The vast majority of companies operate in highly competitive industries and dynamically developing markets. Starting a business in such an environment should be preceded by a reflection on the business model. The lack of a well-thought-out strategy in a competitive market usually leads to price competition, which automatically lowers the profitability of the business and leads to meeting the customer’s expectations without meeting the company’s needs. Creating business models avoids similar situations. So it’s time to take a look at what a business model is.

Business model – what is it? Business model definition

A company’s business model, also known as an economic model, is a plan that creates a company to generate income and maximize operating profit. In other words, it is a document that describes all the logic that will enable a given company to earn money. The business model is therefore central to most business plans and is an opportunity to create a thriving, profitable business.

Elements of the business model

The purpose of the business model is to plan how you will create value for your customers and then how you will deliver it to them. In addition, this plan answers the questions: when should your business start, how can it grow and when will you know you have been successful? Each thoroughly developed business model should consist of four basic elements. Here they are:

WHO is the customer of the company?
Targeting your offer to a wide audience will not allow your company to focus on customers who really need your product or service. Therefore, when creating a business model, it is worth limiting the group of recipients to two or three precisely defined persons. We have prepared some sample questions for you that you can ask yourself to create a clear picture of your customers:

– How old is your client?
– Does she have children?
– What is his profession?
– Where he lives? – What are his passions?
– What do I need?
– How does he make purchasing decisions?
– What social networks does it use?
– Why should he choose your product or service?
– What may prevent him from taking advantage of your offer?

WHAT value do you offer?
The second element of the business model defines the value you intend to provide to your audience to meet their needs and expectations. Think about what product or service you can offer to your target customers and describe it in as much detail as possible.

HOW will you deliver value to your customers?
Think about what methods, tools or technologies you will use to deliver defined value to your clients. Also think about how at this stage you can stand out from the competition that offers similar products or services. This will tell you what you can do differently to more completely meet the needs of your target customers.

WHY should the client take advantage of your offer?
To define the fourth element of the business model, you may consider why your target customer should leave their current supplier and take advantage of your offer. What are the benefits of making him take risks and partner with you? Why should the customer pay you? It is worth considering how he will be able to make this payment.

Of course, business models do not have to (and should not) be limited to just defining the above four elements. In your analysis, you can also include information on how you will implement the developed model to your business, whether you will establish cooperation with some business partners, and what strategic resources your company has at its disposal.

Before starting to build a business model, it is worth getting to know the market and its trends well. The collected data should be real and reliably verified. Otherwise, you risk developing your model based on wrong assumptions.

Business model – how to do?

Building business models is basically asking yourself the right questions to get the necessary information from the four areas defined above. Before that, however, it is necessary to choose the right tool with which you will be able to collect all the necessary data in a way that will allow you to use it in the future for business development. Experts in the field of creating business models use many different methods in their practice. One of the most popular and used is the Canvas model.

Canvas model

The Canvas model allows you to create business models by presenting them on a single page in the form of a table. This quick and synthetic process also helps you prepare for an oral presentation of your project. This tool will work for almost any type of business, regardless of the scale and type of value offered. It enables verification of the consistency between what will be sold and why, to whom, how and for how much. At the same time, Canvas allows you to map key design elements, understand the interactions between them and organize them.

Several methods can be used to create a Canvas business model. The best known and currently widely used method was proposed by Alexander Osterwalder and Yves Pigneur. According to the authors’ assumption, the Canvas model consists of 9 elements:

– customer segments,
– value proposition,
– key partners,
– key activities,
– key resources,
– channels,
– customer relationship,
– cost structure.

The individual blocks of the Canvas business model form an inseparable whole, which in the final form constitutes the business model of the enterprise.

Business model – an example

There is no one perfect exemplary business model. Business models can be categorized in a variety of ways, based on many different market relationships. Moreover, companies rarely use only one type of model. The most advantageous option is to create your model, which will be a combination of several different types. The most popular classification of business models is based on the relationship between an enterprise and its customers and distinguishes the following types of models:

– B2C (Business-to-Customer): companies target their offer to individual clients,
– B2B (Business-to-Business): the enterprise offers value to other companies,
– C2C (Customer-to-Customer): exchange of goods between consumers,
– P2P (Peer-to-Peer): sharing files on the Internet without the need to transfer them through the main server,
– E- or m-commerce: consists of selling products and making transactions via the Internet and mobiles devices.

To inspire you even more, here are some examples of other popular business models.

A. Production and distribution
Production is a classic business model. It consists in transforming raw materials into products intended to be placed on the market. Example: an artisan selling his wares.

B. Franchise
In this model, the franchisee adopts the concept of the franchisor who grants permission to use his idea. In exchange for the possibility of using a model whose profitability has been proven, the franchisee is obliged to pay the franchisor a fixed part of his turnover. Example: fast food restaurant chains.

C. Rent
This business model is to charge customers for using a product or service for a specified period of time without making a purchase. As a result, consumers gain access to goods that they may not be able to afford or simply do not want to buy. Example: car rental.

