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Developing a Marketing Plan for Your Business
Every business needs a business plan that maps out the process of identifying the target market, attracting interest, gaining customers and retaining them for future sales. A solid marketing plan is an integral part of the overall business plan, as it maps out objectives and the plan for achieving them.
What Does a Marketing Plan Contain?
An effective marketing plan is detailed with concise steps that will accomplish a defined goal. The plan should identify and discuss the target market with information about direct competition in the industry. It should include information about marketing activity used in the past with the effectiveness of these activities. Then, the marketing plan consists of a set of realistic goals with defined objectives along with deadlines for meeting these objectives. The plan must also include budgetary guidelines for the marketing activities as well as a plan for measuring the effectiveness of the activities. It’s important to make the marketing plan easy to maintain and update as a company evolves, too.
Marketing Planning Process
The process of making a marketing plan involves market research to assess trends, profile target customers, identify potential competition, outline products or services, find vendors, calculate costs and brainstorm all positive and negative impacts that could affect the business. The business should create a mission statement that defines the company, its vision and its priorities. Next, the plan needs to focus on specific strategies and methods that will generate sales, including product descriptions, calls to action, promotion and advertising methods and budget, product or service pricing, and a plan to monitor how effective the marketing strategies are performing for the company.
Questions to Ask Yourself
To succeed in any industry, a business needs to set itself apart to attract customers and compete successfully with similar businesses. Questions to ponder include:
- Is this business model unique, and how is it unique? What need does the business meet?
- Who makes up the target market that will buy the service or product?
- What other companies currently exist that will compete for the target market? How can you prevail over this competition?
- What message will you communicate to potential buyers? How will potential buyers find out about your service or product?
- How will you deliver your service or product to your buyers?
Using a Marketing Plan Template
Some small business owners prefer to use a marketing plan template. Free marketing plan templates are available for download from the Internet. You can also use a marketing plan worksheet to help you brainstorm your ideas, goals and objectives. Once you have an outline of your marketing objectives, you can create an effective plan.
How Do I Write a Marketing Plan?
Make sure your marketing plan includes these points:
- Start with a description of the business, including mission statement and overall intent. Include goals, the organization of the business, the products or services provided with branding, and the target market.
- Outline results of market research, including identification of target market, customer demographics and profiles, market influences, economy, competition, customer satisfaction and identification of strengths and weaknesses the business may face.
- Set pricing based on business and manufacturing costs, break-even point, profit analysis, competitive pricing and the amount buyers are willing to pay.
- Include profiles of your target market, including demographics, their habits, qualities valued by customers, potential customers not being currently reached, ways to reach these customers and any changes customers might want.
- Analyze the competition based on talking to their customers, visiting their business and checking out their website. Find out about their products, branding, advertising and marketing. Pinpoint how your product or service differs.
- State goals that create a defined marketing direction. Plan objectives that outline specific actions that will achieve goals. Be as specific and realistic as possible, and describe how you will measure attainment of objectives and goals.
- Make a plan to put objectives in action to attain goals. For example, if your goal is to increase product reorders by 25 percent in the next year, make an objective to contact clients by phone or email within one month of sales, offering a return-order discount.
- Define your company’s distribution method such as direct sales, wholesale, print mail, telemarketing, advertising, networking, Internet marketing or a direct sales force.
- Create a marketing budget, such as a specific percentage of revenue or a particular portion of your annual budget. Every product or service needs a budget. Determine how many products or services you will need to sell to make a profit.
- Analyze the success of marketing efforts to determine what’s working and what’s not working. How many sales occurred? Are buyers happy? How many sales calls were necessary to make sales?
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Business model frameworks for your business canvas or marketing plan
How do you summarise a business model canvas or marketing plan for online startups using a single sheet of A4? Our top business model frameworks for you
Defining a clear online business model framework is essential for a new startup online business to help create a sustainable business and communicate the features of their new business to partners and within the company.
Reviewing business models is also important for existing businesses thinking about options to refine their business model or add new services to their offerings in the light of new opportunities made possible by the Internet.
As you know, I'm a big fan of simple frameworks to help communicate strategy. In particular, I love the Business Model Canvas which is a valuable framework for summarizing strategy for online businesses. It was published as part of a co-creation creative commons project involving 470 practitioners from 45 countries.
We feature it as part of our digital toolkit where we give an example in our online startup business model template . It’s also available as an app and downloadable templates on the Business Model Generation site . Of course, it can be used for all business models, but it is particularly suitable for online startups.
Business model template - Source: BusinessModelGeneration.com
The business model canvas is also a valuable framework for summarizing your marketing strategy. The main sections of the canvas in a logical order to consider them are:
- 1. Value proposition . This is at the heart of what the business offers to its audiences and is arguably most to important success.
- 2. Customer segments . Different target audiences the value propositions will appeal to. In the business model canvas, the alternatives recommended are mass market, niche market, segmented (broken down further) or a range of diverse segments.
- 3. Customer relationships . The types of relationships that will be formed, for example, self-service, automated services, communities or more personal assistance. Co-creation of content may be part of this.
- 4. Channels . The methods by which the organization’s services will be delivered and the audiences reached.
- 5. Key partners . To exploit online and offline value networks, forming partnerships gives an opportunity of expanding reach and taking advantage of existing organizations and online influencers that have built an audience.
- 6. Activities . Which are the main activities that need to be performed to deliver the value proposition to develop revenue?
- 7. Resources . Different types of process and people to complete the activities to create and deliver the value proposition.
- 8. Cost structure . Different cost-elements - these should be checked against activities and resources. Costs are classically broken down into Fixed and Variable costs and economies of scale.
- 9. Revenue stream . This is the method by which a business derives income. Common online options are: ad revenue, subscription fees, sales of physical or virtual goods or affiliate-based commission arrangements. Licensing and leasing are other alternatives.
Digital strategy success factors
Part of the Digital marketing strategy and planning Toolkit
Learn how to define a structure and scope for your omnichannel marketing strategy
Applying the RACE Framework to your lean canvas approach
The business model canvas great framework, but I always like to think about what the missing elements of frameworks are since the summary can be misleading otherwise.
The Business Model Canvas is arguably missing a method of specifying Key Performance Indicators for evaluating the performance of the business model. I recommend adding these to the relevant sections, in particular for Revenue stream, cost structure, and key activities.
Our popular RACE Framework model allows managers and marketers to optimize their key interactions with customers at each stage of the customer journey. This strategic framework gives indications of metrics and KPIs to track the journey, which is needed for all business models.
Structure a plan using Smart Insights’ RACE
Learn how to structure a comprehensive omnichannel marketing plan, using Smart Insights' RACE
Applying SOSTAC® to your lean canvas approach
PR Smiths SOSTAC® is another popular strategic planning framework for creating a marketing plan. We have a dedicated SOSTAC® Learning Path module for Business Members. Or, see PR Smith's site for more details ( www.prsmith.org ).
Notably, the Business Model Canvas doesn’t directly consider the impact of different forms of competitors, such as in the situational analysis stage of SOSTAC®. That's why we recommend applying SOSTAC® to inform your planning.
Smart Insights Business Members can also use our blank Word template and B2C example of a one-page summary in this template. This simply takes each part of SOSTAC® and then you overlay specific digital marketing opportunities and challenges across each part of the Smart Insights RACE planning framework - by marketing them up with RACE (plus B, G, R, D for Branding, Governance, Resourcing, Data issues).
Structure a plan using SOSTAC®
Part of the Paid media Toolkit
Learn how to use PR Smith’s SOSTAC® framework, a popular tool for structuring business and marketing plans
By Dave Chaffey
Digital strategist Dr Dave Chaffey is co-founder and Content Director of online marketing training platform and publisher Smart Insights. Dave is editor of the 100+ templates, ebooks and courses in the digital marketing resource library created by our team of 25+ digital marketing experts. Our resources are used by our Premium members in more than 100 countries to Plan, Manage and Optimize their digital marketing. Free members can access our free sample templates here . Dave is a keynote speaker, trainer and consultant who is author of 5 bestselling books on digital marketing including Digital Marketing Excellence and Digital Marketing: Strategy, Implementation and Practice . My personal site, DaveChaffey.com, lists my latest Digital marketing and E-commerce books and support materials including a digital marketing glossary . In 2004 he was recognised by the Chartered Institute of Marketing as one of 50 marketing ‘gurus’ worldwide who have helped shape the future of marketing. Please connect on LinkedIn to receive updates or ask me a question .
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The Digital Marketing Strategy And Planning toolkit contains:
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Start your Digital Marketing Plan today with our Free membership.
- FREE practical guides to review your approach
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How a business model is involved in marketing
An easy way to work on the basis of your business is the Business Model Canvas. This 9-part business model is like a business plan on one page making it easy to make the big decisions while giving you enough flexibility for your business in the future. Not only helps the Business Model Canvas to see how your business will function for you, but also supports you in your marketing strategy by providing important information, including but not limited to your audience, your unique selling points and your products and services.
Table of Contents
Why you need a business model (canvas)?
When you are working on your marketing strategy, knowing what your business looks like (your business foundations) is rather important. You want to know what you are marketing to the audience and what results you want to achieve from it after all.
You could write a business plan, but that has some very big limitations:
- it takes a lot of time to write a good business plan
- it is very specific, giving it a limited time span it is relevant
- it is so complicated that it is hardly something you can really base your decisions on a daily basis
By working with the Business Model Canvas instead, you write a plan that is well thought-out and solid while being flexible enough to change things if needed. And you can see everything you need in one glance because it is on one page instead of 80-pages that are hard to keep up with.
Filling in a Business Model Canvas is interesting to do no matter if you are starting a new business as a creative or you have been in the creative industry for a long time. It shows you opportunities, things to change or to stop all together and ways to innovate and grow. The simple model offers you quick adaptation, which is why it is such a great tool to use in your marketing.
What is the Business Model Canvas?
The Business Model Canvas was designed by Alex Osterwalder and together with Yves Pigneur, they wrote the book Business Model Generation. In this book, they explain the canvas that is made up out of 9 elements.
- Customer Segments
- Value Propositions
- Customer Relationships
- Revenue Streams
- Key Activities
- Key Resources
- Key Partners
- Cost Structure
We will go into each of these elements soon.
How does it work?
