Basic Elements of a Business Model

Basic Elements of a Business Model

Select features embedded in product or service

Determine benefit to the customer from using the

product or service

Identify market segments to be targeted

Confirm available revenue streams

Design mechanisms to capture value

In the simplest terms, a Business Model is how a business makes money.

This introductory presentation is intended to introduce a framework for further thought and discussion through which AIRN will define its Business Model.

EMBEDDED SERVICES -- MEMBER BENEFITS

AIRN services must have features which its members perceive as valuable (i.e., as beneficial to them).

It is important to remember that members pay dues or fees because they want to solve a problem or meet a need. Members, whether openly or not, will always be asking the question, “What’s in it for me?”

Features are what the service provides. Benefits are the reasons members pay for the service.

1. Evaluate the potential of a member seeing the value (benefit) of each.

2. Investigate. Ask members about the service. How would they use it? How would they change it?

3. Test. If considering a new service, test it on some of the members.

4. Value. Does the service deliver value to the member? The more benefits the member sees the service as providing the less important the cost becomes.

5. Examine the cost of the service to determine whether it can be provided for less cost.

6. Adjust membership development/ “drives” to reflect new benefits.

Identify Member Benefits

Segmentation Marketing

4 Key Market SegmentsMarket segmentation is the subdividing the AIRN membership into a group or groups of people who have similar needs.

It is important to divide members into groups and then decide which services best fit each group.   AIRN also may determine after defining the member segments that the ideal member is one who can belong to two or more of the of the groups shown in the chart and discussed in the next slides.   

Key Market SegmentationGeographic Segmentation – Geographic segmentation based on where the businesses are located. Segmentation by Size – Size might be measured in terms of number of employees or in terms of volume/sales. Segmentation by Industry - Industry segmentation (e.g., seeds, fertilizer, crop protection products, wholesale, retail, etc.) may be used when providing services with specific appeal in certain industry segments.Business Need – Segmentation based on business need allows AIRN to identify and connect with members that cut across location, size, and industry (e.g. gender), but share a common need which can be addressed by services.

SegmentationSegmentation is simply the process of dividing a particular market (AIRN members) into sections which display similar characteristics or behavior.Defined: As AIRN will have more than one segment, each should be made up of markets (members and/or clients) which require specific services due to differences. Measurable: Over a period of time it will be important to be able to measure the income from services to each segment relative to the cost of providing those services, and whether the demand for a service, and its related income is greater or less than the expense of providing it.

SEGMENTATION

Defined

Measureable

Actionable

Suitable

Accessible

Segmentation

DEFINED MEASUREABLE ACTIONABLE

SUITABLE ACCESSIBLE

Accessibility is about communicating with members and being able to actually get services to them. Suitability means that the of the members of a segment are likely to use/pay (and can pay) for the service. It is important to remember that if the number of members in the segment are too few, the cost of services will be high and the income derived too little. Actionable: Even if all of the criteria above are satisfied, a segment is unsuitable unless AIRN has the resources to satisfy the “need” of the segment.

The “Golden Egg”Revenue Streams

The 80/20 rule: 20% of AIRN service will consume 80% of its time; 20% of its services will generate 80% of its income. Analysis can help you see where AIRN can best utilize time and money. 1. For every service AIRN offers calculate the total revenue minus total costs = “profit.”2. In addition to the actual costs, add in the average amount of time spent to deliver each service because time is another form of money.3. Combine the information from steps one and two and identify which services have the highest “profitability.” It will help determine whether or not to provide or continue a member service.

POLITICAL, ECONOMIC, SOCIAL & TECHNOLOGICAL (PEST) ANALYSIS (Example of factors influencing businesses)

SWOT ANALYSIS

Basic Elements of a Business ModelBasic Elements of a Business Model

Select features embedded in

product or service

Determine benefit to the customer from

using the product or service

Identify market segments to be

targeted

Confirm available revenue streams

Design mechanisms to capture value