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Recap6:38 with Pasan Premaratne
Let's recap everything we've learned about using the business model to expand on our business idea.
Now that we've walked through the business model and 0:00 all its minute details, let's recap on what we have learned so far. 0:02 There are nine sections in the traditional business model canvas, 0:07 plus the one that we inserted in there. 0:10 First up is our value proposition. 0:13 A business's value proposition is our product or 0:15 service through which we offer value to our customers. 0:18 We create this value by solving a problem for 0:22 the customer, or by satisfying a need or want. 0:24 This is very important. 0:28 Our value proposition can be a mix of different elements. 0:31 Including newness, performance, convenience, design, and so on. 0:34 A customer segment is a group of people or 0:40 organizations that you aim to reach and serve with your value proposition. 0:43 There are different types of customer segments. 0:48 The main ones we talked about are mass market, 0:51 niche, segmented, diversified, and multi-sided markets. 0:53 The goal of this section of the business model canvass is to get you exploring your 0:58 customer segments, and defining who your hypothetical customers are. 1:03 Once you have identified the type of segment, develop your customer 1:08 archetypes to get a better sense of how you can gear your business model to them. 1:11 Next, we have channels. 1:18 Channels cover three very important aspects of our business. 1:19 Communication, distribution, and sales. 1:24 There are two types of channels, owned or partner channels. 1:27 Owned channels have higher margins, but are harder to manage. 1:31 Partner channels have lower margins, but allow easy distribution and greater reach. 1:35 In addition, owned channels can be broken down into direct and indirect. 1:41 However, all partner channels are by their nature, indirect. 1:46 Regardless of the type of channel you choose, 1:51 all channels have five main stages. 1:54 It is crucial that you think through your approach for each stage. 1:57 There's awareness, evaluation, purchase, delivery, and post purchase. 2:00 Keep in mind that starting out, your aim should be to pick one channel that 2:06 you think will maximize your return, and focus on that channel. 2:10 Don't waste you resources by trying to simultaneously deliver through 2:15 multiple channels. 2:19 Customer relationships cover any communication we 2:21 have with our customers throughout our business model. 2:24 These relationships can be broken into three main groupings: acquisition, 2:28 retention, and up selling. 2:33 When starting out, we're going to focus on our customer acquisiton and 2:35 activation strategies, and how we can maximize our revenue stream. 2:39 Remember that your customer relationships are closely tied to your channels, so 2:44 develop them in parallel. 2:48 Next we have key activities, resources, and partnerships. 2:51 To execute our business model, 2:55 we have a certain set of activities we need to complete. 2:57 Some of these activities are crucial to our business model. 3:00 These are our key activities. 3:03 Most of our efforts should be dedicated in making these key activities a reality. 3:06 And our key resources are the intellectual, human, financial and 3:10 physical capital that we harness to execute on it. 3:15 For the activities outside of our key activities list, 3:18 we don't necessarily need to handle all the activities ourselves. 3:23 We can work with key partners who would help reduce the risk, uncertainty and 3:27 costs of executing our business model. 3:32 Allowing us to focus on our core product. 3:34 Next we have revenue. 3:38 There are two main types of revenue streams, transaction revenues, 3:39 resulting from the one time sale of your value proposition, and recurring revenue 3:43 streams, obtained by continuously delivering your value proposition. 3:47 Your chosen revenue model is closely tied to the pricing structure you implement. 3:51 There are two main pricing categories, fixed and dynamic pricing. 3:57 Fixed pricing is a pricing methodology based on static predefined variables. 4:01 Fixed pricing can be further broken down into different types: list pricing, 4:07 product future dependent, customer segment dependent, and volume dependent pricing. 4:12 The second main type of pricing is dynamic pricing. 4:18 Under dynamic pricing, 4:22 your price constantly changes based on certain market variables. 4:23 Dynamic pricing is seen in instances of negotiation, yield management, 4:27 real time markets, and options. 4:32 Remember that the price you implement must not only take into account your 4:35 value proposition and customer segments, but also accommodate the cost of doing 4:39 business, highlight the value that your product delivers, respect the practices 4:43 and expectations of your market, and keep an eye on competitive prices. 4:48 Your revenue model is very closely linked to your customer segments and 4:53 channels, so explore those sections before you start on this one. 4:56 Then there is costs, a company's cost structure building block 5:02 describes the major costs incurred to make the business model a success. 5:05 In a cost driven business model, 5:10 the focus is on minimizing costs as much as possible. 5:11 This is reflected in the value proposition, 5:15 where low cost is heavily emphasized. 5:17 In a value driven model, the main focus is on value creation, rather than cost. 5:20 This type of business model is accompanied by personalized customer relationships and 5:25 premium value propositions. 5:30 In this section of the business model, don't worry about the nitty gritty. 5:32 Instead, focus on the large cost drivers. 5:36 The last section of our business model, is the industry analysis. 5:40 The industry analysis should focus on two things. 5:44 The type of market we're entering and how that drives our marketing and 5:47 sales spending. 5:51 As well as the speed of product development and customer expectations. 5:52 The second thing you should focus on is your competitors. 5:56 What are they doing well, what aren't they doing for customers. 5:59 How do they earn revenue and how are we competing with them. 6:03 We've covered quite a bit of information in this section, so 6:06 watch it as many times as you need to, until you get a good grasp of things. 6:09 Above all, what I want you to take away is that at this stage in your company, 6:13 we still don't have a business model. 6:18 We're still looking for one, and 6:20 we're using this canvas to come up with a set of hypotheses for our undertaking. 6:22 In the next stage, we're going to look at how we can test these hypotheses. 6:27 And use a method of iteration and 6:31 experimentation to validate our business model until we find something that works. 6:33
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