By generating a Business Model for your business you get to take a look at your (proposed) business, both inside and out, from an audience perspective, a financial perspective, a relevance perspective. You get to see the strong suits and the weak points of the organisation, the products and the services.
To fill in the Business Model Canvas you will start by writing out the existing situation. This allows you to see possible improvements to the business. Once you have new ideas for the business you can even fill those into the canvas and see how it would affect your business.
- What would happen if we would change our services?
- What would happen if we lose that big customer?
- Who can we partner up with to reach a new audience?
Questions to ask yourself when looking at your situation and brainstorming what you could do and what it would mean. Always start from the first two elements, the customer segments and value propositions. Those are the basis of any business.
The elements of the Business Model Canvas
- Customer Segments – Well I hope you know this one. These are your ideal customers, if needed divided into groups.
- Value Propositions – What do you offer? What is your USP?
- Channels – How do you connect with your ideal customer. There are 5 moments for which you need channels.
- Customer Relationships – What kind of relationships do you build with your customer?
- Revenue Streams – How will you get your income? How much?
- Cost Structure – What does it cost to keep the business alive?
- Key Activities – What activities are the most important part of your business? Without which activities wouldn’t your business exist?
- Key Resources – Who and what is important for your business?
- Key Partners – Who do you need to work together with to be able to do your key activities?
By making sure all these elements of the business model canvas are worked out properly you are certain you have a good, viable business mode.
How the Business Model Canvas helps your marketing
As you might see some parts in the business model canvas are also very important for your marketing plan. Customer Segments are your ideal customers and therefor your whole plan revolves around them. Value Propositions show you were you are good at, and how you can stand out of the crowd. Channels are how you communicate and Revenue Stream are how your products are priced.
In your business model you can make sure that you have enough different products to cater to the needs of your customer segments. You can make sure they can get to know you better before buying an expensive product by not only having great communication channels beforehand but also having some ‘starter products’ for people who are on the fench.
By working out your business model first you not only have a viable business that is worth marketing, but you also have already done half the work for your marketing strategy!
Hi, I'm Natalie
I love being creative (scrapbooking, card making, crocheting) and helping other creative entrepreneurs create money-making content that leads to fabulous products and services.
About this post
- 23 January 2016
- Marketing Your Creativity
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The Easy Guide to the Business Model Canvas
Got a new business idea, but don’t know how to put it to work? Want to improve your existing business model? Overwhelmed by writing your business plan? There is a one-page technique that can provide you the solution you are looking for, and that’s the business model canvas.
In this guide, you’ll have the Business Model Canvas explained, along with steps on how to create one. All business model canvas examples in the post can be edited online.
What is a Business Model Canvas
A business model is simply a plan describing how a business intends to make money. It explains who your customer base is and how you deliver value to them and the related details of financing. And the business model canvas lets you define these different components on a single page.
The Business Model Canvas is a strategic management tool that lets you visualize and assess your business idea or concept. It’s a one-page document containing nine boxes that represent different fundamental elements of a business.
The business model canvas beats the traditional business plan that spans across several pages, by offering a much easier way to understand the different core elements of a business.
The right side of the canvas focuses on the customer or the market (external factors that are not under your control) while the left side of the canvas focuses on the business (internal factors that are mostly under your control). In the middle, you get the value propositions that represent the exchange of value between your business and your customers.
The business model canvas was originally developed by Alex Osterwalder and Yves Pigneur and introduced in their book ‘ Business Model Generation ’ as a visual framework for planning, developing and testing the business model(s) of an organization.
Why You Need a Business Model Canvas
- The BMC provides a quick overview of the business model and is devoid of the unnecessary details compared to the traditional business plan.
- The visual nature of the business model canvas makes it easier to refer to and understand by anyone.
- It’s easier to edit and it can be easily shared with employees and stakeholders.
- The business model canvas can be used by large corporations as well as startups with just a few employees.
- It clarifies how different aspects of the business are related to each other.
- You can use a BMC template to guide a brainstorming session on defining your business model effectively.
How to Make a Business Model Canvas
There are nine building blocks in the business model canvas and they are customer value proposition, customer segments, channels, customer relationships, revenue streams, key resources, key partners, key activities, and cost structure.
When filling out a Business Model Canvas, you will brainstorm and conduct research on each of these elements. The data you collect can be placed in each relevant section of the canvas. So have a business model canvas ready when you start the exercise.
What are the 9 Components of the Business Model Canvas?
- Customer Segments
- Customer Relationships
- Revenue Streams
Key Activities
Key resources, key partners.
- Cost Structure
- Value Proposition
Let’s look into what the 9 components of the BMC are in more detail.
Customer segments
These are the groups of people or companies that you are trying to target and sell your product or service to.
Segmenting your customers based on similarities such as geographical area, gender, age, behaviors, interests, etc. gives you the opportunity to better serve their needs, specifically by customizing the solution you are providing them.
After a thorough analysis of your customer segments, you can determine who you should serve and ignore. Then create customer personas for each of the selected customer segments.
There are different customer segments a business model can target and they are;
- Mass market: A business model that focuses on mass markets doesn’t group its customers into segments. Instead, it focuses on the general population or a large group of people with similar needs. For example, a product like a phone.
- Niche market: Here the focus is centered on a specific group of people with unique needs and traits. Here the value propositions, distribution channels, and customer relationships should be customized to meet their specific requirements. An example would be buyers of sports shoes.
- Segmented: Based on slightly different needs, there could be different groups within the main customer segment. Accordingly, you can create different value propositions, distribution channels, etc. to meet the different needs of these segments.
- Diversified: A diversified market segment includes customers with very different needs.
- Multi-sided markets: this includes interdependent customer segments. For example, a credit card company caters to both their credit card holders as well as merchants who accept those cards.
Use STP Model templates for segmenting your market and developing ideal marketing campaigns
Visualize, assess, and update your business model. Collaborate on brainstorming with your team on your next business model innovation.
Customer relationships
In this section, you need to establish the type of relationship you will have with each of your customer segments or how you will interact with them throughout their journey with your company.
There are several types of customer relationships
- Personal assistance: you interact with the customer in person or by email, through phone call or other means.
- Dedicated personal assistance: you assign a dedicated customer representative to an individual customer.
- Self-service: here you maintain no relationship with the customer, but provides what the customer needs to help themselves.
- Automated services: this includes automated processes or machinery that helps customers perform services themselves.
- Communities: these include online communities where customers can help each other solve their own problems with regard to the product or service.
- Co-creation: here the company allows the customer to get involved in the designing or development of the product. For example, YouTube has given its users the opportunity to create content for its audience.
You can understand the kind of relationship your customer has with your company through a customer journey map . It will help you identify the different stages your customers go through when interacting with your company. And it will help you make sense of how to acquire, retain and grow your customers.
This block is to describe how your company will communicate with and reach out to your customers. Channels are the touchpoints that let your customers connect with your company.
Channels play a role in raising awareness of your product or service among customers and delivering your value propositions to them. Channels can also be used to allow customers the avenue to buy products or services and offer post-purchase support.
There are two types of channels
- Owned channels: company website, social media sites, in-house sales, etc.
- Partner channels: partner-owned websites, wholesale distribution, retail, etc.
Revenue streams
Revenues streams are the sources from which a company generates money by selling their product or service to the customers. And in this block, you should describe how you will earn revenue from your value propositions.
A revenue stream can belong to one of the following revenue models,
- Transaction-based revenue: made from customers who make a one-time payment
- Recurring revenue: made from ongoing payments for continuing services or post-sale services
There are several ways you can generate revenue from
- Asset sales: by selling the rights of ownership for a product to a buyer
- Usage fee: by charging the customer for the use of its product or service
- Subscription fee: by charging the customer for using its product regularly and consistently
- Lending/ leasing/ renting: the customer pays to get exclusive rights to use an asset for a fixed period of time
- Licensing: customer pays to get permission to use the company’s intellectual property
- Brokerage fees: revenue generated by acting as an intermediary between two or more parties
- Advertising: by charging the customer to advertise a product, service or brand using company platforms
What are the activities/ tasks that need to be completed to fulfill your business purpose? In this section, you should list down all the key activities you need to do to make your business model work.
These key activities should focus on fulfilling its value proposition, reaching customer segments and maintaining customer relationships, and generating revenue.
There are 3 categories of key activities;
- Production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality.
- Problem-solving: finding new solutions to individual problems faced by customers.
- Platform/ network: Creating and maintaining platforms. For example, Microsoft provides a reliable operating system to support third-party software products.
This is where you list down which key resources or the main inputs you need to carry out your key activities in order to create your value proposition.
There are several types of key resources and they are
- Human (employees)
- Financial (cash, lines of credit, etc.)
- Intellectual (brand, patents, IP, copyright)
- Physical (equipment, inventory, buildings)
Key partners are the external companies or suppliers that will help you carry out your key activities. These partnerships are forged in oder to reduce risks and acquire resources.
Types of partnerships are
- Strategic alliance: partnership between non-competitors
- Coopetition: strategic partnership between partners
- Joint ventures: partners developing a new business
- Buyer-supplier relationships: ensure reliable supplies
Cost structure
In this block, you identify all the costs associated with operating your business model.
You’ll need to focus on evaluating the cost of creating and delivering your value propositions, creating revenue streams, and maintaining customer relationships. And this will be easier to do so once you have defined your key resources, activities, and partners.
Businesses can either be cost-driven (focuses on minimizing costs whenever possible) and value-driven (focuses on providing maximum value to the customer).
Value propositions
This is the building block that is at the heart of the business model canvas. And it represents your unique solution (product or service) for a problem faced by a customer segment, or that creates value for the customer segment.
A value proposition should be unique or should be different from that of your competitors. If you are offering a new product, it should be innovative and disruptive. And if you are offering a product that already exists in the market, it should stand out with new features and attributes.
Value propositions can be either quantitative (price and speed of service) or qualitative (customer experience or design).
What Are Your Thoughts on the Business Model Canvas?
Once you have completed your business model canvas, you can share it with your organization and stakeholders and get their feedback as well. The business model canvas is a living document, therefore after completing it you need to revisit and ensure that it is relevant, updated and accurate.
What best practices do you follow when creating a business model canvas? Do share your tips with us in the comments section below.
