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