Chapter 2: Business Model Course Facilitator: Shije Bidaure

Business Models: Types, Examples and How to

Design One
Written by Randa Kriss, Rosalie Murphy and Edited by Ryan Lane Last updated on July 15, 2022

What is a business model?

A business model is a plan for generating revenue. A business model spells out how a business
will generate revenue.
A business model is an outline for how company plans to make money. In general, a business
model explains four things:
• What product or service a company will sell.
• How it intends to market that product or service.
• What kind of expenses the company will face.
• How the company expects to turn a profit.

Types of business models and examples

Because there are many different businesses, the list of business model types is constantly
changing.

12 common business model options, which can be customized for a specific company or
industry.
A “disruptive business model” innovates on these basic structures. And lots of businesses earn
money from multiple revenue streams, meaning their business models include several of these
types.

1. Retailer model - A retailer is the last link in the supply chain. These businesses purchase
goods from manufacturers or distributors and then sell them to customers for a price that
will both cover expenses and turn a profit. Retailers may specialize in a particular niche or
carry a range of products.
Examples: Many of the businesses you patronize day to day are probably retailers, from
grocery stores to pharmacies to florists.

2. Manufacturer model - A manufacturer converts raw materials into products. Then, they
sell those products to distributors, retailers or directly to consumers.
Example: Manufacturing businesses build everything from furniture to pharmaceuticals.
They can be companies of any size and in almost any industry.

3. Fee-for-service model - A fee-for-service is just what it sounds like: A business charges

a set fee for a specific service. A business set up on this model can increase its earnings
by doing work for additional clients or by raising its rates. Depending on what type of
work the business does, it might charge an hourly rate, monthly retainer or commission. It
may also create a fee schedule with a set rate for different types of services.

Page 1 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

Example: Hairstylists, accountants and real estate agents all charge fees for their
specialized services. They may work independently or be affiliated with a salon, office or
brokerage that provides resources in exchange for a percentage of their earnings.

4. Subscription model - A subscription business model can be applied to both traditional

brick-and-mortar stores and e-commerce businesses alike. Essentially, the customer
makes a recurring payment for ongoing access to a service or product. A company may
directly ship its product in the mail, or you may pay a fee to use its services.
Example: Many local farms offer farm shares or community-supported agriculture
subscriptions, where clients get access to fresh produce on an ongoing basis while crops
are in season.

5. Bundling model - The bundling business model involves companies selling two or more
products together as a single unit, often for a lower price than they would charge selling
the products separately. This type of business model allows companies to generate a
greater volume of sales and perhaps market products or services that are more difficult to
sell. However, profit margins often shrink since businesses sell the products for less.
Example: Many class-based fitness centers and gyms use a type of bundling model,
where clients pay fees for a certain number of classes per month. The more classes a
client buys, the cheaper each individual class becomes, even though their total spend
increases.

6. Product-as-a-service model - Product-as-a-service businesses charge customers to use

physical products. They may charge a subscription fee, a per-use or per-mile fee, or a
combination of both.
Example: Bike rental companies offer products as a service. Customers might pay an
annual membership fee plus a per-mile fee each time they ride, or they might have the
option to rent a bike for the day.

7. Leasing model - Under a leasing business model, a company buys a product from a
seller. That company then allows another company to use the product they purchased for
a recurring fee. Leasing agreements are usually most efficient with big-ticket items like
manufacturing and medical equipment, but some companies lease smaller items too.
Leasing is similar to the product-as-a-service business model, but leases usually have
longer terms — days or weeks compared to minutes or hours. Leasing companies are
unlikely to charge a subscription or membership fee for access to their products.
Example: A business that rents machinery like backhoes, augers and dozers to
individuals for their home construction projects is using a leasing business model.

8. Franchise model - A franchise is an established business blueprint that a franchisee

purchases and reproduces. The franchiser, or original owner, works with the franchisee to
help them with financing, marketing and other business operations to ensure the business
functions as it should. In return, the franchisee pays the franchiser a percentage of the
profits.
Example: 7/11, Mercury Drug Store and Ace Hardware are all examples of the franchise
model.

Page 2 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

9. Distribution model - A company operating as a distributor is responsible for taking

manufactured goods to the market. To make a profit, distributors buy the product in bulk
and sell it to retailers at a higher price.
Example: A chain of beauty salons that buys supplies in bulk and sells some of them to
other salons is using a distribution business model, though they may have other revenue
streams too.