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Amanda Athuraliya is the communication specialist/content writer at Creately, online diagramming and collaboration tool. She is an avid reader, a budding writer and a passionate researcher who loves to write about all kinds of topics.
The 9-Step Business Model Canvas Explained (2023 Update)
Written by Raquel Alberdi
Business | entrepreneurship, 0 comments(s).
Blog » The 9-Step Business Model Canvas Explained (2023 Update)
“A major mistake made by many start-ups around the world is focusing on the technology, the software, the product, and the design, but neglecting to ever figure out the business . And by “business” we simply mean how the company makes money by acquiring and serving its customers”.
-Reid Hoffman
After meeting with hundreds of entrepreneurs and business owners over the years I believe the LinkedIn co-founder and Blitzscaling author Reid Hoffman’s got it spot on.
People tend to focus on specific parts of their business, such as which software packages are being used, which is the cheapest supplier, how to optimize internal processes…?
They get so bogged down in the details of the day-to-day running that they lose the overall vision of their business.
Without this vision they are unable to scale, they make marginal profits, miss opportunities, struggle to innovate, and end up running “just another” business.
Another handy metaphor in understanding this common mistake is the soldier in the trenches .
Every meter of ground gained comes at a heavy cost, mistakes are made, and progress is hard-fought and slow…a day-to-day experience for 99% of entrepreneurs and businessmen.
But when you do have that 360 vision you see the entire battlefield. Decisions are much clearer, fewer mistakes are made, and progress is fast and methodical.
Fortunately, a business model framework exists that gives you both vision and clarity .
The Business Model Canvas provides entrepreneurs, business owners, and strategists with a tool to analyze, structure, and evolve a business while always keeping the bigger picture front of mind.
So let’s take a closer look at how it works.
Table of Content
What is the Business Model Canvas?
Customer segments, value propositions, customer relationships, revenue streams, key resources, key activities, key partners, customer segments, value proposition, strategyzer, business model canvas tool, would you like to learn more about business models.
Created by Swiss entrepreneur and Strategyzer co-founder, Alexander Osterwalder, the Business Model Canvas is a visual representation of the 9 key building blocks that form the foundations of every successful business. It’s a blueprint to help entrepreneurs invent, design, and build models with a more systematic approach.
Why is it so popular within the business community?
Its simplicity. The business model canvas allows us to carry out a high-level analysis without drilling down and getting lost in the details. You just draw out the 9 building blocks on a blank canvas, fill them in as each concept relates to your business, and hang it somewhere everybody can see.
It’s a visual overview of your entire business on a single canvas.
While the Business Model Canvas is an extremely fluid concept and hyper-specific to individual companies, each canvas is still broken down into these 9 key building blocks:
When laid out on the canvas the model will look something like this:
While you’ve probably come across each of the 9 building blocks before, the attractiveness of the Business Model Canvas is that it confines them to a single page , not a traditional 42-page document.
This makes it a lot easier to digest, as well as assess existing business models or map out new ideas.
How do I fill out the Business Model Canvas?
To start your Business Model Canvas you will need to breakdown and analyze each of the 9 building blocks.
A good way to approach this is to gather the heads from marketing, sales, operations, finance, and manufacturing (if product-based) and pencil-in a morning where you can all meet together.
Then, after drawing a mock canvas onto a whiteboard, proceed to dissect and discuss each of the 9 building blocks as they relate to your business. You can use sticky notes to better organize your thoughts around the canvas.
If you are an entrepreneur or new business owner working alone and don’t have a team to bounce your ideas off, not to worry. You can still carry out your analysis before sharing it with a like-minded entrepreneurial community or forum, like those found on ThePowerMBA , to get useful, insightful feedback.
Whichever way you decide to approach it, I recommend you complete each block in the following order:
- Cost structure
For continuity, I’m going to use the fashion retail giant Zara when analyzing each of the 9 key building blocks.
If you’d like to skip to another case study similar to your own business, navigate to the table of contents at the top of the page and select one of the other business model canvas examples.
The first block of the Business Canvas Model is about understanding who is the most important customer(s) you’re delivering value to. Or, in other words, who are they? What do they do? And why would they buy your product or service?
Not a single company exists without its clients, making customer segments the best block to start with while drawing out your business model canvas.
A great exercise to define your customer segments is to brainstorm and create your company’s buyer persona (s) .
Buyer personas are fictional depictions of an ideal or hypothetical client. Typically when brainstorming a buyer persona you’d want to define certain characteristics (age, demographic, gender, income, industry, pain points, goals, etc.)
However, remember at this stage we want a snapshot of our customer segment. There’s no need to jump into great detail just yet.
In the case of Zara, there are three distinct customer segments to whom they offer different products.
The products created for each of these customer segments (clothing, shoes, and accessories) are not trans-consumable. That is to say, a woman’s dress is highly unlikely to be worn by a 7-year-old child.
Once we know exactly who it is we are targeting, it’s time to look at what we as a company have to offer.
The second phase is about figuring out your company’s value propositions , and importantly, your UVP (unique value proposition). The “what” that makes customers turn to you, over your competitors? Which of their problems are you best at solving?
Each value proposition consists of a bundle of products or services that fulfill the needs of a buyer persona from your customer segment. It’s the intersection between what your company offers, and the reason or impulse customers have for purchasing.
Some popular questions to ask while determining your UVP are:
- Which specific customer pain point are you trying to solve?
- What job are you helping customers get done?
- How does your UVP eliminate customer pain points?
- What products or services do you provide that answer this specific pain point?
So let’s try and apply this to Zara. Why do people choose to purchase from them, over their competitors?
Zara’s principal value propositions are fairly clear. They offer various ranges of stylish men’s, women’s, and children’s clothing and accessories at an affordable price.
But there’s more to it than that.
If we dive a little deeper we see Zara’s value propositions are more complex, which are behind the success of the brand:
Fast fashion
Zara adds new clothes and designs to its collections every 2-3 weeks, both in its stores and online. It keeps the brand updated, fresh, and modern while maintaining its all-important medium price point
Great eCommerce experience
Once you enter Zara’s online store you’re presented with a clean, easy-to-navigate, and high-end feel. The customer segments are visible on the left navigation bar with a search tab to further aid customers with their online experience.
Localized stores
You can find a store in nearly all major retail locations (shopping malls, retail outlets, airports, etc.) meaning accessibility is not an issue for the majority of consumers.
Flagship stores
Zara demonstrates its aesthetic evolution to customers through its flagship stores. The recent opening of their Hudson Yards , New York City flagship is a great example of this. Customers shop around its vivid, minimalist layout offering them an experience aligned with the brand’s deeper, eco-friendly values.
Zara Hudson Yards, New York
The next step is to ask yourself how you are reaching your customers, and through which channels ?
This includes both the channels that customers want to communicate with you as well as how they’ll receive your products or services.
Is it going to be a physical channel? (store, field sales representatives, etc.) Or is it a digital channel? (mobile, web, cloud, etc.).
Zara has 3 primary channels in which they communicate and deliver products to its customers:
- Direct sales through their stores
- Online (both app and website)
- Social media
Customers can go to a traditional “bricks and mortar” store to browse, model, and purchase different items of clothing at one of their retail stores.
Alternatively, they can shop online or through their mobile application and have the product delivered straight to their door or nearest store. The choice is completely up to them!
So that covers Zara’s commercial channels, but what about how they communicate with customers?
While they do communicate through their mobile app, their predominant channel is social media.
What’s more, they’re really, really good at it.
For example, did you know that Zara invests less than 0.3% of its sales revenue into advertising?
This is only possible due to an A-rated social media presence . Customer queries are not only dealt with quickly, but recommended re-works are sent back to HQ, forwarded onto in-house designers who then apply the feedback to future collections.
This customer-first approach through fluid communication channels has saved them thousands of dollars in marketing, strengthened their brand, and created a loyal customer base.
You should only step away from this building block once you’ve decided how each of your customer segments want to be reached.
Once you have acquired customers, you will need to think about how you can build , nurture, and grow those relationships.
Now, this can be automated and transactional like large eCommerce brands Amazon or Alibaba. Or, it could be at the complete opposite end of the scale and require a more personal relationship you’d typically have with a bank or your local bike shop.
Zara’s relationship with its customers is threefold, and lies somewhere in the middle of transactional and personal:
- Salesperson at store
- Brand through social media
- Sentimental attachment to a product
Yes, you have the initial transactional touchpoint at the store or online, something relatively impersonal and for many the only interaction they’ll have with the brand.
However, customers (especially in the fashion industry) are encouraged to continue to interact with a brand through social media platforms.
As we mentioned before when discussing channels, Zara has a very effective communication system in place. Not only can people instantly get in touch with the brand, but also engage with new posts, images, and collections uploaded to social media.
This personal approach to customer relationship building can, in some cases, lead to the natural growth of brand ambassadors and communities .
An attachment can also develop between customers and particular garments or accessories from one of their collections. The sentimental attachment to these products also creates another potential form of brand loyalty.
Now that you’ve described how you are going to create real value for your customers, it’s time to look at how you plan to capture that value.
What are your revenue streams? Is it going to be a transactional, direct sales strategy ? Are you going to consider a freemium mode l, where you give a portion of your product or service away for free with the idea of converting later on down the line?
If you’re a SaaS company such as SalesForce or Strava , then it’s likely that a licensing or subscription revenue model will be more appropriate.
At Zara, it’s extremely simple. They make their money by selling clothes and accessories either at a store or online.
As you can see, we’ve filled in the entire right-hand side of our business model canvas. We touched upon:
- Value propositions
- Revenue streams
- Distribution channels
Now it’s time to move over to the left side of the business canvas model and look at what we need, internally , to deliver our value propositions.
To start with, let’s take a look at key resources.
The key resources are all things you need to have, or the assets required to create that value for customers.
This could be anything from intellectual property (patents, trademarks, copyrights, etc.) to physical holdings (factories, offices, delivery vans, etc.) right down to finances (the initial cash flow perhaps needed to start your brand).
Another key resource every company needs to consider is its human capital . Are you going to need highly specialized software engineers? Or field-based sales teams?
They are relatively capital-heavy resources that need to be factored into your business model.
In the case of Zara, they are going to need a number of key resources if they hope to deliver their propositions:
- Stock management
- A large, interconnected network of physical stores
- A strong brand
- Logistics and supply chain infrastructure
Stock is vital for both online and offline customers.
