Customer segments, value proposition and revenue streams

Business Model Canvas for startups: Part 2

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How to create a powerful Business Model Canvas and understand your value proposition, competition and market

Gary Fox is an Ecosystem & Platform Design Consultant, Doctoral Researcher on Digital Platform Ecosystems and Lecturer at Cranfield University. Here he talks through the different segments of the Business Model Canvas and how to think about using them effectively. The Business Model Canvas is made up of nine segments which he will explain. In this part Fox focusses on customer segments, value proposition and revenue streams.




Watch the rest of the series here:

What do you need to create a powerful Business Model Canvas?

Before producing a business model canvas make sure you gather some useful data and information to help validate your ideas and thinking.

  • Gather data about your potential customers.
  • Research communication channels they use.
  • See what existing value propositions exist – what and why do customers buy.
  • If there is already competition in the market find out what partners and resources they use – you can then think about how you do things differently.

This will help you to understand how and why you can be different in the market.

How do you create a Business Model Canvas?

First you need to download your Business Model Canvas.

1. Customer segments

  • Without a customer you won't have a business. You need to identify them early in your process. What type of customers are you targeting?
  • Which works best for your business? This is about understanding customers. The key is research. 
  • What are the problems you're trying to address? 
  • Put together a profile using data that gives you a consistent view of who the customer is.
  • Consider the different types of buyers you're trying to address in the marketplace.
  • Do your homework and make sure you do market research. Ask questions of customers directly if possible as well as desk research—which startups often rely heavily on.

Some examples of the different types of customer segments you can target:

  • Mass market
  • Niche market
  • Segmented
  • Diversified
  • Multi-sided platform

2. Value proposition

  • The most important thing that you're trying to address in the market is offering some sort of value to customers.

  • How is that defined? If you're a business-to-business customer, you might be looking at helping save time, money, costs, or getting faster and being more efficient. These are all performance criteria that your product or service might help a customer with. Value in a market could be all sorts of different things. 

Elements that can create customer value include:

  • Cost Reduction

  • Convenience/Usability

  • Risk Reduction

  • Performance

  • Customisation

  • Accessibility

  • Newness

  • Design

  • Brand/Status

What you need to do is really hone in on what value you offer and then wrap it up in a way that customers can clearly understand it. Lots of businesses generate products or services but don't explain them clearly, and therefore customers don't really understand what the value is.

How do I package it so that it's easy to understand? Customers can immediately tell what you do, know why they should buy and know the problem you're trying to solve.

Now watch Business Model Canvas for startups: Part 3 - channels, customer relationships and key activities. Here.


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Eagle Labs Business Model Canvas

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