LESSON 4: BUILDING

BUSINESS MODELS

Reporter:

Shailyn Capa
Chrishanlou Caay
Roelyn Camba
The more you drive positive change, the
more enhanced your business model."

- Anand Mahindra
A good product and/or service does not automatically turn into a
commercial success. A business model makes the difference
between success in the laboratory and success in the
marketplace. Having a business model will also define the
foundation of a business operations. The business model involves
the product or service offering, the targeted customers, and the
economic engine that will enable a business to meet its
profitability and growth objectives. Business model assessment is
essential for startups, new and recognized businesses which need
to discover, preserve or advance their business models.
What is a Business Model?
Basically, when management is asked about its model, the
question only says "how does it plan to generate money".
According to management guru Peter Drucker: "a business model
is supposed to answer who your customer is, what value you can
create/add for the customer and how you can do that at
reasonable costs". Simply, a business model defines the
foundation of its company's core value proposition, targeting
customers, key resources, and assumed revenue streams.
Eventually, a business model offers a framework for success and
overcoming challenges.
DIFFERENT TYPES OF BUSINESS
MODELS:
1. Manufacturer - A manufacturer is a person or a registered
company which makes finished products from raw materials
in an effort to make a profit. The goods are later distributed
to wholesalers and retailers who then sell them directly to
customers. The retailers exhibit the products via brick and
mortar stores or on 3rd party E-commerce platforms. In the
manufacturing industry, products are made in big-scale so
as to meet the irresistible demand coming from consumers.
Examples of manufacturers in the Philippines are Ajinomoto
Philippines, Alaska Milk and Century Pacific Foods among
others.
• 2. Distributor - A distributor is an entity or a company that
purchases noncompeting products or product lines, stores them in
warehouses, and resells them to retailers or directly to the
customers. Auto dealers are examples of distributors. Unilever
spends its major part of revenue in maintaining a proper distribution.
• 3. Retailer - A retailer is a person or business that purchases
goods from the wholesaler or directly from the manufacturer.
Retailers normally do not produce their own items. They purchase
goods to sell those goods in small quantities to end consumers.
Online retailer giants include Best Buy, Wal-Mart and Target.
• 4. Franchise - A franchise can be a manufacturer, distributor or
retailer. It is a method distributing products or services involving a
franchisor. A franchisor provides access to his business' proprietary
knowledge, processes, business system and a brand's trademark or
trade name in order to let the franchisee to sell a product or provide
a service under his business's name. A franchisee pays a royalty and
often an initial fee for the right to do business under the franchisor's
name and system. In the Philippines, Jollibee McDonald's and Pizza
Hut are some examples of retailing businesses. McDonalds's though
is the best example which has 93% of its franchised restaurants
worldwide.
• 5. Brick-and-mortar - It is a model that refers to the old-fashioned street-side
business that sells products and services to its customers face-to-face in an office or store
that the business owns or rents. Grocery stores, dentists, gas stations, local grocery and
walk-in banks are examples of brick-and-mortar businesses.
• 6. Bricks-and-clicks - It is a model where a company combines its online and a
physical presence. Customers may place their orders online and then pick up the products
from the physical stores. This model provides the advantage of flexibility because it can
show its products to customers who live in places where brick-and-mortar stores are not
present. These day, most businesses selling apparel and shoes items in Divisoria use this
model.
• 7. Direct Sales - In this model, products are directly sold to the customers. Selling
could be in the form of a face-to-face conversation or small gathering. The former
Tupperware used to have house parties to sell its products. The salesperson gets a
commission of every sale. Even in this age of technology, there are still companies that make
use of direst selling such as Avon, Boardwalk, Dakki, Fern and Forever Living. These
companies choose to always be in personal touch with its customers.
• 8. High Touch - This model uses a lot of human interaction and involvement in order
to the experience highly personalized. This type of business operates on trust and credibility
to earn revenues for the company. Here the highest involvement of the customer with the
business the more pay they give and the more loyal they become. Hair salons and auto
dealers make use of this model.
