- Going from the Canvas to the Plan
Having the right customer listed in the customer segment canvas block requires having an understanding of the problem that you are trying to solve. The customer segment you choose is closely related to the industry analysis section of your business plan. The industry analysis helps you understand if your product (solution) is a good fit with the problem of the customer segment you have picked i.e. if you have chosen the right customer segment.
This is also where you determine if your solution will fall into the need or want category. Information that can help determine this includes income information on your target customer segment and what they currently spend their money on (if that information is available). This information helps determine if the solution is something that your customer segment is able and willing to pay for.
Your industry includes several players. First there are your potential customers (as discussed above) and your competitors. Your competitors are the people/organizations that provide solutions that are currently being used to alleviate the problem you are solving, so these will be substitute products. Note that the substitute products don’t always have to come from the same industry; to use a simplistic example a pen and paper can be substituted for a word processing program if the problem is a writing related issue. This section of the plan shall include an analysis of how your solution (offering) stacks up when weighed against the other solutions out there (the competition). The prevailing way of conducting this analysis is the use of a SWOT analysis.
This section also involves analyzing the macro environment. The macro environment has other players that include, but are not limited to, suppliers and government regulators that interact with the market in which your offering competes. To determine whether you can profitably serve the customer segment, you need to have an understanding of this environment. You need to know what the emerging trends are with respect to the population in the area you are planning to serve, the regulatory environment, personal preferences, technology et al.
With the business model canvas you defined a group of people that you believe you would be best able to serve, the industry analysis takes it a step further as this is where you do the research to determine the environment that you will be working in to ensure that you can serve these people. An easy way to look at what this section does for you is this, it answers the question:
What is the market and competitive environment and is it worth my while to dive in?
The value proposition canvas block is a benefit summary of your offering. And your offering is described in more detail under the description of venture and marketing plan: product sections of your business plan. These sections of your business plan essentially define the physical form (either good or service) that your value proposition will take.
Your value proposition should be expanded in the description of venture section by:
- Describing the physical characteristics/features that allow you to deliver value with your offering
- Describe how these characteristics translate into the benefits that you are promoting to the customer in the form of your value proposition.
Another section that is influenced by the value proposition is the product section of your marketing plan. Under the marketing plan you clarify what actually goes into making the product. When writing the marketing plan you want to ensure that all the product related marketing plan activities are directly related to communicating your value proposition to your customer segment. You want to discuss “the quality of components or materials, style, features, options, brand name, packaging, sizes, service availability, and warranties.”1.
Having the value proposition defined before you start writing the product section of your venture description and marketing plan is crucial because it helps you focus on the things that you need to do to communicate that value proposition with the product and not just your communication message. Information from this section will feed into your production/operations plan as all these aspects will determine the production processes as well as your operations.
As defined earlier, channels canvas block includes how you get your value proposition to your customer. This canvas block will help you define your distribution systems (marketing plan: distribution) and how you promote your products (marketing plan: promotion) to the customer for them to buy them.
The distribution section of the marketing plan details out the finer points of how you are going to get your product to your customer. Distribution systems can either be direct or indirect; they can also be owned by you or by somebody else. The question to consider is:
Do you sell it to a wholesaler who then sells it to a retailer who then sells it to the customer; or do you sell directly to the customer yourself?
Then there is promotion. How do your customers know about your great new offering that can solve the problem that they have been struggling with? Promotion channels can include direct mail campaigns, advertising campaigns, or the more accessible social media campaigns.
The customer relationships canvas block defines part of your operations plan and marketing plan: promotion. Both these sections of the business plan detail out what actions need to be taken to ensure that you can start and maintain the desired customer relationships that you outlined in your canvas.
In the operations plan, your customer relationships help define what kind of customer service programs that you need to implement from customer acquisition to retention.
With promotions, understandably the purpose of your customer service isn’t to push particular products onto the customer, but it could have that residual effect. How? Well what does a customer do when they have had an expectation-exceeding interaction with a company? The expectation is that they would pass this news on to their friends. You can either hope for this outcome or you can design your customer relationship systems specifically to motivate satisfied customers to talk to their friend’s about your offering. Also you need to determine what structure such systems will take i.e. automated vs personal relationship.
The revenue stream canvas block define the parts of your business model that earn you money. This is tied into the description of venture, the pricing portion of your marketing plan (marketing plan pricing), and the financial plan.
In the description of venture, you can give a high level description revenue streams listed on your business model canvas. A note on identifying revenue streams: obviously you should make money from your offering (value proposition: product/service), but you can also make money from your channels and customer relationships. For instance if you have an owned distribution system, you can choose to offer access – for a price of course – to people who would derive value from that offering. If you do decide to do something along these lines, you need to ensure that doing so does not compromise your core business. An example of this is Amazon – they used their expertise in developing web infrastructure to launch a cloud service to business. You could also make money from your customer relationships: one way you could do this is offer basic customer support for free and then a more advanced customer support basis for people who are willing to pay for it.
The pricing portion of the marketing plan details how much you will charge for these revenue generating blocks and also give a breakdown of how these prices. You will also need to give an economic basis for the prices and the expected demand i.e. the total revenue projections that you are making based on these prices.
Finally the financial plan will have to include your revenue streams and help show that these revenues can cover costs and the business can be profitable after a given period of time.
- Robert D. Hirish, Michael P. Peters, and Dean A Shepherd, the Eight Edition.