10. Freemium model - In a freemium model, customers can use parts of a product or
service for free but must pay for access to more advanced features. This model is
common in the software-as-a-service space — Spotify, for instance, has a free ad-
supported tier, but subscribers get to listen ad-free.
Example: Some news and internet publishing companies use a freemium model, where
some or all content is free but premium content or special features are paywalled.

11. Advertising or affiliate marketing model - The advertising and affiliate marketing
business models leverage a business’s audience as an asset. With advertising, a business
sell its audience’s attention. Advertisers pay for space — whether it’s in the pages of a
magazine or on the side of a vehicle — with rates usually determined by the size of the
business's audience. With affiliate marketing, a business earns a commission when a
member of its audience buys a product or service it recommends. If you’ve ever heard a
podcaster encourage you to use a specific offer code when you buy a product they’re
promoting, affiliate marketing is probably part of the podcaster's business model.
Example: A fashion blogger who sells ads on their podcast or website is using an
advertising model. If they post outfit-of-the-day photos with links that viewers can click to
“get the look,” they might also earn an affiliate marketing commission on those purchases.

12. Razor blades model - To understand the razor blades model, you can simply look to
your local drugstore. You’ll notice that replacement razor blades may cost more than
razors themselves. Companies offer a cheaper razor with the understanding that you’ll
continue to purchase more expensive accessories — in this case, razor blades — in the
future. In addition to the traditional razor blades model, you'll also see companies use the
reverse razor blades model, in which they offer customers a high-margin product and then
promote the sales of lower-margin products that accompany that initial product.
Examples: This business model is most common among companies that sell physical
products. Printers that require a specific type of ink or water pitchers that require a
specific type of filter are examples of the razor blades model.

How to design a business model

There is no one-size-fits-all business model. Many businesses include elements of several models
— the yoga studio that bundles classes may also sell retail products in its lobby, for instance.
To design your own business model, start by answering the following questions:
• How will you make money? Outline one or several revenue streams, which are the
different ways your company plans to generate earnings.
• What are your key metrics? Having a profitable business is great, but it usually doesn’t
happen right away. You’ll want to identify other ways your company will measure its

Page 3 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

success, like how much it costs to acquire a customer or how many repeat customers
you'll have.
• Who’s your target customer? Your product or service should solve a specific problem
for a specific group of consumers. Your business model should consider how big your
potential customer base is.
• How will your product or service benefit those customers? Your business model
should have a clear value proposition, which is what makes it uniquely attractive to
customers. Ideally, your value proposition should be specialized enough that competitors
can’t easily copy it.
• What expenses will you have? Make a list of the fixed and variable expenses your
business requires to function, and then figure out what prices you need to charge so your
revenue will exceed those costs. Keep in mind the costs associated with the physical,
financial, and intellectual assets of your company.

From the outset, you may not have a clear idea of what each of these components will
look like for your business. Writing a business plan can help them become more evident.

It may also be helpful to research other businesses that are similar to yours and see how
they've structured their operations. This market research may reveal things you want to
imitate, as well as gaps in the market that your business can fill.

Your business model will inform your operations and vice versa. As your business grows,
you'll be able to change and adapt your strategy based on your learnings.

Page 4 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

What is a Business Model Canvas?

Paul Hersztowski
Head of Studio| 26 March 2020

Business Model Canvas Definition

A business model canvas is a visual representation of a business model, highlighting all key
strategic factors. In other words, it is a general, holistic and complete overview of the company’s
workings, customers, revenue streams and more.

The actual business model canvas definition was first proposed by Alexander Osterwalder, a
Swiss entrepreneur, and consultant, but has gone to be used around the world.

What’s the Purpose of a Business Model Canvas?

Other than providing a general overview of the business model, these canvases enable
companies to visualize and analyze their strategy. This includes updating the model as the
company evolves, such as changes in the market, new streams or expansions.

The business model canvas provides the central, common source of knowledge through which
each department can add their unique input from their respective domains.

It is a template that defines the business - specifically, how each section interacts with the
others. For example, understanding the value proposition, the target customer and the channels
through which they are engaged all need to be analyzed together, not just in individual vacuums.

Alternatively, the business model canvas can be used by organizations to plan, assess or execute
new models altogether. In this way, the canvas highlights the key essentials and ensures that no
vital factors are forgotten. If the canvas is incomplete, then the respective strategy is also
incomplete.

