This document provides an overview of value analysis and business models. It begins with recapping key concepts from the previous lesson on market and costs. It then discusses perceived value and how companies like Gillette, 3M, and A-Style create additional perceived value to justify higher costs. Next, it covers business models like freemium, advertising, and low-cost. The document concludes by explaining the business model canvas and its nine components: value proposition, customer segments, channels, customer relationships, revenue streams, key resources, key partners, key activities, and cost structure.

1. Value analysis
and
business model
IED
Lesson 5/2014
Frieda Brioschi / Emma Tracanella
frieda.brioschi@gmail.com / emma.tracanella@gmail.com

2. 5. Value Analysis and Business Model
Course program
1. Italian Startups
2. Set up a startup in Italy
3. I've got an idea. And now?
4. Market and costs
5. Value analysis and business model
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3. 5. Value Analysis and Business Model
Today's table of content
1. Perceived Value
2. Business Model
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4. 5. Value Analysis and Business Model
Market & costs: quick recap
Past slides available on Slideshare @ubifrieda:
https://www.slideshare.net/ubifrieda/
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5. 5. Value Analysis and Business Model
Market & costs: quick recap
During last lesson we discussed:
• Who are your customers and who will buy your product
• Who are your competitors
• Which is the specific demographics to target
• Which is the psychographics of your target
• Evaluate your decision (target market to big?,…)
!
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6. 5. Value Analysis and Business Model
Market & costs: quick recap
B2C
Make a product or service and charge consumers for using it.
This model is being used by Starbucks, McDonald’s, Amazon
and others.
!
B2B
Make a product or service and charge other companies for
using it. Google, Cisco, MySQL and others are using this
model.
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7. 5. Value Analysis and Business Model
Market & costs: quick recap
During last lesson you learnt about direct and indirect
costs:
• the former are costs that can be identified
specifically with a particular project or activity labour
agreements
• the latters include all the other costs
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8. 5. Value Analysis and Business Model
Market & costs: quick recap
You went through the definitions of cash and accrual
basis accounting:
• difference between them has to do with the time
frame in which revenues and expenses are recorded
and reported
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9. 5. Value Analysis and Business Model5. Value Analysis and Business Model
Value
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10. 5. Value Analysis and Business Model5. Value Analysis and Business Model
Value
• The extent to which a good or service is perceived by
its customer to meet his or her needs or wants,
measured by the customer’s willingness to pay for it
• It depends more on the customer’s perception of the
worth of the product than on its intrinsict value.
• How do we create the perception of value when we
talk to our customers?
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11. 5. Value Analysis and Business Model5. Value Analysis and Business Model
Gillette Fusion
!
• Amazon’s price: 19.25$
• 8 cartridges
• Cost/cartridge: 2.41$
• You need the razor (11.49$)
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12. 5. Business Model5. Value Analysis and Business Model
Gillette Custum Plus
Disposable
!
• Amazon’s price: 20.97$
• 30 razors
• Cost/razor: 0.70$
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13. 5. Value Analysis and Business Model5. Value Analysis and Business Model
Gillette Fusion vs. Custom
Plus
• Prices
• 19.25$ vs. 20.97$
• 8 cartridge vs. 30 razors
• Cost in use
• 2.41$ vs. 0.70$
• Additional perceived values justify the additional cost in use
• Durability of blade
• Comfort
• Less irritation
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14. 5. Value Analysis and Business Model5. Value Analysis and Business Model
Gillette Idea
By providing something at below the market price (the
razor), you can create a market for a secondary product
(the blade) upon which you make ongoing profits.
The mark-up on the secondary products is
disproportionate relative to their cost so were highly
profitable for the manufacturer.
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15. 5. Value Analysis and Business Model5. Value Analysis and Business Model
3M Scotch® Tape
!
• Amazon’s price: $1.70
• Lenght 650 inches
• Cost/inch: $0.003
• Cost to hang a poster:
$0.01
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16. 5. Value Analysis and Business Model5. Value Analysis and Business Model
3M Scotch® Command
Strips
!
• Amazon’s price: $2.70
• 12 strips
• Cost/strip: $0.08$
• Cost to hang a poster:
$0.32
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17. 5. Value Analysis and Business Model5. Value Analysis and Business Model
3M Scotch® Tape vs. Strips
• Prices
• $1.70 vs. $2.70
• Using Scotch Tape, the user can hang 75 posters vs. 3 for the command strips
• Cost in use
• $0.01 vs. $0.32 to hang 1 poster
• Additional perceived values justify the additional cost in use
• Less damage to wall
• Simplicity to remove
• Durability
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18. 5. Value Analysis and Business Model5. Value Analysis and Business Model
A-Style
• Logo
• 1989 stikers on the walls of Milano
and Roma
• Patented by Italian designer
Marco Bruns
!
• Clothing Brand
• Italian brand founded in 1999
!
• A-style has used street-level buzz
marketing to grow to international
prominence
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19. 5. Value Analysis and Business Model5. Value Analysis and Business Model
Lacoste
!
• Founded in 1933 by the
tennis man Rene Lacoste
• At the end of 1990 the
company change its strategy:
marketing, retails outlets,
product range, …
• Sale of t-shirts in limited
series
• Re-establishing Lacoste as “a
distinctive premium brand”
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20. 5. Value Analysis and Business Model5. Value Analysis and Business Model
Models
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21. 5. Value Analysis and Business Model5. Value Analysis and Business Model
Freemium
Giving away a product that people want for free and
selling premium products.
Skype:
• A free quality product
• Selling cheap calls to ordinary phones
!
Only 8% buy something
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https://www.freemium.org

