CHAPTER 4: Building Business Models

“The more you drive positive change, the more enhanced your business model.”
- Anand Mahindra

>a good product and/or service does not automatically turn into a commercial
success.
>a business model makes the difference between success in the laboratory
and success in the marketplace.
(business model)
- having this will also define the foundation of a business operations.
- involves the product or service offering, the targeted customers, and the
economic engine that will enable a business to meet its profitability and
growth objectives.

Business model assessment- essential for startups, new and recognized

businesses which need to discover, preserve or
advance their business models.

What is a Business Model?

-basically, when management is asked about its model, the question only says
“how does it plan to generate money”

-according to management guru Peter Drucker: “a business model is supposed to

answer who your customer is, what value you can create/add for the
customer and how you can do that at reasonable costs”

-simply, business model defines the foundation of its company’s core value
proposition, targeting customers, key resources, and assumed revenue
streams. Eventually, it offers a framework for success and overcoming
challenges.

Different Types f Business Models

There are different types of business models meant for different businesses, some
of these are traditional and some are in contemporary times.

Here are the business models that are used traditionally:

1. Manufacturer
- a person or a registered company which makes finished products from raw
material in an effort to make a profit.
-the goods are later distributed to wholesalers and retailers who sell them
directly to customers.
-the retailers exhibit the products via brick and mortar stores or on 3rd party E-
commerce platforms.
-in the manufacturing industry, products are made in big-scale so as to meet the
irresistible demand coming from consumers.

Examples of manufacturers in the Philippines:

Ajinomoto Philippines
Alaska Milk
Century Pacific Foods
(among others)

2. Distributor
-an entity or a company that purchases noncompeting products or product
lines, stores them in warehouses, and resells them to retailers or directly to
the customers.
- examples are Auto dealers
- Unilever- spends its major part of revenue in maintaining a proper distribution

3. Retailer
-a person or business that purchases goods from the wholesaler or directly
from the manufacturer.
-normally do not produce their own items
-they purchase goods to sell those goods in small quantities to end
consumers

Online retailer giants include:

Best Buy
Wal-Mart
Target

4. Franchise
-can be a manufacturer, distributor or retailer
-a method distributing products or services involving a franchisor

>franchisor- provides access to his business’ proprietary knowledge, processes,

business system and a brand’s trademark or trade name in order to let the
franchisee to sell a product or provide a service under his business’s name

>franchisee- pays a royalty and often an initial fee for the right to do business
under the franchisor’s name and system

Some examples of franchising businesses in the Philippines:

Jollibee
Pizza Hut
McDonald’s- the best example which has 93% of its franchised restaurants
worldwide

5. Brick-and-mortar
-a model that refers to the old-fashioned street-side business that sells
products and services to its customers face-to-face in an office or store that
the business owns or rents

Examples of brick-and-mortar business:

Grocery stores
Dentists
Gas stations
Local grocery
Walk-in banks

6. Bricks-and-clicks
-a model where a company combines its online and a physical presence
-customers may place their orders online and then pick up the products from the
physical stores
-provides the advantage of flexibility because it can show its products to
customers who live in places where brick-and-mortar stores are not present
-these days, most business selling apparel and shoes items in Divisoria use
this model

7. Direct Sales
-products are directly sold to the customers
-selling could be in the form of a face-to-face conversation or small gathering
>the former Tupperware used to have house parties to sell its products
-the salesperson gets a commission of every sale
-even in this age of technology, there are still companies that make use of direct
selling such as: Avon
Boardwalk
Dakki
Fern
Forever Living; these companies choose to always be in personal touch
with its customers

8. High Touch
-uses a lot of human interaction and involvement in order to the experience
highly personalized.
-operates in trust and credibility to earn revenues for the company
-the highest involvement of the customers with the business, the more pay
they give and the more loyal they become

Examples of businesses that use this model:

Hair salons
Auto dealers

9. Family-owned
-business that is owned and operated by a family
-the decision making are controlled by family members
Example of this type of model:
National Bookstore
ShoeMart
Jollibee
Robinsons

Some of the basic types of modern business models are explained here:

