market, value and business model (v.2015-2016)

Market, Value and Business Model

Frieda Brioschi / Emma Tracanella [email protected] / [email protected]

IED, 22 Mar 2016Lesson 4/2016

mailto:[email protected]

mailto:[email protected]

4. Market, Value and Business Model

Course program

1. Start-ups

2. Ideas in context

3. From ideas to projects


2


ReassessLook at Your Product or Service with a Fresh Light

• There are enough potential customers within your target audience?

• Will your target market benefit from your product or service?

• Will this target market see a true need for it?

• Can your target market afford your product or service? how frequently?

• Can you reach your market with your message?

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4. Market and Value Analysis

Kinds B2B B2C

http://plantostart.com/how-to-define-target-market-product/4


B2B

Your business model is to make a product or service and charge other companies for using it.

The advantage of this model is that companies have money and they are willing to spend it on a product/service, which improves their daily operations, helps them sell more or communicate better.

Google, Cisco, MySQL and others are using this model.

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B2C

Your business model is to make a product or service and charge consumers for using it. Even though most people think this is a very profitable model, most often companies need to have at least hundreds of thousands of users in order to earn enough money to maintain and expand the business.

This model is being used by Starbucks, McDonald’s, Amazon and others.

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All you need to know about costs

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Costs

In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore.

Two kind of costs:

• Direct costs

• Indirect costs

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Direct costsCosts that can be identified specifically with a particular project or activity, or that can be directly assigned to them with a high degree of accuracy.

Direct costs generally includes:

• Salary and wages

• Material, supplies and equipment purchased directly for the specific project

• Communication and travels costs

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Indirect costsCosts that are not classified as direct

Indirect costs generally includes:

• Salary of administrative staff providing normal support activities

• Office supplies, computers

• Local telephone calls

• Memberships

=> Overhead

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BykesDirect costs:

• Metals

• Wages for assembly

Indirect costs:

• Abrasive, glue, pink

• Rent

• Insurance

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Actual cost of doing business

Before you can price a product or a service, you need to know your cost to produce it.

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Photographer

• How much charge a photo?

• Minimum fee?

• No costs?

A useful tool: the Cost of Business calculator. It list annual expenses, but it depends on your inputs which can be hard to estimate.

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Cost of doing business calculator/1

Expenses

• Office and/or studio (rent, mortgage payments, taxes, insurances, home maintenance, …)

• Phone (cell and/or landline and faxes) – remember to include also the cost of the phone itself

• Photo/Video/Audio Equipment and Accessories

• Equipment services and Repairs

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https://nppa.org/calculator



• Computer(s) (harware and software)

• Broadband internet

• Web hosting/Portal services

• Vehicle Expenses (Lease, Insurance, Maintenance)

• Office supplies and Furnitures

• Postage and Shipping

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• Professional Development

• Advertising and Promotion

• Subscription and Dues

• Equipment and Business Insurance

• Health Insurance/Deductibles/Copays

• Legal and Accounting Services

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• Taxes and Licenses (Business and Self-Employment)

• Office Assistance (Payroll, Answering Service, Intern, etc.)

• Utilities

• Travel and Entertainment

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• Income factors

• Desired Annual Salary

• Non-assigment Income

• Number of Days You Can Bill Per Year

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4. Market and Value Analysis

Cost of doing business calculator /6

https://nppa.org/calculator19


Perceived Value

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Value

The extent to which a good or service is perceived by its customer to meet his or her needs or wants, measured by the customer’s willingness to pay for it

It depends more on the customer’s perception of the worth of the product than on its intrinsict value

How do we create the perception of value when we talk to our customers?

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4. Market and Value4. Market, Value and Business Model

Gillette Fusion

• Amazon price: 19.25$

• 8 cartridges

• Cost/cartridge: 2.41$

• You need the razor (11.49$)

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4. Market and Value4. Market, Value and Business Model

Gillette Custom Plus Disposable

• Amazon’s price: 20.97$

• 30 razors

• Cost/razor: 0.70$

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4. Market, Value and Business Model4. Market, Value and Business Model

Gillette Fusion vs. Custom Plus

• Prices

• 19.25$ vs. 20.97$

• 8 cartridge vs. 30 razors

• Cost in use

• 2.41$ vs. 0.70$

• Additional perceived value justify the additional cost in use

• Durability of blade

• Comfort

• Less irritation

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Gillette idea

By providing something at below the market price (the razor), you can create a market for a secondary product (the blade) upon which you make ongoing profits.

The mark-up on the secondary products is disproportionate relative to their cost so were highly profitable for the manufacturer.

