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All You Need To Know About The Concept Of Business Model
A business model is the rationale of your business organization. It shows how your company creates, delivers and captures different forms of values-economic, social etc.
The business model presents core aspects of business-purpose, offering, strategies, infrastructure, organizational structures, trading practices, operational processes and policies. All successful ventures need a clear business model, and any qualified investor will want to see it before making an investment.
The most known basic business model is the shopkeeper model. That means setting up a store in a location where potential customers are likely to be and displaying a product or a service. That also involves offering a basic product at a very low cost, often at a loss, then charging compensatory recurring amounts for refills or associated products or services.
Over the years, business models have become much more sophisticated, while today the type of business models mostly depends on how technology is used. Using technology, businesses can reach a large number of customers with minimal costs.
Designing a business model is part of business strategy, while the implementation of a company’s business model into organizational structures and systems is part of a company’s business operations.
The brand is a consequence of a business model and is closely related to it. The business model determines the brand promise and the brand equity becomes a feature of the model.
The principal aspects of each business model are:
- Value propositions are products and services a business has to offer or how your service or product can help your customers solve the problem or provide the benefit. Together they represent value for a specific customer segment. Besides, as an overall view, a value proposition describes the way a firm differentiates from its competitors, showing why the customers buy from a certain firm and not from another
- Customers present your target audience for a business’ products and services. A very important part of each firm’s business model is relationship with its clients. Questions like: How to attract new customers? and What is it that keeps them coming to you? require your concentration and your time. It may seem expensive and hard to win customers. One of approaches is to identify a niche customer segment of early adopters. Early adopters also may provide a cheap marketing.
- Distribution channel includes means by which the company delivers products and services to customers. It is very connected with the company’s marketing and distribution strategy. Distribution is, actually, one of the services you provide to your clients and one of the aspects of your communication with them. Therefore, it may be used for marketing causes.
- Finances are probably the best known part of any business model. It includes revenue of the way a company makes money through a variety revenue flows. This is a company’s income. Considering one business model you need to determine how much investment is needed to secure revenues for customers and how much risk is there in achieving a positive cash flow, giving the required upfront investment. Finances are closely connected to
- Pricing can be another key way to build your customer value proposition. The goal of this part of business modeling is to develop the easiest way for customers to pay for your products or your services.