1. Nickel-and-dime
-makes use of the lowest price strategy in selling basic products or service to the
customers
-since the basic price is low, additional charges for the other perks and
services that are offered are required
>here in the country, Cebu Pacific- the low-cost carrier which offers the lowest
possible price for the flight tickets and charges fee; however, it charges fees
over extra services such as meal/snack, beverage and other services

2. Freemium
-is a combination of free and paid services normally used by tech companies in
the Software as a Service (SaaS) or apps business model
-the basic service are free but for a limited time or with limited features
>the basic service comes with app advertisements and storage restrictions but
the premium plans do not have; in order to unlock the upgraded features, the
customer has to choose for paid services

Examples:
Zoom
Spotify
Dropbox

3. E-Commerce
-an upgradation of the old-style brick-and-mortar business model
-focuses on buying and selling of goods or services creating a web-store
using the Internet
>the transactions of transfer of money and data are executed via the Internet

Examples:
Amazon Olx
Flipkart Alibaba
Shopify
Myntra
Ebay
Quikr
4. Subscription
-offers a long term contract to customers by paying a fixed amount every
month or year
-the company needs to provide enough value to its customers for repeat
purchases by visiting the website over and over again

Examples:
Netflix
LinkedIn
Amazon Prime
Dollar Shave Club

5. Aggregator
-a network model, the company acts as a middleman between two individual
parties
-most companies provide information and sources on a single industry
-the company sells its own brand by creating value for both demand and supply
side
-it makes profit through commissions

Examples:
Hotels- Airbnb
Zillow
Oyo

Taxi service- Uber

Financial service- Yodlee

6. Online Marketplace
-thre is a collection of different sellers into one platform
-the sellers compete with each other to deliver similar product/service at
competitive prices
-earns a commission
-examples of well-known companies using this model are Amazon and Alibaba

>Good brand built from factors such as trust, free and/or on time home delivery,
and quality sellers are vital in an online marketplace

7. Hidden Revenue
- the company offers its services for free
-the company earns revenue streams from advertisements which are paid for
by identified sponsors when information is shared
>users of Google, Facebook, Instagram, and Twitter don’t pay for the search
engine, but these companies earn from advertising money spent by
businesses

8. Data Licensing/ Data Selling

-the Internet has given rise to the importance of data
>Data- the major element in the web technology where companies need vital
information to perform its operations and gain profit
-Twitter- sells real-time data to third party users for analysis, advertising, customer
insight, and other uses

9. Agency-Based
-this is a partner company that has specialization in doing non-core business
activities such as advertising, digital marketing, PR, even janitorial and security
>usually, businesses that has no internal know-how hire agencies to acquire a
customizable solution for their needs

Leo Burnett Company- an agency that services United Airlines, McDonald’s,

Kellogg’s, and some of their notable clients

10. Affiliate Marketing

-a commission-based model where companies make profit by promoting a
partner’s product and convince its followers and users to buy the same
-the affiliate gains a commission for every sales opportunity it referred to their
vendor companies
-the affiliate website oftentimes provides product review

Examples of businesses that are into affiliate marketing:

NerdWalllet
Capterra
MoneySavingExpert.comand
The Wirecutter

11. Dropshipping
-the owner has no ownership of the product or hold any inventory but he has
an E-store; he has many different suppliers/wholesalers to sells their
product on the website
>when an order is placed on a business owner’s website, the partner sellers
then deliver the products directly to the customer

Examples:
Doba
Oberlo
Dropship Direct
Wholesale 2B

12. Network Marketing

-often called multi-level marketing, this model works on direct marketing and
direct selling philosophy
-there are no retail shops here but the offerings are sold to the target market
directly by the participants
-the more people that become part of the pyramid structure, more money are
gained by selling more goods and getting more people on board
-this is a commission-based model where participants earn income through
selling and recruitment of members
Some good examples:
Avon
H and Mary Kay

13. Crowdsourcing
-solicits intellectual information of users on what value-added concepts be
inputted in the product and or service offering
-there is an open call for contributions to help solve the problem
>in some instances, the contributor of the solution is given monetary or
recognition as rewards

Some companies/businesses that use crowdsourcing:

YouTube
LEGO ideas
Unilever
Coca Cola

14. Blockchain
-a digital ledger that is irreversible and decentralized
-no one owns and monitors this digital database but anyone can contribute to
it
-works on peer-to-peer interactions and document all on a digital decentralized
ledger

Many crypto-currencies such as Bitcon, Etherum, and Litecoin use Blockchain

technology-based business model in their operations.