• 9. Family-owned - This is a family that is owned and operated by a family. The
decision making are controlled by family members. Some examples of this type of model are
the National Bookstore, Shoe Mart, Jollibee and Robinsons.
Some of the basic types of modern business models
are explained here:
• 1. Nickel-and-dime - This model makes use of the lowest price strategy in selling basic
product or service to the customers. Since the basic price is low, additional charges for the
other perks and services that are offered are required. Here in the country, Cebu Pacific is the
low-cost carrier which offers the lowest possible price for the flight tickets and charges fee.
However, it charges fees over extra services such as meal/snack, beverage and other services.
• 2. Freemium -This model is a combination of free and paid services normally used by
tech companies in the Software as a Service (SaaS) or apps business model. Usually the basic
services are free but for a limited time or with limited features. The basic service comes with
app advertisements and storage restrictions but the premium plans do not have. In order to
unlock the upgraded features, the customer has to choose for paid services. Zoom, Spotify
and Dropbox are examples of this model.
• 3. E-Commerce - This model is an up gradation of the old-style brick-and-mortar
business model. It focuses on buying and selling of goods or services creating a web-store
using the internet. The transactions of transfer of money and data are executed via the
Internet. Online stores like Amazon, Flipkart, Shopify, Myntra, Ebay, Quikr, Olx and Alibaba
are examples of E-commerce businesses.
• 4. Subscription - This model offers a long term contract to customers by paying a fixed
amount every month or year. The company needs to provide enough value to its customers for
repeat purchases by visiting the website over and over again. Netflix, LinkedIn, Amazon Prime,
Dollar Shave Club, are few of its examples.
• 5. Aggregator - This is a network model, the company acts as a middleman between two
individual parties. Under this business model, most companies provide information and sources on
a single industry. The company sells its own brand by creating value for both demand and supply
side. It makes profit by through commissions. Airbnb, Zillow and Oyo for Hotels; Uber for taxi
service; and Yodlee for financial service are the right examples for this model.
• 6. Online Marketplace - In the online marketplace, there is a collection of different sellers
into one platform. These sellers compete with each other to deliver similar product/service at
competitive prices. Good brand built from factors such as trust, free and/or on-time home delivery
and quality sellers is vital in an online marketplace. The online marketplace earns commission on
every sale carried on its platform. Examples of well-known companies using this model are Amazon
and Alibaba.
• 7. Hidden Revenue - In this model the company offers its services for free. The company
earns revenue streams from advertisements which are paid for by identified sponsors when
information is shared. Users of Google, Facebook, Instagram and Twitter don't pay for the search
engine, but these companies earn from advertising money spent by businesses.
• 8. Data Licensing/ Data Selling - The Internet has given rise to the importance of data. Data
is the major element in the web technology where companies need vital information to perform its
operations and gain profit. Twitter sells real-time data to third party users for analysis, advertising,
customer insight and other uses.
• 9. Agency-Based - This is a partner company that has specialization in
doing non-core business activities such as advertising, digital marketing, PR,
even janitorial and security. Usually, businesses that has no internal know-how
hire agencies to acquire a customizable solution for their needs. Leo Burnett
Company is an agency that services United Airlines, McDonald's, Kellogg's and
some of their notable clients.
• 10. Affiliate Marketing - This is a commission-based model where
companies make profit by promoting a partner's product and convince its
followers and users to buy the same. In return, the affiliate gains a commission
for every sales opportunity it referred to their vendor companies. The affiliate
website oftentimes provides product review. NerdWallet, Capterra,
MoneySavingExpert.comand and the Wirecutter are examples of businesses that
are into affiliate marketing.
• 11. Dropshipping - In a drop-shipping business, the owner has no
ownership of the product or hold any inventory but he has an E-store. He has
many different suppliers/ wholesalers to sell their product on the website.
When an order is placed on a business owner's website, the partner sellers then
deliver the products directly to the customer. Few examples of this nature
include Doba, Oberlo, Dropship Direct, and Wholesale 2B.
