Unit-4

Business Model Canvas

-Janmejay Shukla
Business Model Canvas

► The Business Model Canvas (BMC) is a strategic management tool used to visually
describe, design, and evaluate a business model.
► It is a visual chart with elements that describe a firm’s or product’s value
proposition, infrastructure, customers, and finances.
► It was created by Alexander Osterwalder and Yves Pigneur, and first introduced
in their book "Business Model Generation" in 2010.
► The canvas consists of nine building blocks that represent the key elements of a
business model.
► By using the Business Model Canvas, businesses can gain a clear understanding of
their current business model, identify potential opportunities for improvement,
and create a roadmap for future growth and success.
Customer segmentation
► Customer segmentation is the process by which you divide your
customers up based on common characteristics – such
as demographics or behaviors, so you can market to those customers
more effectively.

► This process makes it easier to target specific groups of customers with

tailored products, services, and marketing strategies.

► By segmenting customers into different classes, businesses can better

understand their needs, preferences, and buying patterns
4 types of customer segmentation
► 1. Demographic Segmentation: This type of segmentation divides
customers into different groups based on shared characteristics such
as age, gender, income, occupation, education level, marital status
and location.

► 2. Psychographic Segmentation: This type of segmentation divides

customers into different groups based on their lifestyle, interests,
values and attitudes.

► 3. Behavioral Segmentation: This type of segmentation divides

customers into different groups based on their purchase history,
usage patterns, brand loyalty and response to marketing campaigns.

► 4. Geographic Segmentation: This type of segmentation divides

customers into different groups based on location, such as country,
region, city.
Value Proposition

► A value proposition is a statement or set of statements that explains the

unique benefit or advantage that a product or service provides to its
customers or target audience.

► It describes the value that the product or service delivers to its

customers and why it is better than other similar products or services in
the market.

► A value proposition should be communicated to customers directly,

either via the company's website or other marketing or advertising
materials.
Purpose of Value Proposition
► A value proposition is meant to convince stakeholders, investors, or
customers that a company or its products or services are worthwhile.

► If the value proposition is weak or unconvincing it may be difficult to

attract investment and consumer demand.

► A value proposition serves as both a marketing statement and a sales

pitch, but it is more expansive than simply a slogan, catchphrase
or positioning statement.

► A strong value proposition is essential for the success of a product or

service as it helps to attract and retain customers by providing them
with a clear understanding of what the product or service offers and
why it is better than its competitors.
Elements of Value Proposition

A value proposition usually includes the following elements:

► Target audience: who the product or service is designed

for.

► Value: what specific value or benefit the product or

service offers to its target audience.

► Differentiation: how the product or service is different

from other similar products or services in the market.
Channel
► The Channel Building Block describes how a company communicates with
and reaches its Customer Segments to deliver its Value Proposition.
► It is important to understand which pathway (or channel) is best for your
company to reach your customers.

Customer channels describe how you reach your target customer

segments.
► How do you make potential customers aware of your business or your
product?
► How do you convince customers to buy your product?
► How will they purchase your product?
► How will the product be delivered to customers?
► And after the sale, how can you continue to support customers and
develop a relationship with them?
FIVE TYPES OF CHANNEL PHASES
► AWARENESS- how do we raise awareness about our company’s products and services?
► Advertising (Word of Mouth, Social Media, Newspaper, etc.)
► EVALUATION- how do we help customers evaluate our organization’s Value Prop?
► Surveys
► Reviews
► PURCHASE- how do we allow customers to purchase specific products and services?
► Web vs. Brick and Mortar
► Self Checkout
► DELIVERY- how do we deliver a Value Proposition to customers?
► Over the counter
► Delivered/Catered
► AFTER SALES- how do we provide post-purchase customer support?
► Call center
► Return policy
► Customer assistance
Different Channels that a business can use
► Direct sales: This refers to selling products or services directly to
customers, either through a physical location, online store, or
salespeople.
► Online sales: This refers to selling products or services through an
e-commerce website, social media, or other online platforms.
► Partner sales: This refers to selling products or services through
partners, such as distributors, retailers, or other businesses.
► Wholesale sales: This refers to selling products or services in bulk to
other businesses or organizations.
► Physical location: This refers to having a brick-and-mortar store or office
where customers can visit and purchase products or services.
► Events and trade shows: This refers to showcasing products or services
at events or trade shows to potential customers.
Customer Relationships

► Customer Relationships refer to the way in which a company interacts

with its customers throughout the customer journey.

► It includes all the interactions that a company has with its customers,
such as marketing, sales, customer service, and support.

► The key to developing strong customer relationships is to understand

your customers' needs and preferences, and to tailor your approach to
meet those needs in a way that aligns with your overall business
strategy.
Types of Customer Relationships

► Personal assistance - Providing dedicated support to individual customers.

► Self-service - Providing customers with tools and resources to help them solve
their problems independently.

► Automated services - Using technology to provide automated services, such as

chatbots.

► Communities - Building communities or forums where customers can interact

with each other and with the company.

► Co-creation - Collaborating with customers to create new products or services

based on their needs and preference.
Revenue Streams
► Revenue streams represent the ways in which a company generates
revenue from its customers.

► Revenue streams are a key component of any business model, as they

directly affect a company's profitability and sustainability.