15. Low Touch

-there is minimum human assistance or intervention in selling a product or
service
-there is no need to keep a big salesforce although companies may focus on
improving technology to further lessen human involvement and make the
customer experience better

Examples:
Ikea
SurveyMonkey

16. Razor and Blaze

-one item is sold at a low price or given for free in order to intensify the sales of
a complementary good, such as consumable supplies
-a good example is the Razor that is sold at a low price and its partner, the blade
is sold at a premium price; the same situation holds in a printer and cartridge
-this model is advisable if the business has a loyal customer base and has the
ability to create some sort of lock-in situation with customers

17. Consulting
-composed of experienced and qualified professionals that offers services
based on their line of expertise
-most consulting firms charge their clients by the number of hours they have
rendered service or a percentage of share one a project is completed
>mostly accountants, lawyers, educators, and businessmen form their
own consulting companies

Most popular consulting firms:

Mckinsey
Deloitte
Boston Consulting Group
Software or website development firms

18. Social Enterprise

-aims to put up a business more for creating a positive change but with profit
>the profit though is intended to be used for humanitarian works to improve
human living conditions

Some social enterprises in the Philippines:

Bayani Brew
Coffee for Peace
First Harvest
Liter of Light

The Business Model Canvas

In Alexander Osterwalder’s earlier book, “Business Model Ontology”- the

Business Model Canvas consisting of nine segments for its building blocks.
>this business model canvas can be written in a one-page canvas
>later, he wrote a comprehensive description of this business model in his
bestselling book “Business Model Generation”

-an entrepreneur may focus on every segment or blocks of the business model
systematically until he is able to close the gaps
-every block describes the factor that a startup business needs to study
-the thoughts and ideas of the entrepreneur are kept intact and focused although
he may modify each blocks as the need arise
-each block is very much interconnected; as one block change, the other blocks
are required to be revisited because they may need to be changed
Sample business canvas model for a small bakery that intends to sell organically
baked breads:

Key Partners Key Activities Key Propositions Customer Customer

1. vendors of 1. introduce 1. freshly baked Relationships Segments
organic materials organically breads 1. hotline 1. neighborhood
2. Packaging produce bread 2. Specialized number communities
suppliers 2. Marketing in organic bread 2. E-mail for 2. Healthy life
3. Retail and sales 3. Breads of questions style
partners 3. Branding constant quality 3. Facebook 3. Neighborhoo
4. Consumer 4. Breads are page d supermarket
education served quickly 4. Loyalty 4. Neighborhoo
5. Competitve discounts d bakeries
price breads Channels
6. Halal 1. social media
certified 2. Rider
7. The delivery
“Finsbury Bread” 3. On call
of Manila delivery
4. Direct selling
using own
website
5. Physical
store
6. Events
planner
Cost Structure Revenue Streams
1. equipment and facilities 1. volume sales from supermarkets
2. Staff salaries 2. Sales to customers
3. Product ingredients 3. Sales to events such as weddings,
birthdays, anniversaries, etc.

There are four major parts of the Business Canvas Model:

1. Infrastructure- includes key partners, key activities, and key resources
2. Offering- consists of the value proposition
3. Customers- comprises customer segments, channels, and customer
relationships
4. Finances- takes into account cost structure and revenue streams

Key Partners
- the network of suppliers and partners that may provide the business model
more effective
-the entrepreneur could partner with other business, governmental, or non-
consumer entities that can help the business model works
-strong partnerships could be a tool to a business success
-there are a lot of reasons in partnering with various companies particularly for
startups
-Partnering- can be for optimizing the use of resources, forming new resource
streams or lessening risks on important business decisions
As the business lifecycle changes, so are the types of partnership that the
business may be needing. Simply, partners of a startup business would differ from
those partners when the business is already five years in operation.