Elements of a Business Model Canvas

Key Partnerships
Very few companies survive on their own. Identifying and preparing key partnerships is essential
for long term survivability. Here are the primary partnerships that you’ll typically need to
consider.

• Distributors: how will your business sell to customers? Whether its using online stores,
sales agents or other companies, you need some form of distribution.
• “Competition”: sometimes two businesses, that would otherwise be competitors, can
join forces to take on larger markets. This works where this is enough potential gains that
a joint venture makes more fiscal sense: there isn’t a clear risk of one siding gaining at
the expense of the others. For example, smaller organizations can often team up to
Page 5 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

provide a larger, holistic offer to users, or to even attend events that are outside of either
side’s budget.
• Suppliers: Similar to distribution, you also need suppliers for everything from raw
materials to software development. If there’s something you need and can’t produce in-
house, then you need to identify trusted suppliers.
• Existing customers: Perhaps if you have existing clients, you can offer some
recommendation rewards, or a commission-based system, to spread awareness?

Like everything else, much of this will be subject to change. As the business grows, you might
find you no longer need certain partnerships, and likewise need to move to others. All of this
should be noted in the business model canvas.

Key Activities
Similar to the last section, what do you need to do to produce your value proposition and ensure
it succeeds? This section includes the key activities needed to make your model effective and
successfully connect with customers.
This can include initial investment, such as finding a development company, or even marketing
and advertising to generate that initial awareness. This section should take everything into
account, including the impact each has on the overall business, to understand the absolute
essentials and recommended extras.

Key Resources
Every organization runs on resources: the essential assets in running the business and providing
the value (defined earlier) to customers. Like the other elements, this can come in many forms.

• Human resources: if you’re providing personalized value or have a model that requires a
lot of staff, the cost and training of employees need to be considered.
• Financial: how much investment is required to run and maintain a business before it
makes a profit? The more money is needed upfront, the bigger the burden to generate
ROI.
• Physical: expanding your presence, opening offices or buying physical space is also an
asset that needs to be considered. This is mostly true for organizations that need
prominent positions, such as high street retailers or hotels. For a lot of businesses, the
push into a digital landscape is quickly reducing the strain of this particular resource.
• Intellectual property: this can include everything needed to develop your IP (such as
an app), as well as develop and maintain it. For example, subscriptions and licenses
survive by ensuring customers can not use the service without your business, as you still
hold the intellectual property rights.

Through these factors, you should identify what is currently available and what is needed to
succeed. Much of this will be defined in your previous channels; this is where you focus on what
those channels need to succeed - with an end goal of creating a sustainable business model.

Page 6 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

Value Proposition

A company’s value proposition is the sum of its various products and services, specifically in
regards to how it uniquely stands out amongst the competition. In layman's terms: what is the
unique factor that makes this business better than another?
The creator of the business model canvas, Osterwalder has also stated that organizations need
to offer something unique and, what’s more, this needs to be immediately discernible from the
competition.

The value proposition can be as simple as being cheaper, faster, more efficient or more readily
available than the competition. However, we can roughly place all values in two broad
categories:

• Quantitative. This refers to benefits that can be easily counted; from a customer’s point
of view, this means they can be easily compared to the competition. Examples of this can
include pricing or speed. Users may very well choose your service because it's cheaper or
quicker.
• Qualitative. This refers to abstract concepts such as value or experience - those that
can’t be readily measured by hard numbers, but nonetheless, give a strong emotional
response to your audience. Examples of this can include various characteristics, such as
using local products, being eco-friendly or having a personal, customer-centric approach
that competitors lack.

Another way of expressing the core value is by asking what you want customers to remember.
When it comes to recommending your business to others, what’s the essential benefit that
people should mention? This is the value that your organization needs to drive - so it needs to be
on the canvas.

Of course, your value also needs to be maintained. For instance, if your value lies in being the
only service in a respective region, what will happen when a larger competitor eventually decides
to move in? The business model canvas should highlight these weaknesses, in order to better
plan ahead.