• 12. Network Marketing - Often called multi-level marketing, this model works on
direct marketing and direct selling philosophy. There are no retail shops here but the
offerings are sold to the target market directly by the participants. The more people that
become part of the pyramid structure, more money are gained by selling more goods and
getting more people on board. This is a commission-based model where participants earn
income through selling and recruitment of members. Avon, H and Mary Kay are good
examples of network marketing.
• 13. Crowdsourcing - This is a model that solicits intellectual information of users on
what value-added concepts be inputted in the product and or service offering Here there is
an open call for contributions to help solve the problem. In some instances, the contributor
of the solution is given monetary or recognition as rewards. Wikipedia, YouTube, Kickstarter,
LEGO ideas, Unilever, Coca Cola (new flavor of beverage) make use of crowdsourcing.
• 14. Blockchain - This is a digital ledger that is irreversible and decentralized. No one
owns and monitors this digital database but anyone can contribute to it. This model works
on peer-to-peer interactions and document all on a digital decentralized ledger. Many
crypto-currencies such as Bitcoin, Ethereum, and Litecoin use Blockchain technology-based
business model in their operations.
• 15. Low Touch - In this model there is minimum human assistance or intervention in
selling a product or service. There is no need to keep a big salesforce although companies
may focus on improving technology to further lessen human involvement and make the
customer experience better. Ikea and SurveyMonkey are good examples.
• 16. Razor and Blade - It is a business model in which one item is sold at a
low price or even given for free in order to intensify the sales of a complementary
good, such as consumable supplies. A good example is the Razor that is sold at a
low. price and its partner, the blade is sold at a premium price. The same situation
holds in a printer and cartridge. This model is advisable if the business has a loyal
customer base and has the ability to create some sort of lock-in situation with
customers.
• 17. Consulting - The consulting business is composed of experienced and
qualified professionals that offers services based on their line of expertise. Most
consulting firms charge their clients by the number of hours they have rendered
service or a percentage of share once a project is completed. Mostly accountants,
lawyers, educators and businessmen form their own consulting companies. The
most popular consulting firms are Mckinsey, Deloitte and Boston Consulting
Group, software or website development firms.
• 18. Social Enterprise - This model aims to put up a business more for
creating a positive change but with profit. The profit though is intended to be used
for humanitarian works to improve human living conditions. Some of the social
enterprises in the Philippines are Bayani Brew, Coffee for Peace, First Harvest and
Liter of Light.
 The Business Model Canvas
• In his earlier book "Business Model Ontology" Alexander Osterwalder, the Business Model Canvas
consisting of nine segments for its building blocks. This business model can be written in a one-
page canvas. Later he wrote a come comprehensive description of this business model in his
bestselling book "Business Model Generation".
• An entrepreneur may focus on every segment or blocks of the business model systematically until
he is able to close the gaps. Every block describes the factor that a startup business needs to study.
The thoughts and ideas of the entrepreneur are kept intact and focused although he may modify
each block as the need arises. Each block is very much interconnected. As one block is change, the
other blocks are required to be revisited because they may need to be changed.
• Here is a sample business canvass model for a small bakery that intends to sell organically baked
breads:
• Basically there are four major parts of the Business Canvass model which are the infrastructure,
offering, customers and finances. Infrastructure includes key partners, key activities and key
resources. Offering consists of the value proposition. The part of the customer comprises customer
segments, channels and customer relationships. Finance takes into account cost structure and
revenue streams.
• Here is the template of the business model canvas of Osterwalder.
 1 Key Partners
• Key partners are the network of suppliers and partners that may
provide the business model more effective. The entrepreneur could
partner with other business, governmental, or non-consumer entities
that can help the business model works. Strong partnerships could be
a tool to a business success. There are a lot of reasons in partnering
with various companies particularly for startups. Partnering can be
for optimizing the use of resources, forming new resource streams or
lessening risks on important business decisions.
• As the business lifecycle changes, so are the types of partnership that
the business may be needing. Simply, partners of a startup business
would differ from those partners when the business is already five
years in operation. Here are the four different types of partnerships:
• 1. Strategic alliances This partnership is an arrangement
between non- competitors to help each other do an equally
advantageous task but retaining their independence. For instance, a
new cafeteria business could with several suppliers of coffee beans.