D. Advertising
The advertising model is one of the oldest and still developed business models. The customer pays for visibility to disseminate his message through a variety of media. Example: Ads offered by Google on the search results page.

A long but profitable process

A business model is a specific recipe that will become the basis for the success of your future business if well prepared. However, if you already run a business, regardless of whether your company is a startup or rather a business that can be described as traditional, it is important that you thoroughly analyze your model, because thanks to this you can effectively improve the performance of your enterprise. Do you feel that you need support in creating or developing your e-commerce business model? Please do not hesitate to contact us. Thanks to an in-depth diagnosis of the economic model, we effectively help our clients to question their business models and improve them, or to design and implement completely new solutions.

Marketing instruments – classic concept

The most basic concept of marketing instruments, i.e. the marketing mix, was created several dozen years ago and basically ends with 4P. According to her, marketing consists of four basic elements, which are:
– product,
– price,
– special offer,
– distribution.

In opposition to this concept, Robert Lauterborn introduced his own, which he called 4C. It contains exactly the same elements as the classic 4P, however, instead of showing the entrepreneur’s point of view, it emphasizes the role of the customer. According to Lauterborn, such an approach to marketing is necessary, because only full focus on the recipient’s needs leads to success. In his theory, we distinguish elements such as:
– customer value,
– cost,
– convenience,
– communication.

Now let’s focus on explaining what the individual instruments refer to and how to understand them and – most importantly – use them in practice.

Product (customer value)
It does not necessarily have to be a tangible commodity sold to the customer. When we talk about a product, we mean the values that a specific thing or service brings to the recipient and the needs it satisfies. So, when we offer mechanical repair shop services, we are not merely communicating that the company provides inspection and replacement of broken parts. We focus on the fact that the use of professional service gives you safety, comfort, time saving, quality guarantee and so on. It must be remembered that dry information about the product does not arouse the desire to buy it yet. We need to make the recipient aware of what problems they can solve and what expectations they can meet. Only then do we gain the interest of potential customers.

Price (cost)
Price is an important element of marketing because it largely affects the other foundations of brand communication. Product prices can be selected based on various criteria, for example brand recognition, competition prices, production costs and financial capacity of the target group. However, it is important to maintain a consistent pricing policy within the brand. So if, by definition, our offer is widely available and intended for consumers with any budget, the prices should be very competitive. However, when we target a group of affluent customers who purchase only luxury products, too low a price will not only be of no help, but may even harm sales.

Promotion (communication)
When we have a product tailored to the needs of the target group, we must, however, communicate to the world that it is available and that it is worth buying it from us. This is what all promotional activities are used for: on the website, in Google Ads, social media, at the company’s headquarters, advertisements in the press, radio, television, on billboards, etc. This is where we can tell people about the benefits of the product and the needs it meets. Of course, we do not have to use all available promotion channels – it is worth conducting an analysis of the target group and advertising (free and paid) where the recipients spend the most time.

Distribution (place, convenience)
In short, these are the things that determine whether the purchase of a good / service will be convenient for the recipient. When it comes to a stationary store or service company (beauty salon, cafe, hotel, etc.), the locations will be of key importance. The product must be close to the recipient, even at hand, so that reaching the company does not constitute an effort for the recipient. In the case of online businesses, the most important thing is the website through which the product can be purchased (its responsiveness, intuitive use, loading speed, etc.). In addition, convenience can also be provided in other ways – for example, by providing various payment or delivery methods.

Extended concept of marketing instruments

However, it quickly turned out that the concept of 4P or 4C is not enough to describe all the marketing factors on which the brand’s success depends. So it was decided to extend it with another 3P, and in the latest developments even with an additional 4P:
– people,
– process,
– physical evidence,
– pleasure.

People
This capacious slogan holds all people who are related to the sale / purchase of the product, i.e. the seller, the customer and other buyers. What’s this all about? First of all, even the best quality product will not be successful if there is no demand for it. Therefore, before introducing a product or service to the market, research is needed to determine the interest in the offer. However, the service associated with a given product is equally important. Whether in the case of stationary businesses or online stores, it is important that the seller is nice, competent, able to solve possible problems and meet the expectations of the recipient. Nowadays, it is the employees who largely build the brand image. On top of that, however, there is one more puzzle called other buyers. This means that no customer lives in a vacuum, they are surrounded by other brand fans with whom they can connect and share their impressions. These days, social media groups that bring together clients and companies, thanks to which you can build an engaged community around the brand, are no longer a rarity.

Process
We are talking about the entire process of contact with the customer, also after the purchase of a product or service, i.e. researching the level of consumer satisfaction, after-sales care, the ability to sell products, improving the offer based on customer feedback, etc. We can do a great thing or service which, however, will not be as useful for customers as it initially seemed. Therefore, the key is to constantly improve the products to better meet the needs of the recipient. That’s why we call it a process.

Physical evidence
Contrary to the name, they do not necessarily have to be tangible things, although we also include them among them. These are all the elements thanks to which the potential customer forms an opinion about the quality of the service / product. This includes, for example, the visual identity of the brand: logo, website, leaflets, promotional materials. Evidence of the high quality of the services provided are also less obvious things, such as the appearance of the company’s headquarters or its equipment.