Customer Relationships
This section covers your relationship with each customer. This includes how customers first came
to use your business, how you kept these initial customers and, ultimately, how the business will
grow its audience.
There are a number of factors to consider here, especially in regards to the type of relationship
you want:

• Personal Assistance. In these forms, customer service is essential. Clients want a

personal approach from your company and, in turn, you offer a direct approach tailored to
their specific needs. This often involves having employees attached to specific customers
(such as a sales or business development position) both before and after the sale process
itself. This is something a bank might have for its business clients, for example. How

Page 7 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

dedicated this exact relationship depends on the nature of your service, as well as your
customers.
• Automation and Self-Service. On the other hand, you might not want to have a direct,
personal relationship at all. This can often be found in e-commerce stores, for example;
customers just want to browse and shop at will, without speaking to anyone. Automation
can enhance this through personalization, without the customer being aware, such as
Netflix’s recommended viewing.
• Communities. Alternatively, if your target audience is a particular niche, segment or
region, you might want to establish a community. In this approach, your business model
brings people of shared interests together, to facilitate more actions.

Channels
How will you and your customer interact? Once you define your customer, as well as flesh out
your unique value, this will impact what channels you use.

For example, if your audience is busy and on the go, a mobile-facing service will be essential.
Likewise, if you’re targeting specific locations, perhaps a physical presence is also needed?
What’s important here is that you consider the many touchpoints that your customers may want
and highlight the beneficial ones.

However, it should be noted that channels can adapt over time and this is one area where the
business model canvas is likely to be updated.
For example, when Domino’s first started, there were only a handful of options, namely dialing
the store or visiting in-person. The invention of the internet and mobile apps quickly changed
this and now there are over 10 different ways, including smart TVs, slack integration and voice
commands.

Yet the decision to expand with new digital products didn’t just happen on a whim; the business
model canvas considered the customer needs (efficiency and a desire for less effort) with their
value proposition (making food ordering and delivery as easy as possible) to define new
channels.

Customer Segments
Whether its B2B or B2C, all businesses have customers. These are the people or organizations
that buy your products, use your service or are otherwise essential for creating a profit.

Customers can be defined through various means but it’s important to focus on the core
customers first, then assess less critical or potential future clients. The canvas should assess,
among other factors:

• Current and future needs: what are customers looking for, and what might they be
looking for in the immediate future?
• General demographic: age range, location, interests, etc
• Likes, dislikes and pain points: what do your customers enjoy and what puts them
off? Knowing this will help understand how best to approach them.
Page 8 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

• Relations with other segments: this is important if your business relies on multiple
groups interacting. Airbnb, for example, has both property owners and guests - the
business strategy only works if both are satisfied.

Additionally, you can list additional segments that may utilize the product or service in the future.
This will highlight future directions the strategy can go in, once success has been gained with the
core, primary audience(s).

Cost Structure
Finally, as far as business model canvas elements go, you need to define all potential costs. After
all, you need to know how much you’ve spent to know when you’re generating profit. The cost
structure takes both existing and future costs into account:

• Fixed costs are the easiest to determine as they have a singular price or a repetitive
price that doesn’t change. Rent is a good example.
• Variable costs, on the other hand, can vary and their high peaks need to be accounted
for. Factors such as temperature can often impact businesses that need to maintain a
certain heat or humidity - they may spend more (or less) in the warmer months.
• Economies of scale and scope, similarly, refer to decreasing costs as the business
expands. This is because larger production can introduce better efficiencies (scale) while
creating new partnerships and improving internal processes, as a result, can improve the
wider organization (scope). For example, you might rely on third-party providers for
immediate support, such as packaging, but move this in-house when it becomes cost-
efficient to do so.

It’s important to understand these variables so that the business model canvas provides a
realistic view of costs right now, as well as where the company aims to be short.

Revenue Streams
Ultimately, a company has to turn a profit. On the business model canvas, this is represented by
revenue streams: the various channels with which income can be generated.

Most common revenue streams to consider:

• Asset or goods sales: this is one of the oldest streams. By selling goods, the business
generates revenue at each transaction.
• Subscription: If your providing an ongoing service or rented out products, then these fall
under subscription models; your customers pay on a regular schedule (such as per month
or year) as long as they are using your business.
• Leasing or lending: This is similar to the subscription, but differs in that it’s for a
predefined period. Car rentals, for instance, often do this, as customers define the rental
period before purchasing. Newer models, however, try to challenge this status quo by
offering a more subscription-based service.
• Licensing: This is where the business sells licenses to other companies or individuals to
use the property. It’s similar to sale, but differs in that you still own the intellectual
property; the user can’t resell it.
Page 9 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

• White labeling: Similar to licensing, white labeling is where you provide a product or
service that businesses can relabel as their own. This is typically done as a subscription or
one-off license purchase, so it can be considered an additional variant of the above.
• Advertising: Perhaps your model is designed to attract users, but currently drive revenue
from advertising opportunities? Social media networks are the most famous example of
this; they don’t make money through purchases or subscriptions, but through charging
advertisers to benefit from this network.

