Which customer needs are we satisfying? A Value Proposition creates value for a Customer for instance, created a whole new industry around Customization Segment through a distinct mix of elements cater- mobile telecommunication. Values may be quan- products such as ethical investment funds have needs of individual customers or Customer titative e. Segments creates value.
In recent years, the e. This approach can contribute to customer value creation. Improving product or service performance has allows for customized products and services, traditionally been a common way to create value. Newness The PC sector has traditionally relied on this factor Some Value Propositions satisfy an entirely new set by bringing more powerful machines to market. This is often, years, for example, faster PCs, more disk storage but not always, technology related.
Cell phones, space, and better graphics have failed to produce corresponding growth in customer demand. Rolls-Royce understands this way to satisfy the needs of price-sensitive Cus- very well: its airline customers rely entirely on Rolls- tomer Segments. But low-price Value Propositions Royce to manufacture and service their jet engines.
No frills airlines, such as Southwest, running their airlines. In return, the airlines pay easyJet, and Ryanair have designed entire business Rolls- Royce a fee for every hour an engine runs. A product may stand out because of superior Its surprisingly low price makes the automobile design. Customers may find value in the simple act of using and displaying a specific brand.
Wearing a Rolex watch signifies wealth, for example. This can result from business CRM application. This relieves buyers from the model innovation, new technologies, or a combina- expense and trouble of having to buy, install, and tion of both. NetJets, for instance, popularized the manage CRM software themselves. Mutual when purchasing products or services.
For a used funds provide another example of value creation car buyer, a one-year service guarantee reduces through increased accessibility.
This innovative the risk of post-purchase breakdowns and repairs. It now dominates the market. Channels are customer touch points that play an important role in the customer experience.
How are we reaching them now? How are our Channels integrated? Which ones work best? How are we integrating them with customer routines? Channels have five distinct phases. Each channel can choose between reaching its customers through its Partner Channels lead to lower margins, but they cover some or all of these phases.
We can distinguish own Channels, through partner Channels, or through allow an organization to expand its reach and benefit between direct Channels and indirect ones, as well as a mix of both. Owned Channels can be direct, such as from partner strengths. Owned Channels and particu- between owned Channels and partner Channels. The trick is to find the Finding the right mix of Channels to satisfy how organization. An organization can retail, or partner-owned Web sites.
Awareness 2. Evaluation 3. Purchase 4. Delivery 5. When the market became saturated, A company should clarify the type of relationship it wants to operators switched to focusing on customer retention and increas- establish with each Customer Segment. Relationships can range ing average revenue per customer. Which ones have we established? How costly are they?
How are they integrated with the rest of our business model? Communities can also Customer Relationships, which may co-exist in a In this type of relationship, a company maintains no help companies better understand their customers. It provides all the Pharmaceutical giant GlaxoSmithKline launched a Customer Segment: necessary means for customers to help themselves. Personal assistance Automated services GlaxoSmithKline wanted to increase its under- This relationship is based on human interaction.
This type of relationship mixes a more sophisti- standing of the challenges faced by overweight The customer can communicate with a real customer cated form of customer self-service with automated adults, and thereby learn to better manage customer representative to get help during the sales process or processes. For example, personal online profiles give expectations. This may happen on- customers access to customized services.
Automated site at the point of sale, through call centers, by e-mail, services can recognize individual customers and their Co-creation or through other means.
At their best, automated services can customer-vendor relationship to co-create value with Dedicated personal assistance stimulate a personal relationship e. It Some companies engage customers to assist with the represents the deepest and most intimate type of Communities design of new and innovative products. Others, such relationship and normally develops over a long period Increasingly, companies are utilizing user communities as YouTube.
Similar and to facilitate connections between community relationships can be found in other businesses in the members.
Many companies maintain online com- form of key account managers who maintain personal munities that allow users to exchange knowledge and relationships with important customers. A company must ask itself, For what value is each Customer Segment truly willing to pay?
Successfully answering that question allows the firm to generate one or more Revenue Streams from each Customer Segment. For what value are our customers really willing to pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?
There are several ways to generate Revenue Streams: Subscription fees of ownership. This Revenue Stream is generated by selling continu- The company allows customers to rent cars by the Asset sale ous access to a service. A gym sells its members hour in North American cities. World of Warcraft purchase automobiles. Fiat sells automobiles, which play its online game in exchange for a monthly sub- Licensing buyers are free to drive, resell, or even destroy.
The more a service is used, the This Revenue Stream is created by temporar- out having to manufacture a product or commercialize more the customer pays. A telecom operator may ily granting someone the exclusive right to use a a service. Licensing is common in the media industry, charge customers for the number of minutes spent on particular asset for a fixed period in return for a where content owners retain copyright while selling the phone.