• 2. Coopetition - This partnership is an agreement between
competitors to help share the risk that these companies may take.
Companies could be partners informing awareness for their shared
industry, to gain new users.
• 3. Joint-ventures - This is when two businesses because of their
mutual interest agreed to for a completely different company. A new
market or a new geographic area could be the reasons for combining
their resources in a join venture. For example, a cheese company may
opt to form a joint venture with a milk manufacturer for a cheese
manufacturing in another place.
• 4. Buyer-supplier relationships - These are the most usual type of
partnerships in businesses. Such relationships make certain that there
will be a dependable spring of supplies coming in. On the part of the
supplier this means a stable established customer for their product.
 2 Key Activities
• Key activities are the most essential activities in
achieving a company's value proposition and to
operate successfully. The key activities are mostly a
bridge between the value proposition and the
customer segment, certainly, the entrepreneur has to
consider his channels and customer relationships when
coming up with the key activities for the business
model. This portion is reliant on business model type.
Here are the categories of key activities:
• 1. Marketing - Adding value by promoting
products and/or services such as advertising a product
to create awareness and hence demand.
• 2. Sales - This concerns selling a product and/or
service. For instance, personal selling includes creating
customer relationships, discovering solutions to the
customer's problem and closing sales.
• 3. Design - This is about forming designs of various
items. For example, an apparel company creates design
of its lines of clothing for presentation to the
outsourced manufacturers.
• 4. Development - This is adding value through developing products
and services. In the case of software company, it develops a software
product which could probably be customized based on the need of the
customer.
• 5. Operations - The manufacturing of products and delivery of
services. Designing manufacturing, and delivering a product in big
quantities and certainly of highest quality are some of the activities under
this. Most companies are under this activity, particularly because a lot of
business models are in manufacturing.
• 6. Distribution - This is about reaching out to the customers to sell
to them and delivering the items to them. To illustrate, a repair shop
provides warranty services of an item bought by a customer.
• 7. Customer experience - Customer service, consulting and customer
support are some of the activities involve here.
 3 Key Resources
• Key resources describes the most important
assets required to make a business model work.
These are the resources that allow an enterprise
to create and offer value proposition, reach
target markets, maintain good relationships with
custome segments, and gain revenues. These
four blocks must be considered when developi
the key resources segment. Here the four
categories of resources, namely:
• 1. Physical - These are physical assets which are considered
tangible resources that a company make use of to form its value
proposition. These could include equipment, machines, inventory,
buildings, vehicles, manufacturing plants and distribution networks
that allow the business to function.
• 2. Intellectual - These are non-physical, intangible resources
such as brand, patents, proprietary knowledge, copyrights, and even
partnerships. Customer lists, customer knowledge, and even the
company's own people, are also form of intellectual resources.
• 3. Human - Employees are the biggest and most vital resources
of any company but are often overlooked. In service-oriented
companies which require great deal of creativity and extensive
knowledge, human resource is very vital. Customer service
representatives, software engineers or scientists are good examples.
• 4. Financial - All businesses have key resources in finance,
however some will have stronger financial resources compared to
 4 Customer Value Proposition
• Customer value proposition (CVP) is a business's way of
generating value in their product or service when targeting
potential customers. A value proposition is a statement
consisting of the reason/s someone should do business
with the company. This is computed through adding all the
benefits that the product could provide to the customers.
CVP is a description of the user's experiences that he will
come to realize upon buying and using of a product.
Without customer value propositions, companies are
walking blindly in the market. Basically, there are factors
considered in the development of the customer value
proposition which are:
• 1. Functional value - The product and or service offers the solution to
a particular problem. Said solution is convenient, better version, easier to
use and more complete compared to others. Examples of functional
benefits consist of the phone competence offered by an iPhone, the thirst-
quenching benefit by a bottle of water and the warmness given by a wool
sweater.
• 2. Emotional value - The product and or service is pleasant to look at
or attractive. Here the customer is fond of this offering because of
sentimental reasons, based from tradition or the advice of people attached
to the customer. Nowadays, purchasing locally produced or organic brands
carries emotional benefitsespecially for those enthusiasts.