It’s important to note that these revenue streams are not set in stone - they will adapt and
evolve as the market changes. As a business, you should regularly return to the canvas to make
sure each stream is as effective as it can be. This includes different pricing plans and options
(especially if you have multiple streams) or adding new streams, such as with Domino’s, for
example.

Benefits of a Business Model Canvas

Visuals at a glance
Thanks for having everything in one place, people in the company can gain an immediate
understanding of the business model as a whole. It’s easily interpretable and offers a single
source of truth for the wider strategy.

Quick Improvements & Iterations

By having everything connected, organizations can see how every part of the business works
with the wider structure. This is where people can highlight flaws or identify solutions. By
comparing all the factors, such as customers, revenue streams and costs, the company can begin
to make strategic improvements it might not have otherwise identified before.

Shareable
Nobody wants to go through a 2-hour presentation everything they want to go through the
business strategy. The business model canvas definition is a better way to show this plan. It can
be easily shown to new people to help bring them up to speed, while simple changes don’t
require extensive explanations; people can see how they fit onto the updated canvas.

What Is a Business Model Canvas?

A business model canvas is an effective way to bring all the elements of your strategy together,
from initial costs to customer & revenue streams. Doing so helps bring in all departments in
company and allows for a broad, but deep, an overview of the intended business model.
Whether its propose updates to an existing strategy or developing an entirely new company, the
canvas is one of the best ways to get an initial overview and assess directions as early as
possible.

Page 10 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

Business Model Canvas

Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
Who are our Key Partners? Who What Key Activities do our What value do we deliver to the What type of relationship does For whom are we creating
are our key suppliers? Which Value Propositions require? Our customer? Which one of our each of our Customer Segments value? Who are our most
Key Resources are we acquiring Distribution Channels? customer’s problems are we expect us to establish and important customers? Is our
from partners? Which Key Customer Relationships? helping to solve? What bundles maintain with them? Which ones customer base a Mass Market,
Activities do partners perform? Revenue streams? of products and services are we have we established? How are Niche Market, Segmented,
offering to each Customer they integrated with the rest of Diversified, Multi-sided Platform
MOTIVATIONS FOR CATEGORIES: Segment? Which customer our business model? How costly
PARTNERSHIPS: Optimization Production, Problem Solving, needs are we satisfying? are they?
and economy, Reduction of risk Platform/Network
and uncertainty, Acquisition of CHARACTERISTICS:
particular resources and Newness, Performance,
activities Customization, “Getting the Job
Key Resources Done”, Design, Brand/Status, Channels
What Key Resources do our Price, Cost Reduction, Risk Through which Channels do our
Value Propositions require? Our Reduction, Accessibility, Customer Segments want to be
Distribution Channels? Convenience/Usability reached? How are we reaching
Customer Relationships them now? How are our
Revenue Streams? Channels integrated? Which
ones work best? Which ones
TYPES OF RESOURCES: are most cost-efficient? How are
Physical, Intellectual (brand we integrating them with
patents, copyrights, data), customer routines?
Human, Financial

Cost Structure Revenue Streams

What are the most important costs inherent in our business model? Which Key For what value are our customers really willing to pay? For what do they currently
Resources are most expensive? Which Key Activities are most expensive? pay? How are they currently paying? How would they prefer to pay? How much does
each Revenue Stream contribute to overall revenues?
IS YOUR BUSINESS MORE: Cost Driven (leanest cost structure, low price value
proposition, maximum automation, extensive outsourcing), Value Driven (focused on TYPES: Asset sale, Usage fee, Subscription Fees, Lending/Renting/Leasing,
value creation, premium value proposition). Licensing, Brokerage fees, Advertising
FIXED PRICING: List Price, Product feature dependent, Customer segment
SAMPLE CHARACTERISTICS: Fixed Costs (salaries, rents, utilities), Variable costs, dependent, Volume dependent
Economies of scale, Economies of scope DYNAMIC PRICING: Negotiation (bargaining), Yield Management, Real-time-Market

Designed by: The Business Model Foundry (www.businessmodelgeneration.com/canvas). Word implementation by: Neos Chronos Limited (https://neoschronos.com). License: CC BY-SA 3.0

Page 11 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

What is the Value Proposition Canvas?