If they are unable to supply their range of products and meet customer demands, satisfaction levels fall and they have a serious problem on their hands.
A large distribution network of brick and mortar stores combined with a strong brand name help mitigate these factors, as well as reinforce any ongoing marketing activities and communication efforts.
Finally, an efficient logistics process within Zara is critical, especially when you consider the complexities involved with such a large-scale operation.
They will require the necessary technology to analyze data on inventory, storage, materials, production, and packaging, with the staff to execute each of these stages and manage the delivery of the final products.
The next step is to define the key activities – the areas you need to be good at to create value for your customers.
To mix it up a little let’s take a look at a slightly different business in Uber .
Their key activities can be broken down into:
- Web and mobile app development
- Driver recruitment
- Marketing: customer acquisition
- Customer service activities : drivers’ ratings, incidents, etc.
They need a fast, clean UX for their customers using the app, drivers to carry out their service, and the ability to both market the product and deal with any customer queries.
Zara’s key activities will differ to those of Uber. Some of the things they need to consider would be:
- Manufacturing
- Retail process (point of sale and 3rd party management)
- Distribution channel / logistics
Design is a key activity as Zara’s value proposition is to provide stylish garments at an affordable price. Their collections need to be constantly updated to follow the latest fashion trends at the time.
To produce their collections Zara will also require manufacturing capabilities. Now Zara doesn’t own their own factories (we will get to that in the Key Partners section) but they still need to be involved in the garment manufacturing process.
Everything from fabric selection to pattern making, to detailing and dyeing affects the outcome of the final product which of course they have to then go on and sell.
The effective management of the retail and distribution channels (online, offline, shipping, and communication with providers) is also key. A breakdown in either of these activities, such as a poor relationship with an important provider will have serious consequences for the business.
Most modern business models now require brands to build out and work with various key partners to fully leverage their business model.
This includes partnerships such as joint ventures and non-equity strategic alliances as well as typical relationships with buyers, suppliers, and producers.
A great example of a strategic partnership would be between ThePowerMBA and Forbes . In exchange for exposure of our brand to the magazine’s global audience, we provide expertise and content on high-level business education programs.
As we touched upon when discussing key activities , Zara requires strategic partnerships with many different providers if they are to design and produce their collections.
Another key partner is their major holding company, Inditex .
Inditex has several subsidiaries including Massimo Dutti , Pull & Bear , and Oysho . Being a subsidiary of Inditex means they share a consolidated balance sheet, stakeholders, management and control, and various legal responsibilities.
While as a subsidiary Zara is afforded certain freedoms when it comes to design, delivery, and the general running of the company, the overall strategy will need to be aligned with Inditex and its other subsidiaries.
The final step of the Business Model Canvas is to ask yourself, how much is it going to cost to run this model?
This includes some of the more obvious needs such as manufacturing costs, physical space, rent, payroll, but also areas such as marketing activities.
If you are unsure of exactly what to include in your cost structure take a look at a Profit and Loss statement ( P&L ) from a competitor or company in a similar industry to yours. You’ll find many items overlap such as research and development ( R&D ), cost of goods sold, admin expenses, operating costs, etc.
Once that’s done you should prioritize your key activities and resources and find out if they are fixed or variable costs .
As Zara is such a large, corporate business they are going to have both fixed costs (rent, payroll, point of sales personnel) and variables, such as costs associated with the fluctuating sale of goods, purchase of materials and, manufacturing costs.
Once you’ve completed these 9 steps, your Business Canvas Model should look something like this:
Business Model Canvas Examples
Hopefully, you were able to get a good feel for the effectiveness of the business model canvas with our run-through of Zara.
However, if you found it difficult to follow due to the stark difference between your industries, I’m going to quickly go through 3 more companies to demonstrate the tool’s flexibility:
- Netflix (Media service/production)
- Vintae (Vineyard)
Even if these business model canvas examples don’t align exactly with your industry, I honestly believe that studying different models gives you a competitive advantage in your professional career regardless.
If you’re currently employed by a company, you’ll better understand how your specific role helps the company achieve some of its “long-term” goals.
Alternatively, if you are a business owner yourself (or perhaps thinking of starting your own business) you’ll have a better understanding of your business and where potential opportunities lay.
I’m sure you’re familiar with our next business model canvas example candidate, Netflix .
The global media company offers an online streaming service of various movies, documentaries, and TV programs produced in-house or licensed 3rd-party content. Their success sparked a revolution in the online media world with the likes of Amazon, Apple, Disney, HBO, and Hulu all rushing to launch their own online video streaming platforms.
Netflix started life as an online DVD rental company, basically a web version of the more popular (at least at that time) “bricks and mortar” Blockbuster.
Co-founder Reed Hastings predicted as far back as 1999 that the future of media was in online streaming, saying “postage rates were going to keep going up and the internet was going to get twice as fast at half the price every 18 months.”
It wouldn’t be until 2007 that Hasting’s prediction would become true when Netflix, as we now know it, was born.
So let’s take a current look at their business model canvas:
As you probably know, there are very few people out there who haven’t subscribed, watched, or at least heard of Netflix. There is content for everybody: wildlife documentaries, sci-fi movies, rom coms, action-thrillers, you name it – it’s there.
That’s why their customer segment can be classified as a “ mass market ” as the base is just so diverse.
All people require is a computer, TV, internet, and/or smartphone and they’re good to go. For most developed markets, that covers just about everybody.
Whether on the train to work, sitting in the car (if you’re not driving!), or relaxing at home in front of the TV, you can consume their online, on-demand video streaming service.
They also have a huge library of content for consumers to choose from, ensuring that people keep coming back, as well as increasing their mass-market appeal.
They also produce high-quality, original content to differentiate themselves from their competitors.
Most people access Netflix either through their website or mobile/TV App . Another popular channel that you may have picked up on is their affiliate partners .
You’ve perhaps signed up for a mobile, TV, and internet package where the provider offers Netflix as an extra to sweeten the deal, so to speak.
That would be an example of an affiliate partnership between Netflix and mobile service providers.
I doubt many consumers have had direct contact with Netflix unless it’s to resolve a subscription issue or general query. It’s very much a self-automated service – you download the app, select the program you wish to watch, and hit play.
Very simple, very effective.
Again, this doesn’t need much embellishment. Netflix generates money from the different tiers and packages put together in their subscription services.
This varies depending on the region to account for local markets, but on the whole, it’s sold at a low price point.
Originally, Netflix’s Key Resources would have been their unrivaled DVD collection combined with a cost-effective mail-order system.
Nowadays it’s undoubtedly the rights to stream online video content. Netflix has brokered deals with some of the biggest production studios worldwide.
Combined with their huge library of in-house productions , it’s more than enough to encourage customers to renew their subscriptions.
To help sustain interest in their product, Netflix understands they need to serve-up relevant content for each sub-sector of their mass audience. Therefore their machine learning algorithm selects content for consumers based on streaming habits (what they watched, at what time, etc,.) to personalize the customer experience.
This explains why over 80% of all content streamed on Netflix was cherry-picked by this algorithm, making it a Key Resource for their business model.
Also, Netflix accounts for a whopping 12.6% of global bandwidth usage . The literal capacity to stream their services must be met meaning bandwidth must also be included here.
Content procurement is arguably their biggest Key Activity. They need to find people to produce and deliver their original content, including actors, studios, writers, etc. as well as secure the licensing and streaming rights from 3rd party producers such as Sony, Warner Bros, and Disney.
Finally, they need a fast, easy-to-use application to host their online streaming service. This needs to be available for both TV and mobile devices if they are to deliver their “on-demand” value proposition.
K ey Partners
Seeing as Netflix’s entire business model is largely based around streaming 3rd party content, key partnerships need to be built with production studios . No content, no Netflix!
Also, as we touched upon earlier Netflix is one of the largest consumers of bandwidth worldwide. If the speed and delivery of their streaming service are to be continued then deals will also need to be made with internet service providers (ISPs).
Netflix’s biggest expenditures come from both their in-house content procurement and 3rd party licensing agreements . The high-quality standard of video streamed on Netflix is only possible due to the speed and performance of its online platform and application , which has additional costs of staff, software, etc.
To show you just how flexible the business model canvas can be, I wanted to throw in a slightly leftfield example. Vintae is a Spanish wine producer who, after a detailed analysis of the business model canvas, was able to innovate and disrupt one of the world’s most competitive industries.
As some of you may know, the wine industry is extremely competitive. It’s also steeped in history and tradition , making it very challenging for newcomers to grab market share, let alone think about year-on-year growth and revenue.
However, CEO “Richi” Arambarri looked at the traditional “ bodega ” business model and saw a chink in its armor.
A “small” innovation in the business canvas model helped them to become one of the region’s most important winery groups, with over 10 installations and a presence across all regional denominations (Rioja, Priorat, Rias Baixas, etc.) with year on year growth of 30% – practically unheard of in such a competitive industry.
So how did Vintae analyze the business model canvas to find a niche in their market?
To answer that question, we must first look at the traditional winery business model .
As you can see, the wine industry has historically been patrimonial. Vineyards and estates are passed down through generations with the winery responsible for all phases of production, clarification, and distribution.
The traditional winery business canvas model suggests you must be the owner of the winery/vineyard where the wine is “manufactured”, meaning physical assets are a key resource of the business model.
So, if you wanted to start producing a Rioja, for example, you’d have to set up your vineyard in the region.
This is monumentally expensive as you need to:
- Purchase the land
- Plant a vineyard
- Absorb set-up and installation costs
- Deal with maintenance costs
It’s here where Vintae saw their opportunity.
What if we move vineyard ownership across the business model canvas from key resources to key partners ?
By leasing the equipment and space of large wineries (of which there was plenty), they could still produce their wine but reduce the cost and exposure associated with land purchase, crushing equipment, huge storage tanks, vineyard maintenance, and their bottling line.
This enabled them to focus on their sales, marketing, and distribution channels to create a better brand experience for their customers.
Also, it afforded them more flexibility when creating new wines as they were no longer confined to the limitations of grapes grown on their vineyard.
The lightness of this new business model eliminates maintenance overheads, channels energy into personalizing the customer experience, and allows for unprecedented levels of growth in one of the world’s most competitive industries.