• 3. Economic value - The product and or service offers a financial
advantage. promotes energy conservation, saves time or is innovative.
• 4. Symbolic value - For the customer the product and or service is
valuable because of a certain type of status given to the customer. This
status can be a social responsibility orientation or based from the brand. It
may include the sophistication and the feeling of being casual coming from
Apple products, themanliness projected by the Italian Ducati motorcycle
brand or the extravaganceexhibited when carrying a cup of Starbucks
 Different Types of CVPS
• By matching the customer segment to the value proposition,
a company can gain more profit. Therefore, it is basic for the
company to know exactly the trade- off amongst different
customer segments and then choose which one to target
and serve. Then, the company should form its customer
value proposition and adopt the best business model that
could best serve the needs of the selected segment.
• There are various CVPs for every customer segment for all
businesses. The reason for this is because each segment has
its own way of meeting the needs of its customers. Types of
CVPs include all-benefits, points of difference, and
resonating focus.
• 1. All Benefits - The company in this type of CVP just list all the
benefits or solutionsthat a product and/or service offering can deliver and
serve to target customersThe more benefits that can be listed down, the
better. This approach needsonly small knowledge about customers and
competitors from the company but it is disadvantageous. This may lead to
managers claiming entitlement to advantages for solution features that in
reality offer little actual benefits to target customers.
• 2. Favorable Points of Difference - The company using this CVP tries
to differentiate their solution by conveying its point of difference
compared to the customer's next-best alternative. Here, there must be a
complete understanding of customer's requirements and preferences,
and what it is worth to fulfill them. Sometimes, the points of difference
that has bees emphasized could be of little importance to the target
customer.
• 3. Resonating Focus - The company making use of this CVP identifies
the one or two points of difference between the its solution and its
competitors that provide the best value to the target customers.
Companies that use resonating focus value propositions are able to create
tailored-fit value propositions for different customer segments. The
 Customer Relationships
• Customer relationships are the types of
relationship a company forms with its
particular customer segments. These
relationships are essential in order to gain
customers, keep them and grow sales with
them. Here are some types of customer
relationships:
• 1. Personal assistance - Founded on human collaboration, the
customer can communicate with a real salesperson to provide help
during and after the sales process. Ways of communication may
include onsite at the point of sale, using call centers and even emails,
among others.
• 2. Dedicated personal assistance - This is the deepest and most
intimate type of relationship that involves assigning a salesperson to an
individual customer. This kind of relationship usually develops over an
extended period of time. For instance, in the banking industry, each big
account is provided an individual banker.
• 3. Self-service - Basically there is no direct relationship that exists
here, although all the essential things to assist customers help
themselves are given.
• 4. Automated services - This is a combination of customer self-
service and automated processes. For instance, automated services are
able to identify individual customers and their characteristics, hence
they can be given information about their orders. Said relationship can
even kindle a personal relationship such that a customer could be
• 5. Communities - User communities can be used by companies to be
more close and connected with their current and potential customers.
It is a trend now to keep online communities to exchange information
and help solve each other's problems. Tsikot.com is the leading
automotive website and community in the Philippines. It offers auto
classifieds, forums, reviews, galleries and a lot more. It has a user-
friendly interface, location based search with map and
mobileresponsiveness. Tsikot is the most popular car users community
in the country.
• 6. Co-creation - Basically, this is an extension of the traditional
customer-vendor relationship. Here customers have the chance to co-
create value with the company such as in designing and innovating
products Writing reviews and soliciting ideas from customers are
examples of engaging customers to become co-creators. A good
example is IKEA, a Swedish furniture and home goods retailer. In 2018,
it launched "Co-Create IKEA", a digital platform that promotes the
participation of customers and fans to design new products. There are
even cash rewards whose ideas are chosen. IKEA also opted to provide
test labs and prototype shops so that customers may hone their
 Customer Segments
• Shared needs, behaviors and other traits can
be the bases for customer segmentation. A
customer segment refers to demographics
such as age, ethnicity, profession and/or
gender; or psychographic factors which
include spending behavior, interests, and
motivations. A company may select a single
group or several groups to target with its
• 1. Mass - This is basically an unsegmented market in which products
with mass appeal products such as aspirin, orange juice, soft drinks,
paperback romances, and the like are offered to every customer. The
customer value proposition for this segment must be for a bi number of
people who has similar problem or need requirements. Refrigerator
manufacturers should target the mass market because there is little
differentiation needed by customers who are interested to buy a
refrigerator.