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3M Scotch® Tape

• Amazon’s price: $1.70

• Lenght: 650 inch

• Cost/inch: $0.003

• Cost to hang a poster: $0.01

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3M Scotch® Command Strips

• Amazon’s price: $2.70

• 12 strips

• Cost/strips: $0.08$

• Cost to hang a poster: $0.32

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Tape vs. 3M Scotch® Strips• Price

• $1.70 vs. $2.70

• Using Scotch Tape, the user can hang 75 posters vs. 3 for the command strips

• Cost in use

• $0.01 vs. $0.32 to hang 1 poster

• Additional perceived value justify the additional cost in use

• Less damage to wall

• Simplicity to remove

• Durability

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CocaCola

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Nespresso

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What else?


A-Style• Logo

• 1989 stikers on the walls of Milano and Roma

• Patented by Italian designer Marco Bruns

• Clothing Brand

• Italian brand founded in 1999

• A-style has used street-level buzz marketing to grow to international prominence

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Lacoste

• Founded in 1933 by the tennis man Rene Lacoste

• At the end of 1990 the company change its strategy: marketing, retails outlets, product range, ...

• Sale of t-shirts in limited series

• Re-establishing Lacoste as “a distinctive premium brand”

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Business Model

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Business Model /1

A business model describes the rationale of how an organization creates, delivers, and captures value (economic, social, cultural, or other forms of value).

The process of business model construction is part of business strategy.

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Business Model /2

It's a way to represent core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies.

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Business Model /3

The essence of a business model is that it defines the manner by which the business enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit: it thus reflects management’s hypothesis about what customers want, how they want it, and how an enterprise can organize to best meet those needs, get paid for doing so, and make a profit.

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Business Model /3The essence of a business model is that it defines the manner by which the business enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit: it thus reflects management’s hypothesis about what customers want, how they want it, and how an enterprise can organize to best meet those needs, get paid for doing so, and make a profit.

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Business model canvas

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Business model canvas 1 – Value proposition

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1


1 – Value propositionThe collection of products and services a business offers to meet the needs of its customers. It's what distinguishes itself from its competitors.

• It provides value through various elements:

• newness,

• performance,

• customization,

• "getting the job done",

• design,

• brand/status,

• price,

• cost /risk reduction,

• ecc.

40http://en.wikipedia.org/wiki/Business_Model_Canvas


Build the Value Proposition• Market: for which market is the value proposition being created?

• Value/customer experience: what does the market value most? The effectiveness of the value proposition depends on gathering real customer, prospect or employee feedback.

• Offering: which products or services are being offered?

• Benefits: what are the benefits the market will derive from the product

• Alternative e differentiation: which alternative options does the market have to the product or service?

• Proof: what evidence is there to substantiate your value proposition?

41http://en.wikipedia.org/wiki/Value_proposition


Business model canvas 2 – Customer segments

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2


2 – Customer segmentsA company must identify which customers it tries to serve. Various set of customers can be segmented based on the different needs and attributes to ensure appropriate implementation of corporate strategy meets the characteristics of selected group of clients.

The different types of customer segments include: • Mass Market • Niche Market • Segmented • Diversify (multiple customer segments with different needs

and characteristics)



Business model canvas 3 - Channels

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3


3 - Channels

A company can deliver its value proposition to its targeted customers through different channels. Effective channels will distribute a company’s value proposition in ways that are fast, efficient and cost effective.



Business model canvas 4 – Customer relationship

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4


4 – Customer relationshipTo ensure the survival and success of any businesses, companies must identify the type of relationship they want to create with their customer segments.

• Personal Assistance • Dedicated Personal Assistance • Self Service

Automated Services • Communities • Co-creation



Business model canvas 5 – Revenue streams

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5


5 – Revenue streamsThe way a company makes income from each customer segment. • Asset Sale • Usage Fee • Subscription Fees • Lending/Leasing/Renting • Licensing • Advertising



Business model canvas 6 – Key resources

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6


6 – Key resources

Are the assets required to offer and deliver value proposition to the customer.

• Physical • Intellectual • Human • Financial

51http://en.wikipedia.org/wiki/Key_resources_(business_model)


Business model canvas 7 – Key partner

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7


7 – Key partnerIn order to optimize operations and reduce risks of a business model, organization usually cultivate buyer- supplier relationships so they can focus on their core activity.

Complementary business alliances also can be considered through joint ventures, strategic alliances between competitors or non-competitors.



Business model canvas 8 – Key activities

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8


8 – Key activities

The most important activities in executing a company's value proposition.



Business model canvas 9 – Cost structure

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9


9 – Cost structureThis describes the most important monetary consequences while operating under different business models.

• Fixed Costs• Variable Costs • Economies of Scale • Economies of Scope


market, value and business model (v.2015-2016)

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