Here are the four different types of partnerships:

1. Strategic alliances- an arrangement between non-competitors to help each
other do an equally advantageous task but retaining their independence

2. Coopetition- an arrangement between competitors to help share the risk that

these companies may take. Companies could be partners in forming awareness
for their shared industry, to gain new users

3. Joint-ventures - two businesses because of their mutual interest agreed to

for a completely different company; a new market for a new geographic area
could be the reason for combining their resources in a joint venture
>example- a cheese company may opt to form a joint-venture with a milk
manufacturer for cheese manufacturing in another place

4. Buyer-supplier relationships- the most usual type of partnerships in

businesses; such relationships make certain that there will be dependable spring
of supplies coming in; on the part of the supplier this means a stable established
customer for their product

Key Activities
-the most essential activities in achieving a company’s value proposition and to
operate successfully
-are mostly a bridge between the value proposition and the customer
segment
>certainly, the entrepreneur has to consider his channels and customer
relationships when coming up with the key activities for the business model
-this portion is reliant on business model type

Categories of key activities:

1. Marketing- adding value by promoting and/or services such as advertising a
product to create awareness and hence demand

2. Sales- selling a product and/or service; personal selling- includes creating

customer relationships, discovering solutions to the customer’s problem and
closing sales

3. Design- forming designs of various items; example- an apparel company

creates design of its lines of clothing for presentation to the outsourced
manufacturers

4. Development- developing products and services; in the case of software

company- develops a software product which could probably be customized based
on the need of the customer

5. Operations- the manufacturing of products and delivery of services

-some of the activities under this are designing, manufacturing, and delivering a
product in big quantities and certainly of highest quality
-most companies are under this activity, particularly because a lot of business
models are in manufacturing

6. Distribution- reaching out to the customers to sell to them and delivering the
items to them (a repair shop provides warranty services of n item bought by a
customer)

7. Customer experience- customer service, consulting, and customer support are

some of the activities involve here

Key Resources
-describes the most important assets required to make a business model work
-the resources that allow an enterprise to create and offer a value
proposition, reach target markets, maintain good relationships with
customer segments, and gain revenues (these four block must be considered
when developing the key resources segment)

Four categories of resources:

1. Physical- physical assets which are considered tangible resources that a

company make use to form its value proposition
-could include equipment, machines, inventory, buildings, vehicles,
manufacturing plants and distribution networks that allow the business to
function

2. Intellectual- non-physical, intangible resources such as brand , patents,

proprietary knowledge, copyrights, and even partnerships
-customer lists, customer knowledge, and even the company’s own people-
are also form of intellectual resources

3. Human- employees are the biggest and most vital resources of any
company but are often overlooked
-human resource is very vital in service-oriented companies which require
great deal of creativity and extensive knowledge
-examples- customer service representatives
Software engineers
Scientists

4. Financial- all businesses have key resources in finance; however, some will
have stronger financial resources compared to others
-examples- cash
Lines of credit
The ability to have stock option plans for employees

Customer Value Proposition(CVP)

-a business’s way of generating value in their product or service when
targeting potential customers
>value proposition- a statement consisting of the reason/s someone should do
business with the company

-computed through adding all the benefits that the product could provide to
the customers
-CVP is a description of the user’s experiences that he will come to realize
upon buying and using of a product
-wihtout it, companies are walking blindly in the market

Factors considered in the development of the customer value proposition

which are:
1. Functional value- the product and or service offers the solution to a
particular problem (said solution is convenient, better version, easier to use and
more complete compared to others)
>example of functional benefits: phone competence offered by an iPhone
The thirst-quenching benefit by a bottle of water
The warmness given by a wool sweater

2. Emotional value- the product and or service is pleasant to look at or

attractive
-the customer is fond of this offering because of sentimental reasons, based from
tradition or the advice of people attached to the customer
-nowadays, purchasing locally produced or organic brands carries emotional
benefits especially for those enthusiasts

