With fast-changing technology, business models have evolved in different industries and the pace of change is expected to continue to be fast as industries merge and get disrupted. These changes have resulted in a situation where you cannot do business as you did ten, five, or even three years ago in some industries. There is a continuous need to evolve and change with industry growth.
To do this, you need to have a hand on the pulse of your industry; knowing – what is happening and being able to discern ideas that will dominate the industry and those that will flop right from the onset. A good understanding of the industry, its players, and more essential the changing behaviors of the target group will determine what works and what does not.
If yours is a start-up business, your chances of creating a new disruptive business model that is sustainable are high because you are not weighed down by your current clients, history of performance, or systems. On the other hand, if you are an established business you must carefully consider what changes in your business model would mean and whether your customers, partners, and systems will have room to accommodate the changes or if this would mean a total overhaul of what you have in place – thus risking your current position in the market.
Customers pay for the value they perceive you to be offering. The objective of your business model is to create value, deliver it efficiently, and leverage on this to create more value. You can d this by;
a. reducing product development and production costs; when you are able to offer a high-quality product at a good price you have a winner especially if your product or service caters to the mass market. Sometimes it is not necessary to have a new product to have a winning business strategy but to ensuring you are able to carefully review the product development and production systems in place and make them more effective and efficient without compromising on quality.
Often the assumption is that the cheaper a product is the more people will buy it, however, this is relative to the expected quality/value the customer wants out of the price they pay. Ensuring you are able to offer the highest quality at a price point works more in your interest than just lowering your prices or compromising on the customers’ expectations of quality.
For example, if the standard meal at restaurants in your area is 10 dollars and you are able to offer a better quality meal than your competition at market price then you need not lower your prices to attract more customers. This may mean coming up with better meal combos or a menu that while catering for the target market is low in production because of ingredients or recipe.
b. reducing time to market for products; efficiency and effectiveness are key aspects of a good business model. First, because these, in essence, mean fast, they will result in you getting your product to market faster than your competition does and establishing your brands – especially with new products. This means if you bring in a great product all other players will be measured against the standard you set and you can thus dictate what happens in the industry.
For a product that has been there in the market, reducing time to market means clients are able to get their products faster from the time an order is made. This can be managed by partial processing, having set options for what a customer can order, or having better production technology. A combination of all three would increase the chances of reducing time to market.
c. leveraging the system to have a suite of products and periodical launches; when you have proofed your business model it is important to leverage this to either increase your product or service options or enter markets you are not currently serving. This ensures you do not reach a slump in sales thus increasing the sustainability of your business. This also reduces dependency on only one product or market. When things change this could kill your business however when you are looking out for leveraging opportunities you would set the pace and be amongst the top players in the industry.
If you depend on only one product or market it could kill your business when market dynamics change. However, when you are looking out for leveraging opportunities your chances of survival in difficult times increase.
d. having a tight client retention plan; all the work done to gain clients can be of little value if there is no client retention plan. Retaining your clients is important because this increases the lifetime value of the customer and the return per dollar invested in marketing. Factors that influence your client retention include your customer service, opportunities to upgrade a product, multiple uses of a product, or the business model itself. Good customer service ensures that customers have a pleasant experience at each touchpoint. People like to associate with pleasant people (and organizations) and your customers will want to continue with a relationship that is hustle free than one that is stressful.
Factors that influence your client retention include your customer service, opportunities to upgrade a product, multiple uses of a product, or the business model itself. Good customer service ensures that customers have a pleasant experience at each touchpoint. People like to associate with pleasant people (and organizations) and your customers will want to continue with a relationship that is hustle free than one that is stressful.
Customers’ needs grow and change. If you have a suite of products that can grow with the needs of the client or be upgraded you have a greater chance of maintaining the client as they trust you. For example, a bicycle production company can have a range of bikes from basic children’s bikes to mountain bikes creating a lifelong relationship almost from cradle to grave. Baby products companies can also extend their range to other forms of products for sensitive skin or unique needs. Similarly, a finance company can have a range of products or flexibility in its range to support start-up businesses as well as support exit options and buyouts.
Finally, your client retention is improved depending on your model. It is easier to retain clients when your business is a subscription service than if the business sells a one-off product that can be easily replaced as this means the client can experiment with your competition. This has led to an increasing number of businesses that offer subscription services for products that are used frequently like socks or perfumes. A good client retention plan increases the lifetime value of your client.
e. predictability in income; As you work on your business model, ensure you create predictability in income for your business. If income is not predictable month after month – as with subscription services or rentals then there is no security for the investor and it is difficult to attract investments or loans that will keep you in business when the need arises.
Predictability in your business also results in a higher valuation for your start-up. Overall a good business model allows you to create a niche and possibly disrupt the industry, change the rules of the game, and create a space where your competitors cannot compete.
Like, Comment and Subscribe
