Welcome to day 2 of the 30 Day Business! I hope you’re excited about what’s ahead today, I know I am!
Today we are going to dive into the value chain and business structure of each of the five ideas that we ended with yesterday.
By the end of today you should know the key partners, activities, resources, and cost structures related to each of your 5 ideas. You will also work on defining and refining your value proposition and uncovering what relationships you need to have with each of your customer segments and the channels you will service them through. Finally we’ll dig a little deeper into the various revenue streams that you can reasonably expect from the value chain and business structure that you’ve mapped out.
There is a lot to unpack so let’s jump right in!
We’ll move through the topics in the following order:
- Customer Segmentation & Value Proposition
- Customer Relationships & Sales Channels
- Revenue Streams
- Cost Structure & Key Resources (tomorrow)
- Key Partnerships & Key Activities (tomorrow)
Now that we have a good outline of what to expect today, let’s get started with the most important part of any value chain – and not ironically it’s at the very end of the chain – the customer!
Download the attached file to fill it out as you follow along!
Customer Segmentation & Value Proposition
Before you can segment your customers in to different groups, you first need to answer the question of who your customer is! The answer to this question is so important that there are hundreds of marketing books, thousands of blog posts, countless conversations, and just as many sleepless nights dedicated to answering it!
Knowing who your customer is so important because it’s the customer that ultimately decides whether or not to give you money for your products or services. It’s the customer that decides if they want to engage in a long-term relationship with your subscription service. It’s the customer that leaves positive or negative reviews. It’s the customer that shares your product with their family and friends, or discards it in the nearest trash can. Learning as much as you possibly can about your customer is the single most important thing you can do when deciding what product or service your business should focus it’s energies on!
Now, getting into the minds of your customers isn’t necessarily easy. Many ways have been devised to extract what customers actually want. And just as often as a customer tells you what they want, you’ll realize that they have no idea what they actually want. This often ends with you standing face to face with your customer, silently staring at each other with blank looks on your faces.
On the other end of the spectrum of knowing what your customer wants are those brilliant innovators that push forward with seemingly reckless-abandon to create something they have convinced themselves that customers will want – developing in isolation without any sense of what the the customer is saying they want.
I don’t mean to imply that every product decisions needs to be made based on existing market data. I also don’t think that market data is always helpful if you don’t know how to analyze it properly. But this still leaves us standing here with the same question; what do our customers want?!
Lets try to answer that question indirectly, using a famous quote from Henry Ford:
“If I had asked people what they wanted, they would have said faster horses”
Henry Ford (probably)
And so the story goes, Henry Ford set about to build a faster horse…🙄
Actually, Henry Ford is known for something else… I’ll have to google it, cause I think he’s only know for that quote… kidding….😅
Anyway, that quote has all the magic we need! Hidden in that quote is the answer to the question we are asking about our customers. But, his statement answers a slightly different question. Henry Ford isn’t answering the question, “what do people want?”. Instead, he is answering the question, “What problem are people trying to solve? How are they solving it today? Is there a solution that I can provide that helps them solve their problem better, faster, in more style, with more friends, with a better reputation, etc…?”
Steve Jobs was also famously quoted as saying:
“A lot of times, people don’t know what they want until you show it to them.”
Steve Jobs, BusinessWeek, May 25, 1998
I’ll add that people are much better at discerning their pain and problems than the solutions that will make their lives better. As humans we seem to hold on to our suffering as if it’s a badge of honor or a name tag that other can identify us by. But that’s the secret of good market research. Find the problems, not the solutions. Endless supply, don’t say I didn’t warn you!
Henry Ford and Steve Jobs weren’t ignoring the market or the needs of their customers in their statements. They were demonstrating what every great marketer should do when trying to reach a customer: Understand the underlying struggle, challenge, problem, jobs-to-be-done for their customer, and only then can they offer something perfectly tailored to do meet customer needs.