3. Economic value- the product and or service offers a financial advantage,

promotes energy conservation, saves time or is innovative

4. Symbolic value- for the customer the product and or service is valuable
because of a certain type of status given to the customer
-the status can be a social responsibility orientation or based from the brand
-it may include:
>the sophistication and the feeling of being casual coming Apple products
>the manliness projected by the Italian Ducati motorcycle brand
>the extravagance exhibited when carrying a cup of Starbucks coffee
Different Types of CVP’s
By matching the customer segment to the value proposition, a company can
gain more profit. Therefore, it is basic for the company to know exactly the trade
off amongst different customer segments and then choose which one to target and
serve. Then, the company should form its customer value proposition and
adopt the best business model that could best serve the needs of the
selected segment.

There are various CVP’s for every customer segment for all businesses. The
reason for this is because each segment has its own way of meeting the needs
of its customers.
1. All Benefits- the company in this type of CVP just list all the benefits or
solutions that a product and/or service offering can deliver and serve to
target customers
-the more benefit that can be listed down, the better
-this approach needs only small knowledge about customers and competitors
from the company but it is disadvantageous; this may lead to managers claiming
entitlement to advantages for solution features that in reality offer little
actual benefits to target customers

2. Favorable Points of Difference- tries to differentiate their solution by

conveying its points of difference compared to the customer’s next-best
alternative
-there must be a complete understanding of customer’s requirements and
preferences, and what us worth to fulfill them
-sometimes, the points of difference that has been emphasized could be of little
importance to the target customer

3. Resonating Focus- identifies the one or two points of difference between

its solution and its competitors that provide the best value to the target
customers
-companies using this are able to create tailored-fit value propositions for
different customer segments
>the elements of value that are important may vary from customer to
customer, hence tailor-fitting is necessary

Customer Relationships
-the types of relationship a company forms with its particular customer
segments
-essential in order to gain customers, keep them and grow sales with them

Types of customer relationships:

1. Personal assistance- founded on human collaboration, the customer can

communicate with a real salesperson to provide help during and after the sales
process
Ways of communicating:
Onsite at the point of sale
Using call centers
Mail

2. Dedicated personal assistance- the deepest and most intimate type of

relationship that involves assigning a sales person to an individual customer
-usually develops over an extended period of time
-for instance- in the banking industry- each big account is provided an individual
banker

3. Self-service- basically there is no direct relationship that exists here;

although all the essential things to assist customers help themselves are given

4. Automated services- there is a combination of customer self-service and

automated processes
>for instance, automated services are able to identify individual customers
and their characteristics, hence they can be given information about their order

-said relationship can even kindle a personal relationship such that a customer
could be proposed of a book or movie

5. Communities- user communities can be used by companies to be more close

and connected with their current and potential customers
-it is a trend now to keep online communities to exchange information and help
solve each other’s problem
>Tsikot.com- the leading automotive website and community in the
Philippines
-offers auto classifieds, forums, reviews, galleries, and a lot more
-has a user friendly interface, location based search with map and a
mobile responsiveness
>Tsikot- the most popular car users community in the country

6. Co-creation- this is an extension of the traditional customer-vendor

relationship
-customers have the chance to co-create value with seller company such as
designing and innovating products
-examples of engaging customers to become co-creators- writing reviews and
soliciting ideas from customers

Example; IKEA- a swedish furniture and home goods retailer

- in 2018, it is launched as “Co-Create IKEA”, a digital platform that
promotes the participation of customers and fans to design new
products
-there are even cash reward whose ideas are chosen
-opted to provide test labs and prototype shops so that the customers
may hone their suggestions

Customer Segments
-share needs, behaviors, and other traits can be the bases for customer
segmentation
>customer segment- refers to demographics such as age, ethnicity,
profession and/or gender; or psychographic factor- spending behavior, interests,
and motivations
-a company may select a single group or several groups to target with its products
and services

Types:

1. Mass- an unsegmented market in which products with mass appeal

products such as aspirin, orange juice, softdrinks, paperback romances, and the
like are offered to every customer
-the customer value proposition for this segment must be for a bi number of
people who has similar problems or need requirements
-refrigerator manufacturers- should target the mass market because there is
little differentiation needed by customers who are interested to buy a refrigerator