Business Model Canvas Software
Although I did mention starting with a large whiteboard, sticky notes, and a pack of colorful sharpies there are several options in which you can digitize the business canvas model production process.
While I still believe the aforementioned process is extremely valuable (it gets your entire team’s input in a single hour-long session) you may decide it more viable for each member of management to pool their ideas digitally before sharing with the rest of the group.
If that’s the case, then take a look at some of the following software tools for creating your business model canvas.
Created by the founders of the business model canvas Alex Osterwalder and Yves Pigneur , Strategyzer offers a range of business model canvas templates for you to get started with.
If you opt for the paid model (there is a 30-day free trial period) they offer a series of various classes that teach you how to build and test different value propositions and business models.
A real-time built-in cost estimator analyzes the financial viability of some of your business ideas, identifying alternative areas you may wish to explore with your model.
All-in-all, it’s a great resource to play around with and test some of your business ideas, with the option to dive into further detail if you see fit.
Canvanizer is a free, easy-to-use web tool that allows you to share links between team members who are brainstorming ideas for a business model canvas, but working remotely.
Like Strategyzer, there are several business model canvas templates provided to help you get started with your analysis. The strength of this platform is its accessibility. Much like a Google Doc., several people can brainstorm on the same canvas simultaneously with changes being synchronized automatically.
A ThePowerMBA alumni, impressed by the simplicity and effectiveness of the tool, went ahead and created the free application Business Model Canvas Tool .
It’s an incredibly intuitive, and easy-to-use tool that allows you to create templates simply by clicking the + button in each building block.
Each business model canvas created can be downloaded and shared as a pdf. with the rest of the team.
If, after going through our 9-step guide on how to use the Business Model Canvas you’d like to learn more about different business model analysis tools , take a look at our alternative MBA business program .
As you’ll see, the course gives students a 360-degree view of business and management practices – such as engines of growth, segmentation and targeting, and value propositions.
I highly recommend you go check it out.
Regardless, I’d love to hear what you thought about this guide. Was it helpful? Would you like to see additional business cases analyzed from your industry?
Let us know in the comments below.
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Jul 7, 2016
How To: Business Model Canvas Explained
Use this tool to quickly and easily define and communicate a business idea..
The Business Model Canvas (BMC) is a strategic management tool to quickly and easily define and communicate a business idea or concept.
It is a one-page document that works through the fundamental elements of a business or product, structuring an idea in a coherent way.
The right side of the BMC focuses on the customer (external), while, the left side of the canvas focuses on the business (internal).
Both external and internal factors meet around the value proposition, which is the exchange of value between your business and your customer/clients.
Why do we use it?
- To quickly draw a picture of what the idea entails.
- It allows us to get an understanding of your business and to go through the process of making connections between what your idea is and how to make it into a business.
- It looks at what kinds of customer decisions influence the use of your systems.
- It allows everyone to get a clear idea of what the business will likely be.
How to use it
Value Proposition:
The Value Proposition is foundational to any business/product.
It is the fundamental concept of the exchange of value between your business and your customer/clients.
Generally, value is exchanged from a customer for money when a problem is solved or pain is relieved for them by your business.
Good questions to ask when defining your business/product:
- What is the problem I am solving?
- Why would someone want to have this problem solved?
- What is the underlying motivator for this problem?
A good way to approach this for users/customers is by looking at your customer segments and figuring out where your product/service solves the problem for your customer, based on Maslow’s Hierarchy of Needs .
If you are selling your product or service to another business, you are a key partner in them achieving their Value Proposition for their customers.
It is important to have context around the goals the company is trying to achieve for their Customer Segments and where your business/product/service fits in the value chain.
Customer Segments
Customer Segmenting is the practice of dividing a customer base into groups of individuals that are similar in specific ways, such as age, gender, interests and spending habits.
Things to consider when determining your Customer Segments:
- Who are we solving the problem for?
- Who are the people that will value my value proposition?
- Are they another business?
- If so, what are the characteristics of those businesses?
- Or, are they other people?
- Does my value proposition appeal to men/women or both?
- Does it appeal to young adults aged 20 to 30 or teenagers?
- What are the characteristics of the people who are looking for my value proposition?
Another thing to gauge and understand is your market size, and how many people there are in the Customer Segment. This will help you understand your market from a micro and macro perspective.
A great place to start understanding your customer is to create customer personas for each of your Customer Segments.
You can read the guide to Persona Development here.
Customer Relationships
Okay, so we know our Value Proposition and have developed Personas to better understand our Customer Segments or ‘customers’, but what is the relationship we have with our customers?
Customer Relationships is defined as how a business interacts with its customers.
So, do you meet with them in person? Or over the phone? Or is your business predominantly run online so the relationship will be online too?
Some examples are:
- In-person (one-to-one)
- Third-party contractors
- Events (one-to-many)
A really helpful step is to create a User Journey Map of your customers as they interact with your business.
This helps clarify the points of engagement between you and your customer and the modes used to relate to your customers.
This will also help you start to define your operations as a business and also help you identify opportunities for automation.
Channels are defined as the avenues through which your customer comes into contact with your business and becomes part of your sales cycle.
This is generally covered under the marketing plan for your business.
Good questions to ask when identifying the channels to reach your customers are:
- How are we going to tell our customer segment about our value proposition ?
- Where are our customers?
- Are they on social media?
- Are they driving their car and listening to the radio?
- Are they at an event or conference?
- Do they watch TV at 7pm on a Friday night?
Examples of channels:
- Social media
- Public speaking
- Electronic mail (email marketing)
- SEM (Search Engine Marketing)
- SEO (Search Engine Optimisation)
- Engineering as marketing
- Viral marketing
- Targeting blogs
- Sales and promotions for commissions
- Existing platforms
- Unconventional PR
- Social advertising
- Trade shows
- Content marketing
- Community building
- Offline advertising (billboards, TV, radio)
Understanding how to reach your customers is so crucial to your business.
We recommend you listen to Traction (Audiobook) by Gabriel Weinberg & Justin Mares.
Key Activities
The Key Activities of your business/product are the actions that your business undertakes to achieve the value proposition for your customers.
Questions to ask:
- What activities does the business undertake in achieving the value proposition for the customer?
- What is the resource used?
- Distribution of product?
- Technical development?
- Offer resources (human/physical)?
- What actions does it take you and/or your staff to achieve value exchange?
- Web development
Key Resources
Next, you should think about what practical resources are needed to achieve the key activities (actions) of the business.
Key means the resources your business requires to do business.
These resources are what is needed practically to undertake the actions/activities of your business:
- Office space
- People (staff)
- Internet connection
- Electricity
Key Partners
Key Partners are a list of other external companies/suppliers/parties you may need to achieve your key activities and deliver value to the customer.
This moves into the realm of ‘if my business cannot achieve the value proposition alone, who else do I need to rely on to do it?’.
An example of this is ‘if I sell groceries to customers, I may need a local baker to supply fresh bread to my store’.
They are a key partner to achieve the value my business promises to the customer.
Cost Structures
Your business cost structure is defined as the monetary cost of operating as a business.
- How much does it cost to achieve my business's key activities?
- What is the cost of my key resources and key partnerships?
- How much does it cost to achieve the value proposition for my customers/users?
- Are there additional costs to running a business?
- What is the cost of my business?
- It is important also to place a monetary value on your time as a cost.
- How much would it cost you to hire you?
- What is the opportunity cost of running your business?
Revenue Streams
Revenue Streams are defined as the way by which your business converts your Value Proposition or solution to the customer’s problem into financial gain.
It is also important to understand pricing your business accordingly to pain of purchase in exchange for the pain of solving the problem for your customer.
But how do you gain revenue?
There are many different revenue models here:
- Pay per product (pay per view)
- Fee for service
- Subscription
- Referral feeds
- Equity gain
Tools to Use
https://canvanizer.com/
Butchers Paper
Google Slides
Case Studies
Apple computers, related resources.
Creating a Startup: The importance of understanding your customer
Three Questions You Should Ask Before Making An App
How To: Idea Validation | Introduction to Prototyping
SEED’s Road to MVP Guide
Want some help building your startup, growing your business and creating products/services that your customers will love? Contact SHEDA to make an inquiry.
This blog originally appeared on the SHEDA website.
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Laurent Bouty
MARKETING CANVAS METHOD
Co-Creation method to assess, compare and improve your marketing strategy.
WHAT IS THE MARKETING CANVAS METHOD ?
Learn more>.
MARKETING CANVAS is a co-creation method to discover, assess and reinforce your marketing strategy which is at the intersection of the environment (where you will play), your goals (what you would like to achieve) and your actions (what you will do). The method is composed of cards, a canvas where you can capture key discussions, templates and online resources.
CO-CREATION OF YOUR MARKETING STRATEGY HAS NEVER BEEN SO EASY!
Learn more> .
A physical deck of 60 cards designed to guide you during the method. In this deck, you have 3 different categories of cards.
A SET OF TEMPLATES HAS BEEN CREATED FOR EACH STEP HELPING YOU CAPTURE YOUR DISCUSSIONS AND IDEAS
Download>.
Marketing Canvas Templates that you can use for capturing your discussion.
A ONE PAGE DOCUMENT ( POSTER ) HELPING YOU HAVE A GLOBAL VIEW OF YOUR STRATEGY
Marketing Canvas Poster with Icons, without Icons and for assessment.
EBOOK - INTRODUCTION SLIDEWARE FROM MARKETING CANVAS MASTER CLASS
54 pages used as introduction during the first day of the Marketing Canvas Master Class.
QUICK ASSESSMENT GUIDE
A quick assessment guide (one pager) allowing you to do a first assessment of your marketing strategy (one target group, one line of product). In case of interest, you can deep dive in one or multiple dimensions using the scoring grid that can be downloaded.
DETAILED SCORING GRID FOR EACH DIMENSION
In complement of the Marketing Canvas cards, you can use a more detailed scoring grid helping you to define whether your customers’ dimensions are brakes or accelerators.
In complement of the Marketing Canvas cards, you can use a more detailed scoring grid helping you to define whether your brand’s dimensions are brakes or accelerators.
In complement of the Marketing Canvas cards, you can use a more detailed scoring grid helping you to define whether your Value Proposition’s dimensions are brakes or accelerators.
In complement of the Marketing Canvas cards, you can use a more detailed scoring grid helping you to define whether your Journey’s dimensions are brakes or accelerators.