• 2. Niche - This market speaks of a customer segment with very
distinct characteristics and extremely specific needs. This segment
necessitates a highly customized product, custom made to fit their needs.
Hence, the customer value proposition for this segment should be strictly
defined based on the preferences of this specific customer segment. This
type of market is common amongst automobile parts suppliers who are
really reliant on automobile manufacturers for sale of their products.
• 3. Segmented - There are businesses that select to offer products
and/or services to customer segments that have very small differences in
their need requirements. In this segment, the company forms various
customer value propositions based on these small differences in the
• 4. Diversified - Some companies often select
differentiated customer segments. Basically these customer
segments have very diverse needs and wants. Although
there may be some overlaps among the profiles of
customers, the company still see it is profitable to invest in
attracting these customers. One of the diversified
companies in the Philippines is San Miguel Corporation.
• 5. Multi-sided platforms - This type of customer
segment is used when customer segments are reliant with
each other, which makes it a necessity to serve both sides of
the balance. This is true with credit cards. It is vital for
customers to use their credit cards. At the same time, it is
also important that stores accept these credit cards of
customers for transaction. If one end of the equation fails,
the other one shall have the same fate.
 Channels
• Channels are the touch points through which
a company communicates with its target
customers. Hence, they play a big role in
defining the customer experience and
providing value. An entrepreneur should
understand which channel is appropriate to
reach his target consumers. There are five
phases that a channel may pass through but
• 1. Awareness - This is the marketing and advertising phase. Said phase entails
educating the target customers about the features of the products and/or services
and how these offerings shall be of value to them. Google and other search engines
plus YouTube, Instagram, Facebook are good examples.
• 2. Evaluation - In this phase, the customer evaluates, read about or uses the
product or avail of the service in order to formulate an honest opinion about it. In
order to form a good evaluation of the offering, it is best for the entrepreneur to
educate the customers also about the company's competitors. This way the
customers are assisted in evaluating their options. Similarly, customers are able to
see clearly why the product and/or service of the entrepreneur's company is the best
choice. Google My Business, Social Media accounts and the company's website may
be used for evaluation.
• 3. Purchase - This phase is the actual sales process. Here the customers buy
their chosen product and/or service. The sales process represents the exchange of a
particular product and/or service for money. Stripe and Paypal can be used for
purchase.
• 4. Delivery - Also known as the fulfillment stage of the process, this is the
phase when the promised value proposition has reached the customers. Simply, the
way the offerings shall reach the customers to solve their problems. Postage/ Mail
such as UPS, FedEx and USPS are good examples.
• 5. After Sales - This phase centers in giving customer care and support after
• There are also different channel types, which are:
• 1. Direct channels - Direct channels are those that the
entrepreneur owns or hascontrol over. This could be his
physical store, website, or salesforce. Owning the channel
could mean added costs but may provide a direct and
strongrelationship with the customer and could give higher
profit margins.
• 2. Indirect channel - Also known as partner channels,
the company makes use ofintermediary and places its
products or makes the service obtainable at the
partnerstore. Wholesalers are considered partner channels.
Winegrowers partner with wholesalers in various countries
to sell their wines. Quick to reach the market and less
investment in infrastructure are some of the advantages of
an indirect channel. However, it is expected that there will
 Value Proposition Canvas
• It was Alexander Osterwalder who developed this value
proposition canvas. His aim is to guarantee proper fit of
the product and the market. Simply, the value
proposition canvas makes certain that a product and/or
service takes into consideration the values and needs of
the customers. The canvas appears to be a detailed
relationship of the customer segments and value
propositions. This canvas can be a tool also to upgrade a
product and/or service offering or to develop an
entirely new offering. The value proposition canvas
consists of two building blocks namely the customer's
profile and a company's value proposition.