In the book “Competing Against Luck” by Clayton Christensen, we learn about the Jobs Theory. No, this isn’t about Steve Jobs the Founder of Apple. Although, Steve Jobs is wrongfully attribute with having blinders on to what customers want, similar to Henry Ford. But a closer look reveals that that Steve and Henry got to have their cake and eat it too. They didn’t rely on customer surveys to make product decisions, but they both are celebrated for know exactly what the public will buy when the product they offered had no historical precedent!
How did they do that?
Apparently, it’s easy. Simple, even. And Clayton Christensen seemed to have cracked the code in his book Competing Against Luck!
“[T]he Theory of Jobs to Be Done … focuses on deeply understanding your customers’ struggle for progress and then creating the right solution and attendant set of experiences to ensure you solve your customers’ jobs well, every time. ”
Clayton M. Christensen. “Competing Against Luck.”
So, now we have a good question – even though we actually set out looking for answers, but we’ll take it!
What are the Jobs to Be Done for your customers? The products that you create are being hired to do certain jobs for your customer. And that is your value proposition! Easy, right?
The best part is, when your products and services do their jobs well for the customer, it creates an almost impossible barrier for your competition trying to impacting your business and take away your customers. When you focus on jobs-to-be-done you are creating more than just an item for sale, you are meeting the customer’s needs with the product, the sales process, the service environment, and the entire experience. And because you know what job your product has been ‘hired’ to solve, you can create additional products that complement the first without fear of the market rejecting it. Making innovation less of a risk.
And that’s the secret behind Henry Ford and Steve Jobs knowing what to build for the people, without relying on market data to spell it out for them.
Action Item: What Job(s) are your customers hiring products to do for them? What currently performs these jobs for your customers? What Job can your product perform for them? Can your product be hired for a job that seems to be unrelated to its designed purpose?
Sales Channels & Customer Relationships
How do you reach your customers? How do they expect to be reached? Where do your customers currently buy products that are similar to yours? The answers to these questions will give us a good idea of what sales channels we should be targeting as part of our distribution strategy!
There are five phases to a sales channel: awareness, evaluation, purchase, delivery, and support. Let’s walk through each phase and see how we can connect the dots for our business ideas.
Awareness
It might sound obvious, but there needs to be a way for people to become aware of your products. Life isn’t like The Field of Dreams that is famously quoted saying “if you build it they will come.” If you only build it, there is no guarantee that anyone will come. That only happens in the movies, guys… and movies aren’t real. Well they are real cause they exist, but that doesn’t mean they are the source of marketing truth.
There needs to be some serious thought around how to get the attention of your potential customer. Having the perfect value-proposition and aligning your products with the jobs your customers need to get done. That’s only half the story. You need to have the best funnel along with the best solution for your customers.
To be clear, the best funnel is necessarily the one that has the highest volume of people running through it. The best funnel is the one that bring the right people through it. The people your product will really help. Your awareness campaign that will bring in your best customers is often their first exposure to your brand and your offering!
If you are targeting people who shop in a cold detached manner, that are only looking for the lowest prices you’ll actually do much better if your funnel is cold and detached as well. However, if you are creating product and solutions for warm-blooded people, then your funnels need to make then feel at home, at ease, and willing to listen. They need to feel – as well as see – that your product is the one they want to hire to perform a specific job.
The point is, you need to make your customers ‘feel the love’ from the moment they are exposed to your brand. And that attention and care needs to continue as long as they are a consumer/user of your product – even if they haven’t made a purchase in a while.
Action Item: Brands do you feel a connection with? Did you feel that connection the first time you were exposed to the brand? Brainstorm how your brand can create an experience that is meaningful and long lasting.
Evaluation
Once you have a customer engaged with the messaging around your product, your ability to help them evaluate your Value Proposition is key!
If you’ve done your homework and created a product that is perfect for doing the jobs your customer needs doing, it’s going to be a no-brainer for them to pull the trigger and make a purchase! Not once, but repeatedly. Which is the ultimate objective, repeat customers who feel no need to look anywhere else for solutions.