In complement of the Marketing Canvas cards, you can use a more detailed scoring grid helping you to define whether your conversation’s dimensions are brakes or accelerators.
In complement of the Marketing Canvas cards, you can use a more detailed scoring grid helping you to define whether your Metrics’s dimensions are brakes or accelerators.
WHO SHOULD USE THE METHOD?
MARKETING CANVAS METHOD is designed for startups, SoHo (Small Office, Home Office), scale-ups or large companies. It works for groups (colleagues, friends, investors, ...) or alone.
It works also for different stages of your company (Product/Market fit), Scale-Ups or Mature products.
WHEN USING THE METHOD?
MARKETING CANVAS METHOD can be used in workshops generating tremendous conversations and discoveries with a shared language or alone offering a structured methodology and analysis for your marketing strategy.
MARKETING CANVAS METHOD is a complement of the Business Model Canvas. If you have not defined your strategy yet, you should first have a robust Business Model and then you can define your Marketing Strategy. The MARKETING CANVAS POSTER is composed by 3 zones: Context (Market, Competition and Trends), your Goal (in terms of Revenue) and 6 marketing dimensions (Customers, Brand, Value Proposition, Journey, Conversation & Metrics).
The elements defined in your BMC like Key Customer Segments (=CUSTOMERS), Value Proposition (=VALUE PROPOSITION), Customer Relationships and Channels (split in BRAND, JOURNEY and CONVERSATIONS) are a good start for your Marketing Canvas.
MARKETING CANVAS METHOD has been designed for one brand and one line of products serving one market. If you are operating in different markets with different brands, you can still use the tool but you should apply the below process for each market and brand, one at a time.
MORE ON THE MARKETING CANVAS
Marketing Canvas in the world - April 2022
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Business Model Canvas: the 9-step business plan
Are you thinking about moving your business online, looking for a different strategy, or trying to identify new opportunities? Maybe your market is changing, or you are thinking of a new product. Your idea deserves a good strategy, a well-devised business plan. Write one that will last for several years and grow with your business. This makes it easier to focus and adjust where necessary. You can use the Business Model Canvas as a basis. Nine practical steps will help your progress.
What is wrong with my beermat business plan?
Most entrepreneurs write a business plan before they start their business. This traditional business plan, often referred to as a ‘beermat business plan’, outlines the financial, marketing and organisation plans for the starting company. However, the life span of this business plan is limited. Working according to the plan often proves difficult. After all, the world around us is changing rapidly. A Business Model Canvas business plan is a multi-annual business plan that enables you to look at your business strategy, the market and customers regularly. During every stage. It also helps you identify opportunities quickly. Which activities should you end, and what should you work on? This way you can continue to grow and innovate. It is a simple model that you can always adjust. Like a beermat, but better. You can also use it for components, such as your marketing strategy. For your existing company or for a whole new business case. For example, if you develop a new product together in co-creation with customers and other companies.
What is the Business Model Canvas?
The Business Model Canvas (BMC model) consists of 9 building blocks. It covers all aspects of your company, both internal and external: organisation, value proposition, customers, suppliers, costs and revenues. With the canvas model you look at the strengths and weaknesses of your organisation. But also at the product itself and at the wishes of your customers. The basis is the value proposition of your company. By that we mean your unique selling point, the distinctive power with which you earn your money. What makes your customers happy. How are you different from the competition? The model is also called the value proposition canvas.
How do I set it up?
Hang up a large sheet of paper, write down the 9 building blocks, and organise a brainstorming session. For example with your employees or collaboration partners. This way you make use of each other's ideas and vision. You start by describing the existing situation. Next, you make strategic choices and look at the changes for your company. Ask yourself questions like:
- What if we choose a different strategy?
- What if we lose the most important customer?
- What do we want to invest in?
These are the 9 building blocks of the Business Model Canvas:
1. Customer segments: who is your customer?
This section describes different groups of customers that you want to reach with your company. These people or organisations are the core of every company. It is difficult to survive without customers. Make a conscious decision about the customer groups you want to target, and the ones you don’t. Each customer group has its own wishes. Try to get a clear picture of these wishes. Adjust your product or service accordingly.
2. Value propositions: why do customers choose you?
The value proposition is the reason why customers choose your company. With the value proposition (or value proposition canvas) you solve a customer’s problem or deliver something your customer is looking for. This building block describes the product or service that creates value for a customer segment. In other words, what makes your customers happy. Why do customers purchase your product or service? Is it the good service, the unique range, the ease of use, the price or quality? Research it with your customers. Talk to your customers. It will provide you with a lot of valuable information.
3. Channels: how do customers find your company?
Channels play an important role in how a customer experiences your company. You reach your customer groups through communication, distribution and sales channels to deliver the value proposition. Simply put, how does your customer know you exist? Via the internet, social media , newsletters, the newspaper, communities? And where do they buy your product? Think about how you want to address your customer. Channels often have different functions. For example, increasing awareness about your product or service, offering service after purchasing your product or evaluation of your company by customers. Contact with the customer takes place in phases (customer journey). Find out what you do at what time and how the customer feels about it.
4. Customer relations: online or offline?
Choose how you want to interact with your customer. This can differ per customer group. From fully automated to personal face-to-face contact. This fully depends on your goal. Do you want to bring in new customers, keep existing customers, fast delivery times or an excellent customer rating? The customer relationships and contact moments you choose have a lot of influence on the entire impression you leave on your customer. It is about the reputation of your company and of you as an entrepreneur. The trick is to coordinate different channels in such a way that a great customer experience is created that pays for you.
5. Income flows: who will pay you for what?
Each customer segment can generate one or more revenue streams. For example through sales, rental or service. Of course, you have to deduct the costs to make a profit. How much turnover or customers do you need to break even? There are many different revenue models and therefore many opportunities. Do you sell individual products or subscriptions? Or do you have franchisees? Or do you generate income through service or advertising activities? Research what your customers are really willing to pay for the value you provide.
6. Key resources: what do you need to move forward?
Key resources are the tools and resources you need to make your business model work. These resources ensure that you reach your market, nurture relationships with your customers and make money. Resources can be physical (such as equipment), intellectual (patents, for example), financial or human (knowledge and skills of your employees). Which key resources you need depends on the type of business model you choose. There are all kinds of possibilities to organise this. You can purchase or lease them yourself, or use your collaboration partners’ resources.
7. Core activities: what will your company do?
This is about your most important business activities. Like key resources, you need them to make money with your value proposition, to maintain your customer relationships and to reach your markets. The most important question is: what exactly are we going to do as a company to ensure that our business model works? And what will we not do? Some activities are best done yourself. Others are better outsourced. Find out where your real added value is. Make your production process as efficient as possible and ensure that your employees' knowledge is kept up-to-date.
8. Key partners: who do you work with?
There are several reasons for collaborating with others. Choose the right partners, so that you reach your goal faster. For example, grow your company and be more successful in the markets in which you operate. Identify your strategic partners and core suppliers. Get to know your (potential) partners (in Dutch) well to ensure a successful collaboration.
9. Cost structure: what does it look like financially?
Costs also come with a business model. Identify your financial needs (in Dutch). Are your key resources, core activities and key partners clearly defined? Then it is quite easy to calculate the costs. What are your highest costs, where can you cut costs, and can you achieve economies of scale?
Done, what now?
Once you have taken all the steps, you will have a good idea of your current situation. Next, look at what you want to change. Now is also a good time to take a look at other companies. You can find many completed canvas models for inspiration online.
Is your plan more or less ready? Organise a sparring session with an advisor or a good friend. With someone you trust. You did not devise this plan to put it in the desk drawer. Translate it into concrete actions. That way your plan will become a success.
This article is based on the Dutch translation of the book 'Business Model Generation' (2010) by Alexander Osterwalder and Yves Pigneur.
Lees dit artikel in het Nederlands
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HDD & More from Me
The 20 Minute Business Plan: Business Model Canvas Made Easy
Table of Contents
What’s the Business Model Canvas?
How do you get started, why use the business model canvas, when should you use the business model canvas, how do you use the canvas to facilitate alignment and focus, step 1 (of 10): customer segments, step 2 (of 10): value propositions, step 3 (of 10): channels, step 4 (of 10): customer relationships, step 5 (of 10): revenue streams, step 6 (of 10): key activities, step 7 (of 10): key resources, step 8 (of 10): key partnerships, step 9 (of 10): cost structure, step 10 (of 10): applications, analysis & next steps, example a: enable quiz (startup), example b: hvac in a hurry (enterprise), using the google doc’s/powerpoint template.
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If you’re already familiar, you can skip to the next section, ‘ How do I get started ?’.
The Business Model Canvas (BMC) gives you the structure of a business plan without the overhead and the improvisation of a ‘back of the napkin’ sketch without the fuzziness (and coffee rings).
Together these elements provide a pretty coherent view of a business’ key drivers–
- Customer Segments : Who are the customers? What do they think? See? Feel? Do?
- Value Propositions : What’s compelling about the proposition? Why do customers buy, use?
- Channels : How are these propositions promoted, sold and delivered? Why? Is it working?
- Customer Relationships : How do you interact with the customer through their ‘journey’?
- Revenue Streams : How does the business earn revenue from the value propositions?
- Key Activities : What uniquely strategic things does the business do to deliver its proposition?
- Key Resources : What unique strategic assets must the business have to compete?
- Key Partnerships : What can the company not do so it can focus on its Key Activities?
- Cost Structure : What are the business’ major cost drivers? How are they linked to revenue?
The Canvas is popular with entrepreneurs and intrapreneurs for business model innovation. Fundamentally, it delivers three things:
- Focus : Stripping away the 40+ pages of ‘stuff’ in a traditional business plan, I’ve seen users of the BMC improve their clarify and focus on what’s driving the business (and what’s non-core and getting in the way).
- Flexibility : It’s easier to facilitate alignment by tweaking the model and trying things (from a planning perspective) with something that’s sitting on a single page.
- Transparency: Your team will have a much easier time understanding your business model and be much more likely to buy in to your vision when it’s laid out on a single page.
