising to reach their customers. customers and partners
REVENUE STREAMS • Questions you need to ask of your business when uncovering
• A way a company makes income from each customer your key resources: distribution channels, customer
segment relationships, and revenue streams
• Ways in which a business earns income from its products or • The resources which you are trying to identify could be
services anything integral to the business’:
ASSET SALE — Value Proposition
• Most common type — Physical Resources (machinery)
• Selling ownership rights to a physical good — Intellectual (patents)
Example: Wal-Mart — Human (workforce)
— Financial
USAGE FEE
• Money generated from the use of a particular service
Example: Google’s key resource include their search algorithms, • Goal: To teach organizations more about their customers
their data centers, their development teams, and their hardware
(such as phones and laptops).

Example: Tesla’s key resources include their manufacturing

plants, their battery and energy storage systems, their
development teams, and their charging network.
REVENUE STREAMS
• People who are integral to your business succeeding
• In order to identify your key partners, you need to ask yourself
the following questions:
— Who are your key partners?
— Who are your suppliers?
— Which resources are you getting from your partners?
— Which activity do your partners perform
• Remember: Once you have listed out your key partners, build
a value proposition for each one of them as well
o Suppliers – a manufacturer may rely on key suppliers for WHY CREATE ONE?
raw materials, components, or finished goods • It will help you to understand the context of users and gives
o Distributors – a food producer may rely on key distributors managers an overview of the customer’s experience
to get their products to market • For the user experience designer, a customer journey map
o Strategic Alliances – a tech company may enter into helps to identify gaps, points in the customer experience that
strategic alliances with other tech firms to build new products are disjointed or painful
or access new markets — Gaps between devices, when a user moves from one
o Joint Ventures – a biotech company may form a joint device to another
venture with a research institute to develop new drugs — Gaps between departments, where the user might get
o Co-Creators – a social medial platform may collaborate with frustrated
content creators to generate user engagement and increase — Gaps between channels (for example, where the
user base experience of going from social media to the website
COST STRUCTURE could be better)
• Refers to the expenses that a business incurs while operating • A customer journey map puts the user front and centre in the
its business model organization’s thinking
• Complete picture of all the costs involved in running the HOW TO PRESENT YOUR CUSTOMER JOURNEY MAP?
business and producing, marketing, and delivering the • There is no right or wrong way to produce a customer journey
products or services map.
• Describes the most important monetary consequences while • Goal: Ensure that the user’s story remains front and centre in
operating under different business models people’s minds
o Fixed Costs – rent, salaries, insurance, and other expenses • The graphic is not meant to map every aspect of the
that don't change much from month to month customer’s experience. Rather, it should tell a simple story to
o Variable Costs – materials, labor, and other costs that vary focus people’s attention on the customer’s needs.
with the level of production or sales
o Economies of Scale – as the business grows, the cost per
unit of output decreases
o Outsourcing – companies may outsource certain functions
to reduce their costs, such as IT support, payroll processing,
or customer service, etc.
o Marketing and Advertising – the cost of promoting the
product, which may include social media ads, SEO, PPC, or
influencer marketing
COST-DRIVEN
• This business model focuses on minimizing all costs and
having no frills
Example: SouthWest
VALUE-DRIVEN
• Less concerned with cost, this business model focuses on
creating value for their products and services
Example: Louis Vuitton, Rolex

1.5 CUSTOMER JOURNEY MAP

INTRODUCTION
• A customer journey map tells the story of the customer’s
experience starting from the initial contact, right through the
process of engagement and eventually into a long-term
relationship