Introduction
The purpose of this report is to demonstrate the author’s understanding of the concept of the Business Model Canvas. In particular, they aim to show the application of the model to online enterprises. To that end, they have selected three different companies: accounting software provider Alaw, consumer products and travel blog platform Bodnant Blogs and a local bakery that works via online orders and delivery named Caradog Cakes. Each of these businesses operates in different circumstances and generates revenue through varying methods. The following report will use the Business Model Canvas approach to elaborate on the model of each of the three companies.
Alaw Company
Key Partners
The firm likely does not have any immediate key partners, though the freelancers that sometimes help it with contracts may qualify. It generally operates by providing services directly to the customers without entering alliances or cooperating with other firms. With that said, the cloud service that it uses for storage is a critical supplier. It provides safe and accessible information storage capability to the company, which is a valuable resource as it deals with sensitive data. Through the usage of cloud services, the company reduces its costs by having to purchase less dedicated storage and manages risk by employing a large-scale secure platform.
Key Activities
The principal activities of the company are creating and supporting software that satisfies all of a small business’s financial management needs. To that end, it needs to establish a robust development framework for implementing new features and resolving issues. Additionally, a reliable technical support system is required to collect customer feedback and solve their problems as soon as possible. As for the platform, the software is distributed via the Internet and interfaces with it closely, as the customer’s data is always stored either at Alaw or in the cloud.
Key Resources
The company’s primary assets are human resources, namely its developers and support workers, which are necessary for the software to work in the long term. The program suite itself is intellectual property, which must be protected for continued safe operation and revenue generation. The physical resources necessary for the operation of the business are its offices as well as the local computer network that hosts the software and client data. Lastly, the financial resources required for the continued operation of the company’s key activities are most likely cash, though it may operate partially on lines of credit.
Value Propositions
The company’s value proposition is that it supplies software that addresses all of the client’s financial accounting needs, such as invoicing, payrolls, and reporting. It resolves the issue of the effort and potential for error that is involved in the formulation of these documents while potentially alleviating the costs of hiring or contracting accountants. Per Pride et al. (2017), accounting software has the potential to be simple, time-efficient, and accessible, particularly in terms of portability. All of these advantages make the software particularly attractive to small business owners. As Alaw’s sole customer segment is small businesses, it only has one product offering, which is the fully featured software suite.
Customer Relationships
The company expects to establish a relationship of a mutually beneficial long-term partnership with its customers. Throughout its history, it has succeeded in doing so, creating a lasting positive reputation and a growing network of customers that has enabled powerful year-on-year growth. These relationships are integrated with the business model through the subscription model that the business employs. Customers pay Alaw monthly and receive continued service via the software and technical support for any issues that emerge. This technical support likely has a significant cost associated with it, but it is necessary for the maintenance of positive customer relationships. It enables small business owners to receive personal service that addresses any issues they may have quickly and efficiently.
Channels
The software is distributed via the website and sold to customers directly without going through retailers or partner companies. With that said, Alaw spends a substantial amount of revenue on online marketing, which can take a variety of forms. Heinze et al. (2016) indicate that social media marketing can be particularly useful when executed appropriately. As such, it is reasonable to assume that these platforms are a prominent channel for raising awareness of the product in customers. With that said, traditional ad-based online marketing should also be taken into account as a noteworthy channel. It is likely managed by an advertising service provider, with which Alaw works to create and target its promotional initiatives.
Customer Segments
Alaw is a B2B company, which means that it has fewer opportunities for differentiation than a B2C firm may. It targets small businesses uniformly, as all of them require financial services regardless of the industry in which they operate. As such, the company’s approach can be categorized as a mass-market one, with the business targeting all potential customers regardless of their circumstances. They likely prioritize quality and reliability due to the legal connotations of financial reporting, but they also appreciate convenience and efficiency. Geographically, the business targets all customers that it can reach, though considerations such as language have to be taken into account. This targeting strategy is expressed via the company’s current worldwide reach, which is enabled by its Internet-based model.
Cost Structure
Alaw is most likely value-driven, as it offers an excellent value proposition to the customers without any mention of a dedicated lean cost structure. The most important costs for the business are those of the creation and maintenance of its software. The expenses of development are likely the highest, as the workers responsible for it are constantly occupied with a high enough volume of work that it is sometimes necessary to outsource tasks. Overall, the majority of the company’s costs appear to be fixed, as salary, rent, and utilities constitute a large portion of its expenses due to the non-physicality of the product. With that said, the variable costs of advertising (which depends on revenue) and storage also have to be considered.
Revenue Streams
The customers are willing to pay for the value of convenience and consistent support, as otherwise, they have the option of human accountants available to them. Currently, they are paying for these advantages as well as their growing reliance on Alaw that stems from its “lock-in” approach. The current revenue generation model involves monthly subscriptions, with customers submitting payments regularly to retain access to the services. Most customers likely prefer this approach because it guarantees that support would be available to them at any time, though some may have preferred a one-time payment for a lifetime license. With that said, such an approach is not feasible for Alaw because its software works on its servers and cannot be guaranteed to work indefinitely. These subscriptions are the company’s sole source of income and, therefore, constitute its entirety.