A hotel charges customers for the number fee. For the lender this provides the advantage of usage licenses to third parties. Similarly, in technology of nights rooms are used. A package delivery service recurring revenues. Renters or lessees, on the other sectors patentholders grant other companies the right charges customers for the delivery of a parcel from hand, enjoy the benefits of incurring expenses for to use a patented technology in return for a license fee.
There are two main types of pricing mechanism: transaction executed between credit card merchants fixed and dynamic pricing.
Brokers and real estate agents earn a commission each time they successfully match a buyer and seller. Advertising This Revenue Stream results from fees for advertising a particular product, service, or brand. Traditionally, the media industry and event organizers relied heavily on revenues from advertising. In recent years other sectors, including software and services, have started relying more heavily on advertising revenues.
A microchip manufacturer requires capital-intensive production facilities, whereas a microchip designer focuses more on human resources. Key resources can be physical, financial, intellectual, or human. Key resources can be owned or leased by the company or acquired from key partners.
What Key Resources do our Value Propositions require? Customer Relationships? Revenue Streams? Consumer Financial goods companies such as Nike and Sony rely heavily Some business models call for financial resources Physical on brand as a Key Resource. Qualcomm, a designer ees.
Ericsson, the telecom manufacturer, provides systems, point-of-sales systems, and distribution and supplier of chipsets for broadband mobile an example of financial resource leverage within a networks. Retailers like Wal-Mart and Amazon.
Ericsson may opt to borrow funds rely heavily on physical resources, which are often microchip designs that earn the company substantial from banks and capital markets, then use a portion of capital-intensive.
The former has an enormous global licensing fees. Every enterprise requires human resources, but people are particularly prominent in certain business Intellectual models. For example, human resources are crucial in Intellectual resources such as brands, proprietary knowledge-intensive and creative industries. A phar- knowledge, patents and copyrights, partnerships, maceutical company such as Novartis, for example, and customer databases are increasingly important relies heavily on human resources: its business model components of a strong business model.
These are the most important actions a company must take to operate successfully. For software maker Microsoft, Key Activities include software development. For consultancy McKinsey, Key Activities include problem solving. What Key Activities do our Value Propositions require? Revenue streams? Networks, matchmaking of superior quality. Production activity dominates the platforms, software, and even brands can function as business models of manufacturing firms.
Key Activi- for activities such as knowledge management and ties in this category relate to platform management, continuous training. Companies create alliances to optimize their business models, reduce risk, or acquire resources. Who are our key suppliers?
Which Key Activities do partners perform? The group cooperated to bring Blu-ray technology to Optimization and economy of scale market, yet individual members compete in selling The most basic form of partnership or buyer-supplier their own Blu-ray products. It is illogical for a company to Acquisition of particular resources and activities own all resources or perform every activity by itself. Few companies own all the resources or perform all Optimization and economy of scale partnerships are the activities described by their business models.
Such partnerships can be Reduction of risk and uncertainty motivated by needs to acquire knowledge, licenses, or Partnerships can help reduce risk in a competitive access to customers. A mobile phone manufacturer, environment characterized by uncertainty. It is not for example, may license an operating system for its unusual for competitors to form a strategic alliance handsets rather than developing one in-house.
An in one area while competing in another. Blu-ray, for insurer may choose to rely on independent brokers to example, is an optical disc format jointly developed sell its policies rather than develop its own sales force.
CS 9 Cost Structure The Cost Structure describes all costs incurred to operate a business model This building block describes the most important costs incurred while operating under a particular business model. Creating and de- livering value, maintaining Customer Relationships, and generating revenue all incur costs. Some business models, though, are more cost-driven than others. Which Key Resources are most expensive? Which Key Activities are most expensive?
Naturally enough, costs should be minimized in every Value-driven Variable costs business model. But low Cost Structures are more Some companies are less concerned with the cost Costs that vary proportionally with the volume of important to some business models than to others. Some businesses, such as Therefore it can be useful to distinguish between two and instead focus on value creation. Premium Value music festivals, are characterized by a high proportion broad classes of business model Cost Structures: Propositions and a high degree of personalized service of variable costs.
Cost advantages that a business enjoys as its output Cost-driven expands. Larger companies, for instance, benefit from Cost-driven business models focus on minimizing Cost Structures can have the following characteristics: lower bulk purchase rates. This and other factors costs wherever possible.
This approach aims at cause average cost per unit to fall as output rises. Get started with a FREE account. But if you listen, you may learn something new. Load more similar PDF files. PDF Drive investigated dozens of problems and listed the biggest global issues facing the world today.
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