POSTED ON JANUARY 16, 2021 BY DANIEL PEREIRA
https://businessmodelanalyst.com/value -proposition-canvas/

Value Proposition Canvas is a business model tool that helps you make sure that a company’s
product or service is positioned around customers’ values and needs.

The tool has been created by Alexander Osterwalder, Yves Pigneur, and Alan Smith. The same
authors of the Business Model Canvas, aiming to map the value perceived by customers.

The primary purpose is, to create a fit between the product and market. For this to happen, the
Value Proposition Canvas explores more deeply these two (out of the nine) blocks from the
Business Model Canvas: Customer Segment and Value Proposition.

What are the advantages of using the Value Proposition Canvas?

• Understanding the customer, with their needs and expectations;
• Developing a product in accordance with what your customer need and want;
• Comparing a product you already have with the user’s need;
• Finding your product-market fit;
• Avoiding producing something nobody wants,
• Saving time and money.

What is Value Proposition Canvas like?

Value Proposition Canvas is made up of only two blocks – Value Proposition and Customer
Segment. They are the core of the business model because they focus on “What” and “To
whom”, how your company delivers value to your audience.

The canvas is divided into two sides: on the right side, it’s the Client Profile. And that is divided
into Jobs-to-be-done, Pains, and Gains. On the left side, it’s the Value Proposition, also
subdivided into three: Products & Services, Gain Creators, and Pain Relievers.

Customer Profile
Jobs-to-be-done
This is about what your customer is trying to do. You have to include all tasks customers are
trying to perform, the problems they are trying to solve, and the needs they want to satisfy.

Page 12 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

It’s also important to note down the frequency and the importance of each job, and all the
different roles the customer have to play, and in what contexts. To fulfill this step, you may ask
yourself:

• What functional tasks is my customer trying to perform? (day by day tasks, problems at
work, etc.)
• What social tasks is my customer trying to accomplish? (get a promotion, gain status,
have a network, etc.)
• What emotional tasks is my customer trying to complete? (get in shape, feel good, feel
motivated, etc.).
• What basic needs do they need/want to have satisfied? (communication, sex, hygiene,
etc.).
Pains
This one encompasses everything that annoys your customer while they are performing their
jobs-to-be-done, such as negative experiences and emotions, challenges, risks involved, financial
costs, mistakes, and consequences, etc.

Remember to classify each pain as severe or light and note down how often it takes place as
well. To complete this step, you can make some questions:

• What is expensive for my customer? (regarding time, cost, effort, etc.)

• What makes my customer feel bad? (frustrations, disappointments, failures, physical
pain, etc.)
• What are the main difficulties and challenges of my customer’s faces? (physical,
intellectual or emotional limitations to do something, resistance, understanding certain
situations, etc.)
• How current solutions are leaving to be desired for my customer? (bad performance,
much effort, lack of functionality, defects, etc.)
• What are the negative consequences for my customer? (losses of power, status,
money, time, trust, etc.)
• What risks is my customer afraid of? (financial, social, technical, etc.)
• What is keeping my customer awake at night? (concerns, challenges, debts, bad
health, etc.)
• What are the most common mistakes my customer makes? (creating expectations,
misunderstandings, errors in use, etc.)
• What is preventing my customer from adopting solutions? (investment, learning curve,
resistance to changes, etc.)
Gains
They are all the benefits your customer expects or wishes – or even something that would
surprise them positively –, whether they are functional, emotional, social or financial. In short,
everything that delight them and make their life easier, more joyful or more successful.

You may rank each gain by relevance and indicate the frequency of them. To do so, you can
follow some questions, such as:

• What kinds of savings would make my customer happy? (time, money, energy, etc.)
• What results do my customer expect? Which ones can mesmerize them? (quality level,
profits and gains, savings and improvements, etc.)
• What current solutions enchant my customer? (functionalities, performance, quality,
etc.)
• What can make my customer’s tasks easier? (lower learning curve, more services,
lower costs, etc.)
• What positive consequences do my customers want? (power, status, acknowledgment,
satisfaction, motivation, etc.)
• What is my customer looking for? (design, guarantees, specific features, functionality,
etc.)
Page 13 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

• How does my customer measure success and failure? (cost, performance, speed,
quality, beauty, likes on social networks, etc.)
• What would increase my customer’s chances of adopting a solution? (lower investment,
longer guarantee, better performance/quality/design, etc.)
It’s worth remembering that you must create one profile for each customer segment. After
mapping your customers’ profiles, the next step is to set what value they are going to perceive
with your product or service.