Bodnant Blogs
Key Partners
The most important partner for Bodnant Blogs is Google, which interacts with it through its AdSense programs. It fulfills the critical function of enabling the company to generate revenue from its blogs by connecting them to advertisers and paying it on a cost-per-click basis. Another important partner category includes the various companies that provide Bodnant Blogs with affiliate links. The critical supplier for the company would be the service that hosts its website. It supplies the business with the essential resource of an access channel to customers. Without it, the content generated by Bodnant Blogs would be unable to reach its audience, failing to produce any benefits.
Key Activities
The company’s key activity is the production of content articles for its blog that is interesting for the readers to consider. It is necessary to maintain a lasting relationship with visitors, who will return as long as the site generates a steady supply of quality content. Additionally, it is essential to consider the task of search engine optimization, which is critical for the attraction of new readers (Sharma, Sharma and Rajasekaran, 2016). It expands the business’s distribution channel by making search engines display it in response to more relevant queries and give it a higher priority.
Key Resources
The company’s most valuable resource is its staff, which experiences various products and locations and uses it to write the content that the site produces. They would qualify as human resources, and their work would count as the company’s intellectual property, generating a base of articles that can convince a new visitor of the quality and appropriateness of the content. The website’s brand is also a valuable intellectual resource, as it ensures that people will go to Bodnant Blogs and not some other source when they are looking for information on a topic. The Google AdSense account is the final intellectual resource, as, without it, the company would struggle to access the same quality of advertisers as what it can access with it.
Value Propositions
The company delivers high-quality, unique information about various products and destinations to people who are interested in these topics. They resolve the problem of a lack of independently produced information about these items that are not marketing material by the brand or otherwise likely to be intentionally deceptive or misleading. The readers of Bodnant Blogs consider it to be trustworthy to some degree and feel safer using products that are endorsed by its writers. As such, they appreciate the brand, risk reduction, and quality design provided by the website’s articles.
Customer Relationships
The relationship that Bodnant Blogs establishes with its customers is one of self-service, where they are free to consume the product that it provides at no charge and make decisions based on the result. Additionally, Allen (2017) suggests that another type of relationship offered by blog websites is community-based. This variant is particularly likely if the site features a comment system, which enables visitors to leave feedback on the blog’s page and interact with the author and other readers. The advertisements and affiliate links may be considered a type of automated service, enabling customers to access recommended resources through the website.
Channels
The blog is likely not promoted through dedicated online advertisements because of its highly specialized nature. As mentioned above, Bodnant Blogs probably expect to attract new customers via search engine results when they search for a specific topic that coincides with those of the company. However, social media are likely channels because an account there can assemble a following of people who are interested in the blog’s topic and prefer to receive updates about new posts. With regard to the distribution of the product, the website is the sole outlet for these actions because of the nature of the site.
Customer Segments
Bodnant Blogs likely follows a mass-market approach to customer segmentation because of the specifics of its product’s appeal. Luttrell (2018) claims that “81 percent of American online consumers trust information and advice from blogs and 61 percent of U.S. online consumers make purchases based on recommendations from a blog” (p. 94). As such, there is a high chance that anybody who discovers the blog will read through the posts and possibly choose to purchase products or services based on its recommendation. Moreover, with the targeted advertising capabilities provided by Google AdSense, the site’s advertising is automatically adjusted for the visitor’s preferences, further eroding reasons to segment buyers.
Cost Structure
The most significant cost for the company is the compensation for the work of the various people involved in its operations, such as writers, designers, editors, developers, and others. It is necessary for the maintenance of an operational, attractive site that regularly produces fresh and relevant content. Other costs include the price of domain maintenance and the expenses involved in purchases of the products reviewed and travel to destinations, which the company likely compensates partially or fully. The business is likely value-driven, providing content of excellent quality to customers to incentivize them to return and click on ads and affiliate links.
Revenue Structure
Bodnant Blogs has two prominent revenue sources: advertisements provided by Google AdSense and affiliate links from travel sites. The former provide income on a Cost Per Click (CPC) basis, which means that not every visitor to the site will generate revenue through this method. However, with Google AdSense’s customization, the advertisements will be tailored to the user’s preferences, increasing their chance of clicking. For this reason, revenue from this source will likely constitute a majority of the company’s revenue. The affiliate links can work on a CPC basis or only create income when the visitor buys a product. Either way, it will likely generate revenue in smaller amounts than the first source.
Caradog Cakes
Key Partners
Caradog Cakes does not necessarily have any direct partners, though it likely benefits substantially from its suppliers. The farms enable it to advertise its cakes as made from local produce, which is an advantage because the business serves the nearby community and its culture. Jane likely has a personal relationship with the owners of the farms and can rely on them to consistently provide high-quality supplies. The proximity of the farms where Caradog Cakes purchases its ingredients also reduces the costs of sourcing them.