2. Niche- the market speaks of a customer segment with very distinct

characteristics and extremely specific needs
-necessitates a highly customized product, custom made to fit their needs
-the customer value proposition for this segment should be strictly defined based
on the preferences of this specific customer segment
-this type of market is common amongst automobile parts suppliers who are
really reliant on automobile manufacturers for sale of their products

3. Segmented- there are businesses that select to offer products or services to

customer segments that have very small differences in their need
requirements
-the company forms various customer value propositions based on these small
differences in the customer segments
>for instance, in retail banking- the distinction lies on the net worth of
customers, which is small yet substantial
-this type of bank finds it profitable to make investment in
forming distinct customer value proposition
for every type of customer segment it has

4. Diversified- some companies often select differentiated customer segment

-have very diverse needs and wants
-although there may be some overlaps among the profiles of the customers, the
company still it as profitable to invest in attracting these customers
- San Miguel Corporation- one of the diversified companies in the Philippines

5. Multi-sided platforms- used when customer segments are reliant with

each other, which makes it a necessity to serve both sides of the balance
>this is true with credit cards; it is vital for customers to use their credit
cards, at the same time, it is also important that stores accept these credit cards of
customers for transaction

-if one end of the equation fails, the other one shall have the same fate
Channels
-the touch points through which a company communicates with its target
customers
-they play a big role in defining the customer experience and providing value
-an entrepreneur should understand which channel is appropriate to teach its
target consumers

Five phases that a channel may pass through but it may cover more than
one of these phases at a time:

1. Awareness- the marketing and advertising phase

-it entails educating the target customers about the features of the products
and/or services and how how these offerings shall be value to them
-examples- Google and other search engines
YouTube
Instagram
Facebook

2. Evaluation- the customer evaluates, read abut or uses the product or avail
of the service in order to formulate an honest opinion about it
-in order to form a good evaluation of the offering, it is best for the entrepreneur to
educate the customers also about the company’s competitors; this way the
company are assisted in evaluating their options, similarly, customers are able to
see clearly why the product and/or service of the entrepreneur’s company is the
best choice
- Google My Business, Social media accounts and the company’s website
may be used for evaluation

3. Purchase- the sales process

-the customers buy their chosen product and or service
>sales process- represents the exchange of a particular product and or service
for money
-Stripe and Paypal- can be used for purchase

4. Delivery- aka the fulfillment stage of the process

-the promised value proposition has reached the customers
-simply, the way the offerings shall reach the customers to solve their problems
Examples: Postage/Mail such as UPS, FedEx and USPS

5. After Sales- centers in giving customer care and support after purchase
-it offers the customers to call when they have a problem or make queries about
the product
Email service providers and Chat platform line Facebook messenger can be
utilized

Different channel types:

1. Direct channels- those that the entrepreneur owns or has control over
-could be his physical store, website, or salesforce
 -owning the channel could mean added costs but may provide a direct
and strong relationship with the customer and could give
higher profit margins

2. Indirect channel- aka partner channels; the company makes use of

intermediary and places its products or makes the service obtainable at the
partner store
-wholesalers are considered partner channel
>winegrowers partnered with wholesalers in various countries to sell their wines

Advantages: quick to reach the market

Less investment in infrastructure

However, it is expected that there will be lower margin on the product

Value Proposition Canvas

-developed by Alexander Osterwalder
-aim to guarantee proper fit of the product and the market
-makes certain that a product an or service takes into consideration the values and
needs of the customers
-a detailed relationship of the customer segments and value proposition
-can be a tool also to upgrade a product and or service offering or to develop an
entirely new offering
-consists of two building blocks- the customer’s profile and a company’s value
proposition

Customer Profile
-the customer segment that the company shall serve its product and or
service offering
-should be created for each customer segment, as each segment has distinct
gains, pains and job
>the company needs to understand the customer’s jobs and make an
assessment as to their pains and gains
>beofore making a customer profile, the various archetypes customers
typically fall into must be evaluated