 Customer Profile
• The customer profile points to the customer segment that
the company shall serve its product and/or service
offering. A customer profile should be created for each
customer segment, as each segment has distinct gains,
pains and jobs. The company needs to understand the
customer's jobs and make an assessment as to their pains
and gains. Before making a customer profile, the various
archetypes customers typically fall into must be
evaluated. Customer archetypes also known as personas
are those dry demographic portrayals of customers
transformed into living, breathing people which the
audience can comprehend. Customer archetype is an idea
of Steve Blank which he popularized in his Lean
 Customer Gains
• Customer gains include all the expectations
and needs of customers, things that may
delight them and other stuffs that may
intensify the possibility of these customers
embracing a value proposition. Upon buying
a product or being provided by a service,
some gains are given less attention by the
customer. Although, there are cases that
• 1. Required gains - When buying a product or being provided by a
service, these are the very basic expectations by the customers. An
individual buying a Smartphone has the least expectation that his new
bought phone can allow him to make and receive phone calls.
• 2. Expected gains - These gains are beyond the basic ones, but even
these are not present in the product and/or service, said offering can still
provide its basic purpose. Hence, for a Smartphone, it is expected that it
should be visually attractive and fashionable.
• 3. Desired gains - These gains are the customer's preference when it
comes to product and/or service. These are the most sought-after and
cherished gains by the customer. Obtaining these gains can result to the
complete satisfaction of the customers. In the case of Smartphone,
having no trouble in the synching the phone with other gadgets is a
desired gain of any user.
• 4. Unexpected gains - These gains are the potential benefits of the
product and/or service for which the customer is unaware until these are
introduced to him. Although these ideas and innovations are not
articulated by the customer, they are able to transform the customer's
 Customer Pains
• Customer pains are situations which either avoid the customer from
getting a job done or the negative experiences, emotions and risks that
the customer experiences before, during or after a job. Said pains
include the following:
• 1. Productivity pains - These pains include the inefficiency of the
businesses that a customer experiences. Majority of customers practice
time management that they felt annoyed when additional steps would
occur in the buying process.
• 2. Support pains - These are pains felt by a customer when he is not
assisted during the buying process.
• 3. Financial pains -These are pains that involve money in particular
that often a customer spends too much for a product and/or service
when his intention really is to spend less.
• 4. Process pains - These pains those that create friction to buyers
because of the substandard processes of the business.
 Customer Jobs/Jobs-to-be-done
• Customer jobs describe the functional, social and
emotional tasks customers are trying to do,
challenges they are attempting to resolve and
needs they desire to satisfy in their personal and
professional lives. Known also as jobs-to-be-done
(JTBD) shifts the focus from a hypothetical or
aggregate user to what actual users want to
accomplish by using the product. Here, the
perspective must be taken from the angle of the
customer to understand him fully. The following
are the types of these jobs:
• 1. Functional jobs -These are the regular and particular
jobs that a customer is trying to do and is working towards.
These are easy and simple things like cooking a menu,
finishing an essay for the English assignment, eating balance
diet and other similar ones.
• 2. Social jobs - These consist of the manners a customer
desires to reflect his image in a social environment. Some
examples include fitting in with a group of friends or
praising a co-employee in his sales presentation.
• 3. Personal/emotional jobs - These include how a
customer works towards feeling a certain way. Some people
feel they can rush from a tough task and then do another
task after like having a gym practice before dinner time.
• 4. Supporting jobs - Often customers also purchase
value, hence doing a supporting task. Here are the three
• a. Buyer of value - This task is any purchase of
value that may cover from evaluating choices at
hand up to paying for the product that had been
chosen.
• b. Co-creator of value - These are jobs for
which a customer has a direct hand in the
manufacture of the product with the company.
Such jobs include providing ideas for product
design, product testing and giving product and/or
service reviews online.