The first time you engage with the canvas, I recommend printing it out or projecting it on a whiteboard and going to town (see below for a PDF). However, if you’re ready to put together something a little more formal (for distribution, presentation, etc.) here’s a Google App’s template you can copy or download as MSFT PowerPoint:
*Omnigraffle a popular diagramming program for the Mac. It has a fairly easy to use layering environment which you may find handy as you want to tinker with and produce different views of the canvas. You can try Omnigraffle for free (the basic paid version is $99).
The short answer is this: because it’s simple yet focused and that means more of your audience is likely to pay attention to it. Also, it’s highly amenable to change on the margins.
This matters a lot- more than most people think. A company that wants to innovate has to be ready to be wrong . A good VC in early stage investments succeeds with a prevalence of something like a 1/10. If you think you’re doing a lot better than that with substantial new innovation investments (a startup or a new line of business inside an enterprise) you’re probably throwing good money after bad.
Transparency, simplicity, and focus are great facilitators of the ‘creative destruction’ a good innovation program needs, and the Canvas does a nice job of delivering that across lines of business. For a large corporation with multiple lines of business at various levels of maturity, I actually prefer the Corporate Innovation Canvas as a starting point. However, from there, the Business Model Canvas does an excellent job of bringing clarity to the questions of how, for example, a given line of business creates focus and then implements it in an innovation-friendly way with, for example, ‘objectives and key results’ OKR’s . It’s a central element in the ‘innovation stack’ where an enterprise is able to go from priority innovation areas (with the Corporate Innovation Canvas) to testable business model designs (with the Business Model Canvas) to product charters (with an agile team charter ) to individual learning pathways to cultivate the talent they need to execute.
Even more important than the top down cascading of objectives with testable results and KPI’s is the improvement in the feedback in outcomes that helps the overall innovation program learn and adapt quickly. With layer appropriate innovation metrics, it’s much easier for the achievements of individuals to cohere (or not) to the job of teams and in turn from there to lines of business back up to corporate objectives. This helps both help the company’s talent understand where they might benefit from more practice and learning as well as what constitutes success in their individual roles and collaborations.
Anytime you want to have a focused discussion about what matters to a given line of business, the Business Model Canvas is a good place to start. The Canvas has received a lot of attention as a tool for startup entrepreneurship. While this may be one of the ‘sexier’ and more ostensibly simple applications of the Canvas, I actually think it’s one of the least compelling. For a startup, the only thing that matters is product/market fit, which the Canvas represents as a set of relationships between Customer Segments and Value Propositions. The Canvas doesn’t do a bad job of describing this, but it’s kind of overkill- the whole left side of the Canvas which describes the delivery infrastructure is mostly irrelevant for startups that are still finding product market fit, since all that’s provisional about where (and whether) they arrive at product/market fit.
Where the Canvas really shines is describing an existing line of business to answer questions like: a) What does product/market fit mean for this business? b) Where have we focused our company building and is it still relevant to ‘a’? c) What are our key revenue, cost, and profit drivers, and how do we improve those?
Now we’re taking! Whether you’re an ‘intrapreneur’ exploring a new extension to the business or a ‘digital transformation’/IT consultant trying to facilitate a discussion about what ‘strategic IT’ means and how you’ll know if you achieve it, the Canvas is a quick and productive place to anchor such a discussion.
First and foremost, I’d try it out for yourself. Fill out the elements the business you’re working on and then ask yourself ‘Does this make sense?’ ‘What are the most important linkages and components of the model?’
From there, you may just want to use the Canvas you sketch to facilitate alignment on some other topic. However, if you’re working with a team on a new venture or with a client on a new project, you may then want to take it from the top and facilitate a workshop where you facilitate a fresh take on the Canvas, levering your experience thinking through it once. The link below will take you to a related curriculum item that has workshop slides, prep. items, and agenda.
LINK TO WORKSHOP PAGE
Otherwise, the next sections (10 steps) offer a tutorial on how to think through a business model design with the Canvas. The closing sections offer notes on how to use the Google Doc’s/PowerPoint and Omnigraffle templates.
Output : a list of Personas, organized by Customer Segment if you have more than one segment. I recommend trying to prioritize them- Who would you pitch first if you could only pitch one? Who next? And so forth…
Notes : If you’re spending a lot of time on this first item, that’s OK (and it’s probably good). The Canvas is a tool, not a strategy and not all the nine blocks are equal. The pairing of Customer Segments and Value Propositions is really the ‘independent variable’ that should be driving everything else in your business model. When I use the Canvas in my Venture Design classes, we usually spend all of the first session (plus time for field research) on Customer Segments and Value Propositions.
For example, at Leonid, an enterprise software company I founded, we thought our largest customers worked with us because of the cost savings we offered and our knowledge about best practices. It turned out that was mostly wrong- reducing their time and risk to get new services to market was the most important. It’s not that the other things weren’t important, but they weren’t the top Value Proposition. That made a difference on how we sold the product and how we focused on operationalizing it for customers.
This mapping says ‘We have 3 personas. Persona 1 cares about VP 1 & 2. Persona 2 cares about VP 2; Persona 3 cares about VP3. (One segment only so segments not noted)’.
Output : a prioritized list of Value Propositions and linkages from each Personas to the VP’s relevant to them.
Notes: Again, this pairing is the key driver for most business models and if you want more on how to describe and discovery what to put in this part of the canvas, I recommend this: Tutorial- Personas .
Maybe you feel like you’re in good shape on understanding the customer’s world but you don’t have any validation on whether the Value Propositions are clicking because this is a new venture? If you’re not sure, that’s OK and good for you for acknowledging the uncertainty! It’s the responsible thing to do. The key is to write down those assumptions, prioritize them, and figure out the quickest and cheapest way to prove or disprove them. That’s what Lean/Startup is about and there are resources here to help you with that, if you’d like- Tutorial: Lean Startup .
Channels includes entities you use to communicate your proposition to your segments, as well as entities through which you sell product and later service customers (see AIDAOR journey below). For example, if you sell bulbs for light houses and there’s a website all light house attendants purchase equipment, that site is a sales Channel. If you use Google AdWords, that’s a Channel, too (for getting attention). If you use a third party company to service the bulbs when they break, that’s also a Channel.
Output : a list of important Channels, linked to Personas or Segments if they differ substantially. Make notes on what steps are relevant for each- promotion, sales, service, etc. See Note this section for more structure on this.
Notes: Channels and the next item, Customer Relationships, define your interface with the Customer. It’s important to think all the way through the customer ‘journey’ in specific terms. For most businesses, the way they get a customer’s attention is different than the way they onboard them or support them over the long term. For this, I recommend the AIDA.OR framework (attention-interest-desire-action-onboarding-retention) and storyboarding your way through it. Here’s a post explaining all that- Storyboarding AIDA(OR) . If you don’t want to do the storyboards, I recommend at least making notes about your customer journey through the AIDA(OR) steps.
Another consideration is whether your channels will give you enough visibility into the user, including, for example, a way to follow up with users. Not sure? Document your assumptions Lean Startup style and figure out how you’ll quickly prove or disprove them.
Output : a description of Customer Relationships, with notes if they differ across Customers (between Segments or among Personas within a Segment) or across the customer journey.
Notes: If you’re a startup, be sure to document and review critical assumptions here. Also, the focal items are in a kind of specific order- you should validate your Segments and their relationship to the Propositions above all else. If this means you provide personal support in the early days (a ‘concierge test’ in Lean Startup terms) to do discovery and validation of Segments and Propositions, that’s OK. You can subsequently test the Customer Relationship models. (Here’s a post on using consulting as a concierge vehicle in B2B if you want more detail: Consulting as B2B Concierge Vehicle ).
Notes : If you have a startup or are re-engineering the business, this is a time to look at where you’re driving revenue and whether it aligns with the rest of your focal points. Are you charging on value? Perceived value? They say everyone loves their banker; hates their lawyer. Why is that? Is there an actionable analog in your business?
For a product-driven business, this probably includes ongoing learning about users and new techniques to build better product. If you’re focused on doing a bunch of things for a particular set of customers (ex: comprehensive IT for law offices), this probably includes maintaining superior expertise on the segment(s) and creating or acquiring products and services that are a good fit, whatever that entails. For an infrastructure business (ex: electric utility), it probably includes keeping the infrastructure working reliably and making it more efficient.
Outputs : a list of Key Activities linked to your business’ Value Propositions.
Notes : One question this analysis should raise for you is whether or not certain Activities and Resources are actually core, actually focal to your business, something you’ll want to think through .
Outputs : a list of Key Resources linked to your business’ Key Activities.
Notes : Product-driven businesses have a differentiated product of some sort. Rovio, the company that makes the popular app Angry Birds, is such a company. Key Resources in product-driven businesses are typically key talent in critical areas of expertise and accumulated intellectual property related to their offering.
Scope-driven businesses create some synergy around a particular Customer Segment. For example, if you started a business that would take care of all the IT needs for law firms, that would be a scope-driven business. These businesses typically have key knowledge about their segment, a repeatable set of processes, and sometimes infrastructure, like service centers.
Infrastructure-driven businesses achieve economies of scale in a specific, highly repeatable area. Telecommunications is traditionally an infrastructure business. Retailers focused on retail, like Walgreens or Costco, are primarily infrastructure-driven businesses. The Key Resources for this type of business are, you guessed it, various types of physical or virtual infrastructure.
Let’s take a single product category: diapers. The Honest Company or another innovating around compostable or otherwise more environmentally friendly diapers would be a product-driven take on the category. Procter & Gamble which has a cradle-to-grave strategy for providing consumer products is a scope-based take; so are various baby-focused retailers. Kimberly-Clark (wood pulp) or DuPont (chemicals and polymers) are both infrastructure-based takes: diapers is just another way to sell something they produce at scale with relatively little differentiation.
If there are major cost components that don’t map to a Key Activity, I’d take a closer look at those costs.
Output : a list of Cost Structure elements with notes on their relationship to Key Activities.
Congratulations- you have a working canvas! The section below offers a few analytical ideas and suggestions for next steps.
Core Applications The most core and obvious applications of the Canvas are to ask: – Does it make sense? – Could it be better? – Does the rest of my team understand and agree? Have additional ideas? – (rinse and repeat at least quarterly)
Competitiveness The canvas does a good job of helping you figure out your business, which is a good place to start. You also want to look at the competitive environment and think about if and how you have/maintain a long term competitive advantage.