Purchase
The purchase process requires a mix of speed, efficiency, accuracy, and an appropriate mix of technology. Historically, the payment method that you chose to accept from your customers could result in lost customers who couldn’t pay. If you have products online, you can offer any payment method under the sun to your customers and it all costs about the same to you. When we get to the implementation phase of our 30 days, we’ll explore ways to get setup with everything you need to accept credit cards, digital wallets, etc.
Delivery
Delivery can be broken down to 2 different considerations. 1. How do you get your product into the hands of your customer, and 2. At what frequency are you delivering your solution to your customer?
If you are offering a digital product, there are countless places where you can host and delivery products. You can leverage an existing 3rd Party platform. Host the products on your own website, or you can send the products to your customers.
When you leverage a 3rd party delivery platform, you lose a lot of control over the user experience. However, 3rd Party platforms bring with them the benefit of much higher traffic – typically free to you! So, the tradeoff with leveraging 3rd party Platforms for digital content delivery is that you lose a degree of control over the user experience in exchange for higher traffic. Depending on your objectives, you could reasonably pick either solution!
Self-hosting a website and content delivery platform gives the highest degree of control over the user experience. The trade-off when you control the entire user experience is that you also need to maintain and enhance the platform as technology becomes obsolete or when a portion of your platform crashes from a security breach.
Fortunately, there are solutions that are a good combination of 3rd party technologies that give you near-complete control over the user experience. There’s also solutions that will handle all the technical issues that might arise so you can focus on your customers and improving their experience with you. This comes with a price tag, but these types of services are so cheap that it’s not even worth discussing further.
After Sales
This part of the channel could just as easily be called pre-sales. Your job is never done. As long as your product is doing a job for your customer, that are your past, present and future customer. So, taking care of them with customer support, replacement parts, refunds, technical solutions and anything else that might be required is just as much an after sales activity as it is a pre sales activity.
If you are selling content or training material, this represents more than just servicing the delivery and sale of your product. It also represents answering questions that come from the content you have created. Be prepared to teach and teach again until you’ve explained your expertise in every way and from every angle imaginable!
Action Item: Write down what your sales channel could look like. Compare your assumptions against existing sales channels for similar products you can find online.
Customer Relations
The topic of customer relations is broad, and is very much connected with the channels that you chose to work through as you interact with your customers.
Your customer relations strategy might be centered around self-help FAQ on your website, or community driven Q&A forums. However you plan to manage the relationships you have with your customer base, make sure you execute on it intentionally.
If there is something that will get you bad reviews fast than anything else online is a lack of responsiveness.
If you say you’re available via phone, have a phone number on your website and answer it. If you say you’re available via twitter, Facebook, instagram, etc. Then be available there and respond to your customers with a tone and care that you’ve put into the product and experience that you’ve crafted for them.
Getting your customer relations right is what can move your customers from a transactional buyer to an advocate that will preach your greatness from the rooftops! Take care of your people!
Action Item: what type of customer relations strategy works best for your business? How can you set this part of the business up to complement and enhance your efforts to provide a high quality experience around your core products?
Revenue Streams
Have you thought about how you are going to make money with your business? I know you’ve thought a lot about building something that you think is great… But, how can you exchange your hard work for money? Have you considered your options get paid in multiple ways from different market segments for the same work?
Revenue stream can be thought of in 2 different ways. the first way is from a on-time transaction with a customer that pays you money in exchange for permanent and irrevocable possession of your product. the second way is a model that enables recurring revenue from ongoing payments from customers. These repeat payments could be for support on the goods they purchased or it could be payments for continued access to a library of content that is added to over time – like Netflix movie subscriptions or Amazon’s Unlimited book subscription.
So, how are you going to price you products? What type of revenue stream make the most sense for the type of product you are selling?
Lets answer that question and be done for day 2!
Congratulations on making it to the end of Day 2!
We filled out Half of the Business Model canvas and answer some crucial questions about each of the 5 ideas we got from our work yesterday. After tomorrow, you should have a really good idea of which ideas you’ll want to move forward with for the rest of our 30 Days! But, we’ll have to wait until tomorrow to get that answer!
Until then!