Value Proposition
Products & Services
Include all the products and services you are going to deliver. About each one, ask yourself:

• Can the product/service help to accomplish any job-to-be-done, whether functional,

social, emotional, needs, wishes, roles, etc.?
• Is the product/service tangible, digital/virtual, or financial?
• Is the product/service crucial or trivial? How relevant is it?
• How often is the product/service used by my customer?
Gain Creators
Involve how the product/service offers the customer added value, what are the benefits your
product brings, and if your customer’s wishes and expectations are reached. After all, how it
makes your customer happier.

Again, you should rank every gain your product or service creates according to relevance to your
customers (if substantial or insignificant) and indicate how often it occurs. To do that, ask if your
product/service:

• creates savings that make your customer happy (in terms of time, money, effort, etc.);
• produces results that your customer expects or that goes beyond their expectations
(better level of quality, more of something, less of another);
• copies or does better than current offerings that delight your customer (in relation to
specific functionalities, performance, quality, etc.);
• makes your customer’s tasks or life easier (lower learning curve, better usability,
accessibility, more built-in services, lower cost of ownership, etc.);
• creates positive social consequences desired by your customer (make it look good on
tape, produce or increase power, status, etc.);
• does/has something the customer is looking for (good design, specific or better
functionalities, etc.);
• meets customers dreams (help on large goals, produce great relief, etc.);
• produces positive results that match criteria of success or failure (better performance,
lower cost, etc.);
• makes adoption easier (reduce cost, lower investment, lower risk, higher quality,
performance or design, etc.).

Pain Relievers
Describe how your product/service relieves the customer’s pains. Identify if you reduce their
costs, negative feelings, efforts, risks, negative consequences, mistakes… Anyway, how you
make your customer feel and sleep better.

It’s important, also, to rank each pain, according to its intensity, to be able to understand how
deeply your product/service help your customer. To help you out, ask if your product/service:

• produces savings (in terms of time, money, effort, etc.);

• makes your customer feel better (they end up with frustrations, discomforts, things
that give headaches, etc.);

Page 14 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

• performances solutions (new features, better performance, better quality, etc.);

• puts an end to the difficulties and challenges your customer faces (make things easier,
help accomplish tasks, eliminate resistance, etc.);
• eliminates social consequences that your customer encounters or is afraid of (losses of
respect, admiration, power, confidence, status, etc.);
• eliminates risks that your customer is afraid of (financial, social, technical risks, or
anything else that can go very wrong);
• helps your customer sleep better at night (help with major problems, reduce worries,
etc.);
• limits or eradicates common mistakes that your customer makes (errors of use,
difficulties of use, etc.)
• eliminates barriers that prevent your customer from adopting new solutions.

When to use Value Proposition Canvas?

In few words, this tool comes to facilitate the job of putting yourself in your customers’ shoes
and understanding their world.

The final goal, as mentioned above, is to discover your Product Market Fit, through positioning
products/services according to the necessities, expectations, and interests of your targeted
customer.

With Value Proposition Canvas, you have an overview of how your value proposition is going to
impact your customer’s life. The product-market fit is achieved when the products and services
match most the most important gains and pains of the customer profile.

Usually, the Value Proposition Canvas works properly:

• At the beginning of a startup;

• To restructure the sales process, in order to understand the customers better;
• To add a new feature to a product, that may demand great investments, whether of
time or resources (or even both);
• To expand into a new market or customer segment, and you need to get to know how
these new customers will receive your product/service.
It’s worth remembering that fulfilling this canvas is only the first stage. It’s essential to validate
the hypothesis, by taking tests and getting feedback. That can help go back to the canvas and
refine it.

And, it is also important to highlight that the Value Proposition Canvas does not substitute the
Business Model Canvas. They work better combined. One does not exclude the other.

Page 15 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

Page 16 of 17
Chapter 2: Business Model Course Facilitator: Shije Bidaure

Value Proposition Canvas of Amazon

Page 17 of 17