Pleasure
The pleasure category includes all the features of a specific product or service that are not strictly related to usability, but are simply a pleasant bonus for the customer. For example, chairs in a restaurant do not affect the quality of a meal, its taste or nutritional value, but if they are comfortable and adjusted to the height of the table, they increase the joy of consumption. The same function can also be performed by, for example, a fragrance in cosmetics or air conditioning in a car.

Marketing instruments in a marketing strategy

Marketing instruments are not the same as tools and do not provide specific ways to promote your brand. However, they are like blocks that can be arranged in any way, creating a strategy with which we will sell a product or service. Understanding their essence and delving into the consumer’s needs is a necessary condition to build a competitive advantage.

We answer right away that the costs of an advertising campaign on the Internet depend on many factors. Therefore, it is impossible to define them precisely without analyzing a specific situation. However, it is worth knowing what influences the scale of expenses and how to plan your budget well for this purpose.

What is the price of an online advertising campaign?

An advertising campaign on the Internet can cost as much as you want.

After all, it’s up to you what budget you plan for it – a few hundred dollars, or maybe a dozen or tens of thousands? You decide. The problem is that determining how much you spend on a campaign shouldn’t be a coincidence, and neither should you plan what exactly the money will go to.

Nevertheless, the great advantage of the Internet – especially campaigns carried out in social media or via Google Ads – is the ability to precisely indicate spending limits: both on a daily or monthly basis, and for the entire campaign.

What are you paying for?

When it comes to displaying typical online advertisements, e.g. banners or sponsored links, the costs most often depend on:
– the number of impressions of the message – in this system you pay for each view, regardless of whether the recipient has decided to interact with the ad,
– the number of clicks on the ad – then the costs are generated only after the recipient clicks on the link to your website.

This is obviously a very general explanation, because it all depends on the type of campaign being run and the specific tools that will be used in it.

What affects the cost of the campaign?

The method of calculating payments by systems such as Google Ads or Facebook ads is not the only factor that translates into the final amount of costs that the advertising campaign will consume on the Internet. So what else is important for the budget?

A. Whether you run the campaign on your own or with the help of an agency
At first glance, the independent configuration of Google Ads campaigns or Facebook ads seems to be a very simple task. After all, service interfaces are easy to use, so just click through the options and you’re done, right? Theoretically yes. In practice, however, especially if you do not have any experience in the world of online marketing, you can expose yourself to very high costs that will not translate into the expected conversion and ROI, and thus return on investment. You can also expect that you will probably wait a long time for the ad’s effects, if they appear at all. So the question is: can you afford such a risky expense?

Yes, internet marketing agencies charge for their work, which can increase your initial investment. However, the actions taken by experts most often hit the spot and allow to achieve satisfactory results at a lower cost. In practice, therefore, an advertising campaign on the Internet carried out by professionals will most often cost much less and bring measurable, clear profits.

B. Experience of an interactive agency
The longer the internet marketing agency’s experience, the higher the chance that its planned campaign will be measurable. However, in the wake of many years of practice and extensive specialist knowledge, the stakes are higher. Therefore, you can expect that using experts’ services will be more expensive than working with beginners in this industry. Contrary to appearances, however, the rates of the former do not have to be “out of space”, and a slightly higher investment may bring greater profits.

C. The scope of cooperation with experts
In order for an advertising campaign on the Internet to translate clearly into the achievement of the set marketing and sales goals, it cannot be carried out without prior preparation. Therefore, the agency will certainly offer you a package of preliminary analytical services – the more precisely its specialists verify your current market position, technical possibilities, business environment, competition and promotional potential of various strategies, the higher the costs will be. Such an investment, however, usually means that the implementation of the campaign itself brings a higher ROI and gains the response you expect. Therefore, this is another issue to consider and discuss with a specialist.

D. The size of your company and the scope of its activities
If you operate on a local scale – e.g. in cities – you need a campaign with a much narrower scope than a corporation operating on the international market. Therefore, you will have to spend less on promotion. It is worth knowing that ad spend is also influenced by competition in your industry, the type of recipient to whom the messages are directed, and the duration of the campaign.

E. Selected communication channels
Advertising on the Internet is a very broad concept. You can put a lot of promotional tools into this bag – starting with sponsored links and banners on external websites, ending with promotion in social media, and even content marketing or SEO activities, which also translate into branding and conversion. The price of the campaign will depend on which of them you choose and how many you include in your campaign.

Summary

Of course, these are not all the pieces of the puzzle that must be taken into account when calculating the budget for online advertising. So as you can see, estimating how much an advertising campaign will cost on the Internet without looking at the specific situation, needs and goals of the company is like reading tea leaves. If you want to get specific information on how much your company should spend to see the results of investment in promotion – contact us. Our specialists will make a valuation and present you with various variants – from very economical to slightly more expensive – so that you can consciously choose what you need.