• c. Transferor of value - These are jobs at the
end of the product use such as disposal of product
trash or giving the ownership of the product to
• Value Proposition
• After really understand the customers, including
their gains, pains and jobs, then it is time to reflect
on the gain creators, pain relievers and the products
and/or services to offer them.
• Gain Creators
• Gain creators explicitly outline how the products
and services may create customer gains and offer
customer added value. An entrepreneur may form
benefits that a customer supposes, desires, or may
came as a surprise. Gain creators may include
functional utility, social gains, positive emotions,
• Pain Relievers
• Pain relievers explicitly outline how the products and/or services lighten, avoid or solve
the particular customer pains. An entrepreneur must provide details on how his offering
of product and/or service could lessen or completely eradicate the annoyance of his
customers before, while, and after they are trying to get a job done.
• Products and Services
• These are the products and/or services which create gain and relieve pain and built
around the value proposition. These offerings may help customers obtain a functional,
social, or emotional job done or just satisfy the basic needs. In addition, these products
and/or services could be in the form of tangible, digital/virtual. intangible or financial
which are essential to the customers.
• Achieving fit between the value proposition and customer profile is the intention of
creating the value proposition canvas. Both the value proposition side elements and the
customer profile elements should fit in. A fit is realized once the products and services
offered as part of the value proposition address the most significant pains and gains
from the customer profile.
 The Lean Canvas: A Business Model
Canvas Alternative
• The Lean Canvas as proposed by Ash Maurya is a
developed version of the Business Model
Generation. It outlines a more problem-focused
approach and appropriate to use by small
entrepreneurs especially those creating startup
businesses. The focus is more on customers' needs,
on actionable metrics and offer a fast idea-to-
product transformation. The Lean Canvas is also
primarily meant for entrepreneurs and not the
customers, consultants, investors or advisors.
• Here are the elements of the Lean Canvas Model:
• 1. Problem - It is important to understand the problem first that the business
will address. Every customer segment that an entrepreneur wants to serve has a
set of problems that require solving. In this box, the entrepreneur shall list the
three high priority problems that the customer segment is experiencing. This is to
ensure that the right product and/or service shall be met based on the existing
need of the customer segment being served.
• 2. Solution - Once a problem has been identified, the next step to look for
theeffective solution. However, this is not easy task to do. According to Steve
Blanks, the Godfather of Lean Startup, the entrepreneur needs to "get out of the
building". The phrase was coined by Blanks to mean going out in the streets and
interview the customer segment. The customer should be asked questions in order
to learn from them regarding their problems. The solution here must be be
concisely written and specific..
• 3. Value Proposition - This block contains a marketable promise to the target
user that the business will solve their problem. This is similar with the business
canvas model.
• 4. Unfair Advantage- A startup should recognize if it has the competitive advantage that cannot be
copied and cannot be bought or it has an unfair advantage over others. Basically, this block is hard to
answer, but essential especially when looking for partners and investors. The entrepreneur needs to think
about what the business has that no one else can buy such as dream team, expert endorsements and
existing customers.
• 5. Customer segments - This is similar with the business canvas model. The problem and the
customer segments must be connected.
• 6. Channels- These are the ways to reach the customer segments. Channels, which are free as well
as paid, can be used to reach your customer directly. They can be email, social, CPC ads, blogs, articles,
trade shows, radio and TV plus webinars which are also the same with the business model canvas.
• 7. Revenue streams - This is the money matter of the business just like in business model canvas. It
is common for startups to lower their cost or even offer it for free in the beginning to gain attraction.
Getting people to sign up for something for free is not the same than asking them to pay as they are more
interested in free products.
• 8. Cost structure - These are the operational costs that the business needs to pay in bringing the
product to the market such as salaries, cost of the materials, cost of maintenance. The complete variable
costs and fixed costs are to be listed here.
• 9. Key Metrics - All businesses, whether big or small have some metrics with which to monitor
their performance. The metrics consist of the assortment of products and/or services the business wants
to deliver. For a startup business though, one metric is good enough and then just build on it. It is
important that the correct metric is recognized.
THANK YOU!