22. 5. Value Analysis and Business Model5. Value Analysis and Business Model
4 Freemium Models
• Time-limited
• Feature-limited (Dropbox – Flickr)
• Seat-limited
• Customer-type limited
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23. 5. Value Analysis and Business Model5. Value Analysis and Business Model
Advertising Model
• Became popular with the growth of radio and TV.
• Indirect revenue from people looking to promote
services
• Increasingly difficult
• Youtube, Facebook
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24. 5. Value Analysis and Business Model5. Value Analysis and Business Model
Low-Cost Model
• Significant volumes of customers (at a low customer
acquisition cost) and by charging a very low price
• Revenue from a whole host of ancillary sources
• Ryanair
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25. 5. Value Analysis and Business Model
Business model
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26. 5. Value Analysis and Business Model
Business model /1
• A business model describes the rationale of how an
organization creates, delivers, and captures value
(economic, social, cultural, or other forms of value).
The process of business model construction is part of
business strategy.
• It's a way to represent core aspects of a business,
including purpose, offerings, strategies, infrastructure,
organizational structures, trading practices, and
operational processes and policies.
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http://en.wikipedia.org/wiki/Business_model

27. 5. Value Analysis and Business Model
Business model /2
The essence of a business model is that it defines the
manner by which the business enterprise delivers value
to customers, entices customers to pay for value, and
converts those payments to profit: it thus reflects
management’s hypothesis about what customers want,
how they want it, and how an enterprise can organize to
best meet those needs, get paid for doing so, and make
a profit.
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http://en.wikipedia.org/wiki/Business_model

28. 5. Value Analysis and Business Model
The business model canvas
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29. 5. Value Analysis and Business Model
The business model canvas
http://www.youtube.com/watch?v=QoAOzMTLP5s
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30. 5. Value Analysis and Business Model
1 – Value proposition
The collection of products and services a business offers to meet the needs of its customers. It's
what distinguishes itself from its competitors.
It provides value through various elements:
• newness,
• performance,
• customization,
• "getting the job done",
• design,
• brand/status,
• price,
• cost /risk reduction, ecc.
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http://en.wikipedia.org/wiki/Business_Model_Canvas

31. 5. Value Analysis and Business Model
Value Proposition Builder
• Market: for which market is the value proposition being created?
• Value/customer experience: what does the market value most? The
effectiveness of the value proposition depends on gathering real
customer, prospect or employee feedback.
• Offering: which products or services are being offered?
• Benefits: what are the benefits the market will derive from the product
or service?
• Alternatives and differentiation: what alternative options does the
market have to the product or service?
• Proof: what evidence is there to substantiate your value proposition?
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http://en.wikipedia.org/wiki/Value_proposition

32. 5. Value Analysis and Business Model
2 – Customer segments
A company must identify which customers it tries to serve. Various
set of customers can be segmented based on the different needs
and attributes to ensure appropriate implementation of corporate
strategy meets the characteristics of selected group of clients. The
different types of customer segments include:
• Mass Market
• Niche Market
• Segmented
• Diversify (multiple customer segments with different needs
and characteristics)
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http://en.wikipedia.org/wiki/Business_Model_Canvas

33. 5. Value Analysis and Business Model
Do you know who your
customers are?
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http://www.designvision.com/strategy/

34. 5. Value Analysis and Business Model
Really?
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http://www.designvision.com/strategy/

35. 5. Value Analysis and Business Model
3 - Channels
A company can deliver its value proposition to its
targeted customers through different channels. Effective
channels will distribute a company’s value proposition in
ways that are fast, efficient and cost effective.
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http://en.wikipedia.org/wiki/Business_Model_Canvas

36. 5. Value Analysis and Business Model
4 – Customer relationship
To ensure the survival and success of any businesses, companies must
identify the type of relationship they want to create with their customer
segments.
• Personal Assistance
• Dedicated Personal Assistance
• Self Service
• Automated Services
• Communities
• Co-creation
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http://en.wikipedia.org/wiki/Business_Model_Canvas

37. 5. Value Analysis and Business Model
Why does it matter?
37
http://soffrontblog.com/2011/02/07/benefits-of-an-on-demand-crm-application/

38. 5. Value Analysis and Business Model
5 – Revenue streams
The way a company makes income from each customer segment.
• Asset Sale
• Usage Fee
• Subscription Fees
• Lending/Leasing/Renting
• Licensing
• Advertising
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http://en.wikipedia.org/wiki/Business_Model_Canvas

39. 5. Value Analysis and Business Model39
http://www.flickr.com/photos/silkcharm/2893602428/

40. 5. Value Analysis and Business Model
6 – Key resources
Are the assets required to offer
and deliver value proposition to
the customer.
• Physical
• Intellectual
• Human
• Financial
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http://en.wikipedia.org/wiki/Key_resources_(business_model)

41. 5. Value Analysis and Business Model
7 – Key partner
• In order to optimize operations and reduce risks of a
business model, organization usually cultivate buyer-
supplier relationships so they can focus on their core
activity.
• Complementary business alliances also can be
considered through joint ventures, strategic alliances
between competitors or non-competitors.
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http://en.wikipedia.org/wiki/Business_Model_Canvas

42. 5. Value Analysis and Business Model
8 – Key activities
The most important activities in executing a company's
value proposition.
42
http://en.wikipedia.org/wiki/Business_Model_Canvas

43. 5. Value Analysis and Business Model
9 – Cost structure
This describes the most important monetary
consequences while operating under different business
models.
• Fixed Costs
• Variable Costs
• Economies of Scale
• Economies of Scope
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http://en.wikipedia.org/wiki/Business_Model_Canvas

44. 5. Value Analysis and Business Model
Next week
Business model examples and pitch.
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