Business Models

1 Customer Segments

The Customer Segments Building Block definesthe different groups of people or organizations anenterprise 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 PropositionsThe Value Propositions Building Block describes the bundle of products and services that create value for a specific Customer SegmentThe 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

1. Awareness: raise awareness about products and services

2. Evaluation: help customers evaluate product3. Purchase: how do customers purchase?4. Delivery: deliver the value proposition to the

customer5. 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

1. Transactions from one-off customer payments

2. Recurring revenues from ongoing payments for continuous delivery of value proposition or post-purchase consumer support

Revenue Streams come from1. Asset sales – sales of a physical product2. Usage fee – minutes on phone, nights in hotel room3. Subscription fees – selling continuous access to a service4. Lending/renting/leasing – temporarily grant exclusive

access to an asset5. Licensing – give customers permission to use protected IP6. Brokerage fees – intermediation services7. 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 types1. Strategic alliances between non-competitors2. Cooperation between competitors3. Joint ventures to develop new businesses4. 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