► When developing a business model, it's important to carefully consider

which revenue streams are most appropriate for your company's
products or services, as well as how to optimize each revenue stream
to maximize profitability.
► This may involve developing different pricing models or bundling
different products or services together to create more value for
customers.
Types of Revenue Streams
► Sales revenue: Revenue generated from the sale of products or services to
customers.
► Subscription revenue: Revenue generated from ongoing subscriptions or
memberships.
► Advertising revenue: Generated from advertising and sponsorship
agreements with third-party companies.
► Licensing or royalty revenue: Revenue generated from licensing intellectual
property or receiving royalties on the use of a product or service.
► Transaction fee revenue: Revenue generated from fees charged for
facilitating transactions, such as for payment processing or online
marketplaces.
► Service revenue: Revenue generated from providing services to customers,
such as consulting or maintenance services.
► Rental or leasing revenue: Generated from renting or leasing out products or
services to customers.
Key Resources

► The key resources in a business model canvas refer to the assets and
infrastructure that a company needs to create and deliver value to its
customers.

► Key resources allow your enterprise to create and offer a Value

Proposition, reach markets, maintain relationships with Customer
Segments, and earn revenues

► By identifying and analyzing key resources, a company can better

understand its strengths and weaknesses and develop a more effective
business strategy.
Examples of Key Resources
► Physical resources: These refer to the tangible assets that a company needs to
operate, such as buildings, equipment, machinery, and vehicles.
► Intellectual property: This includes patents, copyrights, trademarks, and other
forms of intellectual property that a company owns and uses to protect its
products or services.
► Human resources: This includes the employees and management team of the
company, as well as any specialized skills or knowledge that are required to
operate the business.
► Financial resources: This includes the funds that a company has available to
invest in its operations, such as cash reserves, lines of credit, and investments.
► Network resources: This includes the partnerships, collaborations, and alliances
that a company has with other organizations or individuals to create and deliver
value to its customers.
► Information resources: This includes the data, information, and knowledge that
a company uses to make decisions and improve its operations, such as market
research, customer feedback, and analytics.
Key Activities

► Key activities are the key things that you need to do in order to deliver
your value propositions to customers.

► By identifying and prioritizing the most important activities, businesses

can optimize their operations, differentiate themselves from competitors,
and achieve sustainable growth.

► These activities will vary depending on the type of business, industry, and
size of the organization, but there are some key activities that are
common to most businesses.
Key Activities in business

► Research and Development: This involves the creation and testing of

new products, services, or processes to improve the business's offerings
or operations.

► Sales and Marketing: This involves promoting and selling the business's
products or services to potential customers through various channels
such as advertising, sales promotions, and social media.

► Operations and Production: This involves the day-to-day operations of

the business, including the production of goods or services, managing
inventory, and maintaining equipment and facilities.
Key Activities in business
► Human Resources: This involves managing the people within the
organization, including hiring, training, and development, as well as
managing employee benefits and compensation.

► Accounting and Finance: This involves managing the financial aspects of

the business, such as budgeting, financial reporting, and managing cash
flow.

► Customer Service: This involves providing support and assistance to

customers, addressing their concerns and complaints, and ensuring their
satisfaction.

► Supply Chain Management: This involves managing the flow of goods and
services from suppliers to customers, including sourcing materials,
managing inventory, and logistics.
Key Partners
► Key Partners in the Business Model Canvas are the outside entities that
a business relies on to create, deliver, or promote its value proposition.
► These partners can include suppliers, vendors, manufacturers,
distributors, and other companies or organizations that contribute to
the business's success.
► A strategic partnership can help the company expand its reach and
resources, while key suppliers ensure a reliable supply chain.
► By identifying and prioritizing its key partners, a business can
effectively leverage external resources to create value for its
customers and achieve its goals.
Types of Key Partners
► Suppliers: Companies that provide the necessary raw materials, components,
or equipment to produce the business's products or services.
► Distributors: Companies that distribute the business's products or services to
the end customers.
► Co-creation partners: Partnerships with customers or other stakeholders to
co-create new products or services.
► Government agencies: Collaborations with government agencies to access
funding, regulatory compliance, or other resources.
► Research and development partners: Collaborations with universities,
research institutions, or other companies to develop new products or
technologies.
► Marketing and advertising partners: Collaborations with advertising agencies
or marketing firms to promote the business's products or services.
► Financial partners: Partnerships with banks, investors, or other financial
institutions to access capital or manage financial risks.
Cost Structure
► Cost structure refers to the types and amounts of costs that a business
incurs in order to deliver its value proposition and generate revenue.
► Understanding and managing the cost structure is essential for a business
to achieve profitability and sustainable growth.
► By analyzing the cost structure, a business can identify opportunities to
reduce costs, improve efficiency, or optimize the use of resources.
► For example, a business may consider outsourcing certain functions,
negotiating better contracts with suppliers, or adopting new technologies
to streamline operations.
► On the other hand, a business may also invest in certain cost areas to
improve its competitive advantage or value proposition, such as R&D or
marketing.
► Overall, managing the cost structure is a critical aspect of a business's
financial management and strategic decision-making.
Types of Cost
► Fixed costs: Costs that do not vary with the level of production or sales, such as
rent, salaries, or insurance.
► Variable costs: Costs that vary with the level of production or sales, such as raw
materials, production labor, or shipping costs.
► Cost of goods sold (COGS): The direct costs of producing or delivering the product
or service, including raw materials, labor, and production overhead.
► Operating expenses: The costs of running the business, such as marketing and
advertising expenses, rent, utilities, and office supplies.
► Research and development costs: The costs of developing new products or
technologies, such as salaries of R&D staff, research equipment, or research
materials.
► Depreciation and amortization: The costs of expensing the purchase or investment
in long-term assets over their useful lives, such as equipment, machineries, etc.
► Interest expenses: The costs of borrowing money to finance the business's
operations, such as interest on loans.
Thank You