Key Activities
The key activities of Caradog Cakes are the baking of cakes and pastries as well as their delivery throughout the local area. For the former, it is necessary to source fresh ingredients and use them to create goods, possibly customized ones. For the latter, it is essential to maintain a staff of delivery workers who bring customers products, whether on foot or using transport. The third and final activity is the maintenance of a website where the customers can make their orders and request customization to their needs.
Key Resources
The company’s key resources are its website, production facilities and delivery staff. The site qualifies as intellectual property due to its brand strength and ability to attract customers. The production facilities that bake the cakes or pastries are physical resources, as they likely feature a variety of instruments and appliances such as ovens in a specific location. Lastly, the delivery staff qualifies as human resources, ensuring that the ordered items reach customers who purchase them and finalizing the value proposition of the business.
Value Propositions
Caradog Cakes offers locally made, fresh cakes and pastries that are delivered to the buyers and can be customized according to their desires. It also provides community members who have been struggling to find a job with an opportunity to earn some income by doing delivery work. The customers receive the unique proposition of having high-quality cakes that are close to homemade produce, made by a company that cares about the community and environment. It can be perceived as a superior alternative to cakes made by larger companies, which will typically use more heavily processed ingredients and use a depersonalized approach.
Customer Relationships
The bulk of the relationships that the company has with its customers is of a variety of automated services. They make an order on the website, likely from a predetermined menu, enter the pertinent information necessary to deliver it to the destination and make the payment. The cake is then cooked, and the delivery drivers let it reach the customer at their convenience. However, the offer of making specialized cakes for the customer’s needs, such as birthday parties or weddings, provides another more personalized relationship. The combination of the two service types ensures that the needs of most customers are met.
Channels
Caradog Cakes distributes its cakes directly to customers, having them ordered and then delivered to one’s doorstep. With that said, Giri (2018) notes that many bakeries also provide wholesale services to distributors, which may also be the case for the business. With regard to advertising and awareness spreading, the firm likely advertises itself through word of mouth, relying on customers to spread information about its services. It is unlikely that the company spends much on search engine optimization despite having a website because of its local appeal.
Customer Segments
The company likely uses a mass-market approach, offering products to anyone in the local area who is willing to purchase them. The local nature of the territory served, and the small number of potential buyers that it implies, make detailed segmentation less beneficial because the customers have many unifying traits (Padgett and Loos, 2019). The company creates value for local customers by providing them with fresh products that display regional characteristics. As such, they can enjoy cakes that reinforce their local culture without devoting the effort needed to create one to the task.
Cost Structure
The company’s primary costs are related to the production of cakes, namely the purchase of components and the operation of equipment. O’Donnell (2016) separates these expenses into ingredients, packaging, direct costs, and manufacturing overhead. Another significant cost category pertains to the delivery of the products, involving driver and fuel costs. Lastly, the expenses of maintaining the website should also be considered, though they are likely low relative to the other two categories.
Revenue Structure
Caradog Cakes’ sole source of revenue is its production and sales of cakes and pastries. Customers are willing to pay for fresh desserts that are made from local ingredients using recipes to which they are used. Moreover, they are likely ready to support the local community and environment. Jane’s company satisfies both requirements, satisfying customers with offerings that are characterized by their regional flavor and closeness. The company’s pricing scheme is a mix of fixed pricing for the items that are standardized and dynamic for custom orders. Customers likely pay for the purchases in advance on the website, which should be a satisfactory arrangement for most buyers.
Conclusion
The three businesses reviewed in this report demonstrate some highly similar traits, such as their approach to customer segmentation. At the same time, their revenue generation models are substantially different in each of the three cases, with one using a subscription model, another relying on ads, and the third employing a straightforward sales model. The three businesses demonstrate the diverse styles and purposes of e-commerce, from an extension of a traditional business to entirely innovative models. The Business Canvas Model has helped the author analyze them in greater detail and understand the specifics of each approach and how it generates its profits.
Reference
Allen, M. (ed.) (2017) The SAGE encyclopedia of communication research methods. Thousand Oaks, CA: SAGE Publications.
Giri, A. V. (2018) Hurdles and barriers in the development of bakery business. New Delhi: Idea Publishing.
Heinze, A. et al. (eds.) (2016) Digital and social media marketing: a results-driven approach. New York, NY: Routledge.
Luttrell, R. (2018). Social media: how to engage, share and connect. 3rd edn. London: Rowman & Littlefield Publishers.
O’Donnell, K. (2016) Bakery production handbook. Bloomington, IN: Xlibris US.
Padgett, D. and Loos, A. (2019) Applied marketing: connecting classrooms to careers. Hoboken, NJ: Wiley.
Pride, W. M. et al. (2017) Marketing principles. 3rd edn. Melbourne: Cengage Learning Australia.
Sharma, V., Sharma, V. and Rajasekaran, K. (2016). Web-based and traditional outsourcing. Boca Raton, FL: CRC Press.