Customer archetype
-aka personas
-those dry demographic portrayals of customers transformed into living,
breathing people which the audience can comprehend
-an idea of Steve Blank which he popularized in his Lean Launchpad
Customer Gains
-include all the expectations and needs of customer, things that may delight
them and other stuffs that may intensify the possibility of these customers
embracing a value proposition
Upon buying a product or being provided by a service, some gains are given less
attention by the customer; although, there are cases that customer are delighted
by some surprises for which they are fully satisfied

Some types of customer gains:

1. Required gains- the very basic expectations by the customers
>an indivdual buying a smartphone has the least expectation that his new bought
phone can allow him to make and receive calls

2. Expected gains- beyond the basic ones, but even these are not present in the
product or service, said offering can still provide its basic purpose
>hence, for a smartphone, it is expected that it should be visually attractive and
fashionable

3. Desired gains- the customer’s preference when it comes to product and or

service; the most sought-after and cherished gains by the customers
-obtaining these gains can result to the complete satisfaction of the customer
>in the case of smartphone, having no trouble in the synching the phone with
other gadgets is a desired gain of any user

4. Unexpected gains- the potential benefits of the product and or service for
which the customer is unaware until these are introduced to him
-although these ideas and innovations are not articulated by the customer, they
are able to transform the customer’s experience with a product and or service
>a touch screen capability of a smartphone is a type of thus gain
Customer Pains
-are situations which either avoid the customer from getting a job done or the
negative experiences, emotions, and risks that the customer experiences before,
during or after a job

1. Productivity pain- include the inefficiency of the businesses that a

customer experiences; majority of customers practice time management that
they felt annoyed when additional steps would occur in the buying process

2. Support pains- felt by a customer when he is not assisted during the buying
process

3. Financial pain- involve money in particular that often a customer spends too
much for a product and/or service when his intention really is to spend less

4. Process pains- those that create friction to buyers because of the

substandard processes of the business
Customer Jobs/Jobs-to-be-done
-the functional, social, emotional tasks customers are trying to do, challenges they
are attempting to resolve and needs they desire to satisfy in their personal and
professional lives
-the perspective must be taken from the angle of the customer to understand him
fully

Types:
1. Functional jobs-the regular and particular jobs that a customer is trying to do
and is working towards, easy and simple things like cooking a menu, finishing an
essay for the english assignment, eating a balance diet and other similar ones

2. Social jobs- consist of the manners a customer desires to reflect his image in a
social environment, examples- fitting in with a group of friends or praising a co-
employee in his sales presentation

3. Personal/emotional jobs-how a customer works toward feeling a certain way;

some people feel they can rush from a tough task and then do another task after
like having a gym practice before dinner time

4. Supporting jobs- often customers also purchase value, hence doing a

supporting task
Three roles of customer that may assist in supporting jobs:
A. Buyer of value- any purchase of value that may cover from evaluating choices
at hand up to paying for the product that had been chosen
B. Co-creator value- jobs for which a customer has a direct hand in the
manufacture of the product with the company; jobs include providing ideas for
product design, product testing and giving product and or service review online

Value proposition
After really understand the customers, including their gains, pains,and jobs, then it
is time to reflect on the gain creators, pain relievers \, and the products and or
services to offer them

Gain creators- explicitly outline how the products and services may create
customer gains and offer customer added value

Pain relievers- explicitly outline how the product and or services lighten, avoid or
solve the particular customer pains

Products and services- the products and or services which create gain and
relieve pain and built around the value proposition

The Lean Canvas: A Business Model Canvas Alternative

Lean Canvas- proposed by Ash Maurya
-a developed version of the Business Model Canvas
-outlines a more problem-focused approach and appropriate to use by
small entrepreneurs esp. those creating startups businesses
-the focus is more on customer’s needs, on actionable metrics and
offer a fast idea-to-product transformation
-also primarily meant for entrepreneurs and not the customers,
consultants, investors or advisors

Elements:
1. Problem
2. Solution
3. Value proposition
4. Unfair advantage
5. Customer segments
6. Channels
7. Revenue streams
8. Cost structure
9. Key metrics