For this, I like Michael Porter’s Five Forces framework ( Wikipedia Page ; see also Chapter 2 of ‘ Starting a Tech Business ‘). Try walking through the Five Forces for your company and then bounce back to your canvas. How does it all hang together?
Next Steps Every business is a work in progress (sorry, I try to avoid saying things like that but it seemed to fit here). As you go through the canvas, you may encounter areas that give you trouble. The table below summarizes a few of the most common that I see in my work as a mentor and coach:
Want to make innovation an everyday thing?
What is Enable Quiz?
Enable Quiz is a (fictional) startup that’s building a lightweight quizzing application for companies that hire a lot of technical talent (engineers). Their take is:
For hiring managers who need to evaluate technical talent, Enable Quiz is a talent assessment system that allows for quick and easy assessment of topical understanding in key engineering topics. Unlike formal certifications or ad hoc questions, our product allows for lightweight but consistent assessments of technical talent.
Why and how would Enable Quiz use the Business Model Canvas?
They have a small team, but arriving at a clear, shared understanding of what they’re after is still important. That said, it’s important that the way they talk about this is both highly visible and amenable to change. Given that, the Canvas is a good fit.
The Business Model Canvas at Enable Quiz
This page shows Enable Quiz’s current working view of product/market fit:
What is HVAC in a Hurry?
HVAC in a Hurry is a mid-sized enterprise that services commercial HVAC (heating, ventilation, and air conditioning) systems. Their take on the business is:
For facilities managers & business owners who need their heating & cooling systems managed and repaired, HVAC in a Hurry is a full service provider that allows for easy and responsible management of a business’ HVAC systems. Unlike smaller firms, our commitment to best practices and training allows customers to worry less and realize superior total cost of ownership for their HVAC systems.
Why and how would HVAC in a Hurry use the Business Model Canvas?
HVAC in a Hurry has a working version of product/market fit. However, their industry is competitive and successful firms increasingly use technology to improve customer experience (CX) and reduce cost (overhead) in their operations. HVAC in a Hurry has a small ‘digital transformation’ team that’s working on digital applications to improve the company’s performance. This team decided to use the Canvas to ‘manage upwards’ in order to facilitate better discussions about where they should focus, how that aligns with the business as a whole, and what success definition makes sense for them.
The Business Model Canvas at HVAC in a Hurry
Here’s their current view of product/market fit:
If you’re not familiar with it, Google Doc’s is a web-based office suite, similar to MS Office. If you have a gmail account, you can access it (no guarantees- that was the case last time I checked).
First, you’ll want to link to the template file: BUSINESS MODEL CANVAS TEMPLATE IN GOOGLE DOC’S .
Once you’re accessed the file, you can make make it your own by going to the File menu and either ‘Make a copy…’, creating a copy in your own Google App’s domain or you can use the ‘Download as…’ option to download it as PowerPoint (and a few other formats).
What’s your experience with the Canvas? How have you used it? What worked? What didn’t? Please consider posting a comment!
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How to Build a Product Roadmap Based on a Business Model Canvas
Could you list all of the key building blocks you need to develop, manage, maintain, market, and sell a product on a single sheet of paper? With the business model canvas, you can! Using the business model canvas approach is a great way to force yourself to focus on the most strategically important elements of your product. As the name suggests, the typical use case for this tool is to outline the fundamental building blocks of a business, but it also can work really well for a product.
Today we’ll show you how the business model canvas works and how you can use it to come up with a high-level product strategy.
What is a Business Model Canvas?
As you can see from the sample example below (thanks, Strategyzer.com), a business model canvas is a one-page summary describing the high-level strategic details needed to get a business (or product) successfully to market.
The categories or buckets contained in a canvas can be customized. But most will look similar to the one here—covering such key areas as:
- The product’s value propositions (what it does and promises)
- Customer segments (who it’s for)
- Key activities (the steps the team must complete to make it successful)
- Key resources (what personnel, tools, and budget the team will have access to)
- Channels (how the organization will market and sell it)
- Customer relationships (how the team will support and work with its customer base)
- Key partners (how third parties will fit into the plan)
- Cost structure (what it costs to build the product as well as how to sell and support it)
- Revenue streams (how the product will make money)
If you think about it, that’s a fairly comprehensive set of building blocks you’ll need to think through for your product before you begin developing it. There will certainly be additional factors that’ll affect your strategy, but if you can fill in these high-level details—which, as you can see, should fit comfortably on a single page—you’ll have a useful strategic guide for developing your product roadmap.
Why Should I Use a Business Model Canvas to Develop a Product Roadmap?
Okay, but why? What’s the benefit of building a business model canvas (or the, even more, stripped-down variation, the lean canvas) to guide my product roadmap ?
There are plenty of reasons. But simply put, you can think of a business model canvas as a mission statement for your product roadmap. It’s a handy reference you can refer to, to make sure your roadmap always reflects all the strategic elements needed for your product’s success.
Tweet This: “Think of a business model canvas as a mission statement for your product roadmap.”
Our co-founder Jim Semick has a couple of great short videos explaining the business model canvas concept, which you can check out in the player below.
As Jim explains, here are a few of the benefits of using a business model canvas to think through product strategies:
1. You can use a business model canvas to roadmap quickly.
You can use this canvas approach in just a few hours (and as Jim says, you can even do it with sticky-notes).
This way, rather than trying to write out every detail about your product plan beforehand, you can just document the highlights—and then you can get rolling translating the canvas into your product roadmap.
2. A business model canvas will be more agile.
One problem with the old structure of documenting a business model—the traditional business plan—was that it was almost always inaccurate as soon as the author finished drafting it.
These meaty plans included detailed cost estimates, revenue projections going years into the future, and long-term plans for growing the staff. How could any of that remain accurate for long?
In product terms, you can think of the business plan as resembling an MRD (Market Requirements Document). It’s long, detailed, and probably mostly untrue by the time it’s done.
But because you can put a canvas together so quickly, it will much more accurately reflect your strategic thinking and your company’s current reality. And if things change, it’ll be easier than a long and detailed plan to adjust. This brings us to Jim’s third benefit…
3. Business model canvas roadmaps allow you to pivot as needed.
If you build a business model canvas to guide your business roadmap , and something happens that forces you to re-prioritize or pivot your product , it will be a lot easier to update this short, high-level document than it would be if you had some monster MRD or business plan to tear apart and edit.
With a one-page business model canvas acting as the strategic undergirding for your roadmap, you’ll always be able to quickly spot any items or plans that need updating whenever priorities change or new realities demand that you adjust your approach.
How Can I Use A Business Model Canvas to Guide My Product Roadmap?
The alexa example.
Let’s talk through a hypothetical example, using Amazon’s Echo device (“Alexa”) as our guide.
Imagine that as they were talking through what belonged in the “Revenue Streams” bucket of the business model canvas, Amazon’s Echo team came up with three sources of revenue to start with:
1) Selling Echo devices.
2) Using the device to sell other stuff as customers ask it to connect to the Amazon marketplace. (“Alexa, please add laundry detergent pods to my shopping cart.”)
3) Licensing Echo’s proprietary speech-recognition technology to other businesses.
Now, if the Echo product team put these on their business model canvas, they’d know that they need to make room for budget, time, and resources on their product roadmap for all of these revenue streams.
Another Hypothetical Example of the Business Model Canvas: Channels
Or think about the Channels bucket in the business model canvas. If your team was building out a canvas, maybe you’d have several ideas for reaching customers:
1) The in-house sales team. 2) Affiliate partners. 3) Word-of-mouth advertising from users.
It’s easy to write. But how are you going to translate that “word-of-mouth” strategy into an actual plan?
Maybe you’ll need to budget time and resources for developing things right into your product that make it easier for users to share their experiences with friends, such as a handy tool to help them tweet about it. Maybe you’ll even want to include an “Invite a friend” feature that lets users easier send a trial license to friends, or a couponing feature that offers some reward to a user who brings in two more users.
The point is, your business model canvas can serve as a great strategic reminder of the things you’ve determined are important enough to make it onto your product roadmap .
So you can always look back and see immediately—it’s just one page, after all—if you’re still working on all of the essential elements of your product, or if you’ve inadvertently strayed from them and gotten lost in the wrong details.
That’s why we’re big proponents of the business model canvas approach to guiding your product roadmap .
Do you have an opinion about using the business model canvas approach for developing and documenting your product’s strategy? Feel free to share them in the comments section.
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Business Model Canvas Examples
How to use the business model canvas
The business model canvas is a tool used by business owners and managers to plan their strategy and business model. This tool can be used to plan any sort of business, from niche to mass markets. In this article, we have prepared some business model canvas examples using our template .
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- Business Model Canvas Template
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There are nine main building blocks in the business model canvas template:
- Key Partners: The strategic relationships your business creates with other companies or people.
- Key Activities: Activities or tasks that are integral to operating your company.
- Key Resources: Assets that are required to operate and deliver your company’s value proposition .
- Value Proposition : The fundamental need that your company is trying to fulfill for its customers. Why your company exists.
- Customer Relationships: The type of interactions your company has with its customers and the level of support it gives.
- Channels: Different methods that your company uses to deliver its products and value proposition to customers.
- Customer Segments: The different groups of customers that your company interacts with.
- Cost Structure: How a company spends money on operations. The key costs and level of cost-focus for your company.
- Revenue Streams: Your company’s sources of cash flows .
The following are some business model canvas examples for different businesses and industries:
#1 Automobile Company Example
The first of these business model canvas examples is for an automobile company. The company that is portrayed in this example is a company with a focus on safety, reliability, style, and mass appeal. For example, a company like Honda or Toyota would fit the description of this business.
#2 Amazon Example
The second of these business model canvas examples is for an e-commerce company. This business model canvas example will be a simple look at Amazon , one of the largest e-commerce companies in the world.
CFI’s Advanced Financial Modeling & Valuation Course takes a deep look at Amazon’s strategy, business model, and financials. Check it out if you want to learn how to apply advanced valuation techniques to one of the largest and most complicated companies in the world!
Additional Resources
Thank you for reading CFI’s guide on Business Model Canvas Examples. To keep learning and advancing your career, the following resources will be helpful:
- Financial Modeling & Valuation Analyst (FMVA)® Certification Program
- Corporate & Business Strategy
- Budgeting and Forecasting
- See all economics resources
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