There are nine basic components in the business model canvas: the customer value proposition, customer segments, channels, customer relationships, revenue sources, key resources, key partners, key activities, and cost structure. The first component of a business model are customer segments. This defines the different groups of people or organizations that a company plans to reach. Without profitable customers, how can a company succeed? When analyzing customer segments, it's important to group people into several segments to better meet their needs.
Groups can be small or large, depending on their needs, behaviors, location, or common attributes. With these groups, you can better understand how to properly communicate with them and find out what works best for any demographic group. Once you have a clear idea of who you're providing a service to, you can take the necessary steps to create value for them. The second component is based on the way your company groups products and services to meet the needs of each customer segment.
A value proposition creates unique value for customers through a combination of elements that can be qualitative or quantitative. This could include price, speed, design, or customer experience. What value do we offer the customer? What makes a person choose AT&T instead of Verizon Wireless or Sprint? Maybe they'll decide to choose Virgin Mobile. Now, think about how each company offers value to its customer segments.
Verizon could offer value to customers looking for the best wireless service at an affordable price. They could also offer an excellent package with the DISH network for a user who doesn't want to pay two different bills. What about the customer who lives in the city with excellent coverage and is looking for the best price? That could be exactly what Virgin Mobile offers at a low cost and without a contract. It is due to the value proposition that a person wants to choose one service over another.
Don't just offer what everyone else offers with lower prices, think innovatively. Startups are often successful because of innovation and disruption. Think about how you can fill gaps in customer needs and problems that other companies in your industry aren't meeting. Through what channels can we direct customers to buy our products and services? With these reasons, classify which objectives are more important to your company than others.
From there, decide what problems you might encounter with these objectives and what is the best way to communicate with your customer segments on each objective. This cost structure focuses on minimizing costs wherever possible. This process can include high automation, extensive outsourcing, low-priced value propositions, and the lowest possible cost structure. Zara adds new clothes and designs to its collections every 2-3 weeks, both in its stores and online.
It keeps the brand up to date, fresh and modern, while maintaining its significant average price. Zara demonstrates its aesthetic evolution to customers through its flagship stores. The recent inauguration of its flagship at Hudson Yards in New York City is a great example of this. Customers opt for its vivid and minimalist design, which offers them an experience aligned with the brand's deeper ecological values.
This customer-centered approach through fluid communication channels has saved them thousands of dollars in marketing, strengthened their brand and created a loyal customer base. Now, this can be automated and transactional, like the big e-commerce brands Amazon or Alibaba. Or, it could be on the opposite end of the scale and require a more personal relationship than you would normally have with a local bank or bike shop. Yes, you have the initial transactional point of contact in the store or on the Internet, something relatively impersonal and, for many, the only interaction they will have with the brand.
However, customers (especially in the fashion industry) are encouraged to continue interacting with a brand through social media platforms. As we mentioned before when talking about channels, Zara has a very effective communication system. Not only can people get in touch with the brand instantly, but they can also interact with the new publications, images and collections uploaded to social networks. This personal approach to building customer relationships can, in some cases, lead to the natural growth of brand ambassadors and communities.
An attachment can also develop between customers and certain garments or accessories from one of their collections. Sentimental attachment to these products also creates another potential form of brand loyalty. An extensive retail network of physical stores, combined with a strong brand, helps to mitigate these factors and to strengthen ongoing marketing activities and communication efforts. Most modern business models now require brands to develop and work with several key partners to get the most out of their business model.
A great example of a strategic partnership would be between ThePowerMBA and Forbes. In exchange for the exposure of our brand to the magazine's global audience, we offer experience and content on high-level business education programs. This allowed them to focus on their sales, marketing and distribution channels to create a better brand experience for their customers. The Business Model Canvas is a strategic management template that is used to develop new business models and document existing ones.
It provides a visual graphic with elements that describe the value proposition, infrastructure, customers and finances of a company or product, helping companies align their activities by illustrating possible compensations. The first block of the Business Canvas model is to understand who are the most important customers to whom you offer value. Acquisition of resources and activities It is rare for a company to have access to all the resources and activities needed to create the most value for its customers. If you're an entrepreneur or new business owner who works alone and you don't have a team to share your ideas, don't worry.
Without this vision, they cannot scale, obtain marginal benefits, lose opportunities, struggle to innovate and end up running “just another business”. There isn't a single company without its customers, so customer segments are the best building block to start drawing the canvas of your business model. Business Model Canvas offers entrepreneurs, business owners and strategists a tool to analyze, structure and develop a business, without losing sight of the big picture. The business model canvas allows us to carry out a high-level analysis without going deep or getting lost in the details.
An interruption in any of these activities, such as a poor relationship with a major supplier, will have serious consequences for the company. This explains why this algorithm carefully selected more than 80% of all the content that is broadcast on Netflix, making it a key resource for its business model. Simply draw the 9 building blocks on a blank canvas, fill them in as each concept relates to your business and hang them in a place that everyone can see. It's important to realize which assets are most cost-effective to outsource and to rely on other companies for resources that you couldn't find on your own.