Figure 1. Business Canvas model

Nowadays, fast-paced and intensely competitive environments require organizations to innovate their business models. Hence, business models have become a mix of traditional and bleeding-edge elements. One of the most simple yet effective methods to redesign a business model is via the application of a Business Canvas Model. As shown in figure above, there are nine elements included in this model. In this article, we will go through the three most important elements, which are Customer segments, Value propositions and Channels. 

#1: Customer segments

This block describes different segments of people or businesses that an organization targets to reach and satisfy customers’ needs. To create values towards its clients, an organization first needs to categorize all customers into distinct groups and then rank these groups in priority, for example, group A (most important), group B (averagely important) and group C (least important). There are other types of customer segments, such as:

• Mass market – an organization doesn’t distinguish any different customer groups. It focuses on one large group with similar needs and insights. Examples are consumer electronics sectors, supermarket chains, social media enterprises, etc.
• Segmented – this type is moderately narrower than the mass market, in which an organization differentiates market segments with slightly different needs. Retail bank can be a good example, as it may distinguish customers into groups possessing high and low assets.
• Diversified – an organization targets at least two unrelated customer segments with very different needs. For example, conglomerates like General Electric and Siemens have this type of customer segments.
• Niche market – Opposite to the mass market, an organization with this type of customer segment focuses on a relatively smaller group with unique needs. For example, conscious consumers, gamers, and remote workers are among the top niche markets in 2023 predicted by Sheehan (2021).

#2: Value propositions

This section exhibits the bundle of products and services that act as values created by an organization for a specific customer segment. Value propositions are highly crucial to any business, as it is the reason why customers stay loyal or switch to another one. Unique Selling Points are also included in this block. Values are a mix of multiple elements that serve the market needs. Some important factors are:

• Functional/ Performance – an organization can improve product or service performance in order to create values. For example, mobile phone manufacturers like Apple introduces a new generation of smartphones annually, in which the products have for example more storage, better graphics and sounds. This also can be seen within PC sector where CPU (Central processing unit) gets more processing power or the GPU (Graphics processing unit) can produce higher graphic quality.
• Quality – “quality over quantity” – an organization can continuously improve their product or service quality in order to maintain customer loyalty. Besides, this criteria is a ‘must’ in certain industries, namely pharmaceutical and automotive sectors.
• Innovation – an organization is able to recognize new needs that customers didn’t perceive before, and works on satisfying these needs. In the past, we did not have any need but curiosity in tracking body performance (e.g. heartbeat, muscle, sleep quality), so then smartwatch was introduced to fulfill these needs.
• Price – if an organization can offer similar value at a lower or equal price, it can reach out to broader customer segments, especially segments that are price-sensitive during economic crisis (e.g. increasing inflation). This element can be seen in almost every business model. Airlines and fashion industries are noticeable examples for price-based value proposition.
• Accessibility/ Convenience/ Usability – these factors offer relatively common values and imply making things easier for customers to access and to use. For example, mutual funds allow customers with modest wealth to build diversified investments, while wireless earphones/ headset enable users to do several things at the same time (e.g. listening to music while sporting).
• Customization – it means that an organization can provide customized offers which meet the needs of a particular customer group, or a niche market. Etsy is an E-commerce marketplace where customers can make, sell and buy unique things. Some convenience shops nowadays enable customers to print personalized cards or photos besides the needs of shopping.

#3: Channels

As seen from the name, this block displays how an organization communicates with its customer segments to deliver a particular value proposition. Two common types of channels which can be used to reach the market are owned channels and partner channels. Owned channels are an organization’s website, its official pages in social media, salespersons, brick-and-mortar stores, showrooms, etc. Partner channels can be partner-owned websites, retail/wholesale E-commerce marketplaces, etc. Apart from these channels, words of mouth (e.g. reviews, recommendations, etc.) is also an effective and indirect channel to promote value towards customers. Inviting consumers to write reviews over products or services, or influencers to introduce new products is a fine example of this kind of channels as well.

Nevertheless, it is important to determine which channels are to be used at different phases in the Marketing Funnel. Staff (2020) provided an easy-to-understand example as shown in the Figure 2 below.

Figure 2. The marketing funnel

Now, we have went though three out of nine elements in the Business Canvas Model. It’s time to apply these theories into practices! Try to fill in these three blocks about your organization, or the one that you would like to analyze… When you’ve done it, please share with me in the Comment section below. And have a look at the following example.

Figure 3. Business Canvas model for MS Teams (made by the author)

Thank you for reading! Please share if you find the article useful.

Recommended reading:

Book “Towards sustainable innovation – A five step approach to sustainable change” (Pastoors et al, 2017)

https://www.investopedia.com/terms/d/diversifiedcompany.asp

https://www.shopify.com/blog/niche-markets

https://www.microsoft.com/en/microsoft-teams/group-chat-software

Image 1 source: https://www.pinterest.com/pin/315040936405544097/

Image 2 source: https://www.skyword.com/contentstandard/how-the-marketing-funnel-works-from-top-to-bottom/

Series Business Canvas model