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A business model is important for every company because it outlines exactly what the business aims to achieve in layman’s terms.
Without a specific business model, companies may lack the necessary roadmap to create user-centric products that fulfill consumers’ wants and needs at a sustainable level.
Business models can be divided into several key components, including:
- Who is the target audience?
- What are their qualities, behaviors, location, age, etc.?
- What advantage will the business give to the target audience?
- Or, what is the brand value?
- How will the brand provide the products or services?
- Will you have brick and mortar stores, online eCommerce, brand partnerships, etc.?
- How will the brand earn money and turn a profit?
- This is where businesses should create a specific revenue model, such as subscriptions, eCommerce sales, commissions, affiliate marketing, etc.
However, not every brand develops the right business model right out of the gate. The market may change, the industry may shift, or consumers just might not understand the value adds provided – even if you as the entrepreneur do.
Luckily, if this sounds like you, you aren’t alone. The hallmark of a successful brand isn’t that they avoided any hardships – it’s that they identified them, make the appropriate changes, and overcame them – just like the brands listed below.
3 Brands That Changed Their Original Business Models
Tiffany & Co Transitioned From Stationery To Luxury Jewelry
When Tiffany & Co. began in 1837, they weren’t known for their classic solitaire engagement rings or iconic breakfast-themed movies. Instead, the retailer provided high-end stationery.
However, in the following decades, Tiffany & Co. slowly shifted towards luxury jewelry, eventually manufacturing engagement rings in 1886.
Although Tiffany & Co.’s business shift was slow, steady and still in the luxury space, it highlights the importance of understanding your target audience and what they want to purchase.
The company smartly recognized a market for high-end jewelry pieces early and jumped into the market to strike while the consumerist iron was hot – and it’s paid off for 182 years.
Nokia Transformed From A Paper Mill To A Major Tech Company
Finnish technology company Nokia wasn’t always an innovative tech company. In fact, when it was founded in May 1865, Nokia was a pulp mill that produced paper, rubber and cables.
Although Nokia notably transformed into a major telecommunications company, they also have continuously tweaked several business models over the past 30+ years.
Nokia’s ever-evolving business model demonstrates how the market is more like waves in an ocean – they ebb and flow.
By constantly assessing potential business partners, acquisitions, revenue models, internal corporate structures and external-facing business plans, brands can float above the competition with ease.
DesignRush.com Moved From An Agency Directory To B2B Marketplace
Finally, my latest company, DesignRush.com, recently changed its business model. When DesignRush was founded over 2 years ago, it was a digital design magazine geared towards web designers and graphic designers.
However, despite providing valuable insights, that target audience simply wasn’t interested. So, we slowly transformed our business model to a B2B marketplace that connects brands with agencies, which recently launched.
This new business model allows brands to post an upcoming project in digital marketing, web design, branding, app development, technology or something else on our website for free.
Then, the best digital agencies from around the world can view the project details and submit a customized proposal directly to the brand, saving them the time and energy it would have taken to find agencies on their own and vet them individually.
I learned – especially through DesignRush – to listen to the industry and what consumers were telling me. Even if you have a great idea, you can’t force users to want it. Instead, you always need to develop products, services and, yes, even your business plan with the customer in mind.
And if you want to try it out, you can post your project for FREE on DesignRush and get personalized professional proposals from agencies.
So, How Do You Know If You Need To Change Your Business Model?
It can sometimes be difficult to determine if you need to change your business model or if the market will catch up – and often, you’ll be taking a change either way.
However, there are a few questions you can ask yourself to determine whether or not you should overhaul your business model.
- Have we seen any positive signs that consumers like what we are currently offering?
- Are we showcasing our value proposition well or is the market oversaturated?
- Are their other products or services that match our brand identity?
- Do we have the manpower to change our business model?
- Are we seeing a return on investment or can we reasonably expect one?
Speaking Of ROI, Is A Business Model The Same Thing As A Revenue Model?
In short, no.
A business model outlines how a brand will bring value to consumers. It will detail the products and services offered and how those will make it to market. Depending on the size of the company, there can be many business models at play at the same time.
Although similar to a business model, a revenue model details how that value will transform into money for the company. Revenue models rely on well-developed and strategic business models to create value for consumers in order to then build a stream (or streams) of income deriving from them.
Regardless, both will need to work in order for a business to be successful.
5 Tips To Build A Successful Business Model
Developing the right business model may seem like a daunting task. However, as long as you can break your process into simple, bite-sized steps, create a successful business model will be easier than you think!
These easy-to-follow tips will help you identify your place in the market and build a business model with longevity.
1. Determine Your Value Adds
Once you come up with an idea for a business, take the time to figure out what your value adds will be. Do you have any competitors, and if so, how will you differentiate yourself? Why should consumers choose to do business with you over other companies?
Understanding where your value lies will enable you to tailor features specifically for consumers and build a more useful brand.
2. Learn From Industry Pros
Before you pull the trigger on your new business (model) ask experts what they think about your idea, solution, and long-term plan. Because they understand the market and are outside third-party critics, they will likely have great insights into how you can improve the user experience or business model to ensure it is truly helpful.
This step is particularly important for entrepreneurs that are venturing into an industry that they are not technically familiar with.
3. Test, Test, Test
Whether you’re building a new product or designing a digital platform, the key to success is test, test, test. Remember, you aren’t creating something for yourself – you’re creating something for consumers or other B2B businesses. Therefore, you should always keep the idea that they might not like what you personally like at the forefront of your mind.
Make sure you build in plenty of time to conduct market research, competitor research, A/B tests, edits and improvements, and more before you go live.
4. Consider A Soft Launch
A soft launch is a great way to dip your toe in the water without committing to a large national or international business model – especially if your industry is a little rocky.
In fact, soft launches are a great way to continue the testing process, as you’ll be able to gather real-world feedback with minimal risk. Try launching your product in select stores, regions or with limited features to begin understanding how consumers will actually utilize your brand.
5. Gather Customer Feedback
Even after you fully launch your business model, always spend time gathering consumer feedback. This feedback will help you continually improve your products, services and business model, which will ensure you remain user-centric and modern.
In addition, gathering customer feedback in public forums – such as social media posts, user-generated content and public reviews – is a great way to bolder your brand identity, increase reach and attract new consumers.
All in all, creating a successful business model can take a lot of time and energy. But by following the simple steps below, you’ll be sure to develop a business model and revenue plan that will showcase your brand’s value and increase income for years to come.
- Determine your value adds
- Identify your target audience
- Understand how you will provide products or services to consumers
- Ask industry experts for advice
- Determine a revenue model
- Test your products, services and business model many times in many ways
- Gather consumer feedback
April 10, 2019 at 06:23PM
Forbes – Entrepreneurs