Make Your Business Model Work For You
If you want your business to
be successful, you must at a minimum have a strong business model. Your
business model will consist of four distinct sections.
Four Sections of a Business Model
Product/Service Offering
What unique product or service are you offering the marketplace
as a solution to a common problem?
Any new product or service
should offer customers a unique way of solving a problem. Every problem in the
world should be viewed as an opportunity, an opportunity to come up with a
solution (a new business) to solve the problem. When we started WOOband, we
started with one of the most common problems on the planet today, losing your
phone. From there we came up with what we thought was the best solution for
solving the problem and then tested it in the marketplace. We were simply sick
of losing my phone and hearing endless stories of phone loss in the world.
Problem = Opportunity.
Target Market
What specific target market is going to buy your
product or service?
With WOOband we originally
thought our target market would consists of only highly intoxicated (drunk)
college students. However, we began to think bigger and realized that one of
the best markets would be a market with more buying power and the same issues.
We came to realize that nearly 1/3 of all elementary students own expensive
smartphones. Armed with this knowledge, we decided to target the parents of
young children as well as our original market. Remember it is okay to have more
than one target market when starting out, but do not get carried away with
having too many. Target no more than three markets when starting out so that
you can get to know everything you can about them: where they buy, how they
buy, why they buy, who influences them, etc. It will also help you to keep your
marketing costs much lower. Below is how we define our two main target markets
for WOOband.
Target Markets
Target Market Buying Cycles
Each of your different
target markets should have a distinct customer buying cycle. Essentially you
need to understand the buying process of your potential customers. What steps
do they go through before purchasing your product or service. If you have not
made any sales than you can look at the way the customer purchases similar
products or services. Below shows how we distinguish the buying cycles of our
two different target markets.
Mike and Carol Brady Buying Cycle
Zach and Kelly Buying Cycle
Marketing Plan
How are you going to market to your defined target
market? How are you going to make them aware of your product or service, and
how are you going to get them to buy your product or service?
The marketing of a business
is where he real magic of a business starts to happen. To be honest with you,
it’s easier than you think to come up with a cool new idea, but if you can’t
convince people to buy it, you have no business. Just think about how many
different brands of successful athletic shoe exist today, the list is endless.
The reason most of them continue to be successful is that they all have their
own target markets and targeted marketing strategies. You cannot, I repeat
CANNOT have a successful marketing strategy if you don’t first have a target
market. Marketing needs to be tailored specifically to your target market. Just
think about it, will a retired husband and wife living in Florida be
reading/watching/visiting the same things as a newly wedded couple in Ohio?
Absolutely not! Hundreds of millions of dollars are wasted all the time on
expensive marketing campaigns. Some of the most wasteful marketing dollars are
in media advertising. Your marketing campaign must be frequently in the face of
your TARGET MARKET. At WOOband we use a highly targeted social media campaign
for the High School/Young College Students. For our parent market (elementary
school students), we rely more heavily on parenting blogs and product review
sites (see below). We also target PTSO and orthodontist newsletters. As I
mentioned earlier, it is completely okay to have more than one target market,
as long as you realize that your marketing campaigns should be different for
each market.
Example - Matching Buying and Selling Cycles
Economics of the Business
How is your business going to make money?
When you get someone to buy
your product or service you have a business, but you don’t have a successful
business until you have a positive bottom line (net income). You need to know
four key numbers at all times in your business.
- · What price are
you charging for your product or service?
- · What are the
variable costs associated with your product or service?
- · What are the
fixed costs associated with the business?
- · What are your
startup costs associated with the business? How much money will it cost you to
get the business up and running and sell your first unit?
Conclusion
Armed with the answers to
these four basic questions, you can take your business into the marketplace and
test your business model assumptions. As you take feedback from what the market
is telling you, then you can adjust the business model as you go. Perhaps you
have a great product, but the target market you thought would be buyers turns
out not to be the right market. You can then adjust the target market, which
should change your marketing plan to make sure that it is applicable to that
new target market.
While I would recommend
having a fully fleshed out business plan before going into business, having at
least a business model to start with will drastically improve your new
company’s ability to be successful.
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