The Business Canvas Model and customer relationships

Last week, I wrote about the Value Proposition, one of the nine building blocks in Alexander Osterwalder’s Business Model Canvas.

The Business Model Canvas provides a simple, one-page draft of a business plan, allowing for changes or iterations as assumptions change, are re-assessed or prove to be incorrect. This column focuses on two other segments of the Business Model Canvas: customer relationships and channels.

According to Osterwalder’s book, “Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers,” (John Wiley and Sons, 2010) co-written with Yves Pigneur, the customer relationship building block describes the type of relationships a company establishes with its customer segments. Some factors that affect customer relationships include customer acquisition, customer retention and upselling.

You should determine what kind of relationship each customer segment expects you to establish and maintain with them. Consider the various relationships you have already established and what they cost your business and what they return to you in profits. For example, what does it cost you to acquire a new customer? It is always more profitable to sell to your existing customer base.

Some of the different types of customer relationships you can have may include:

■ A personal-assistance relationship based on human interaction, in which the customer communicates with company representatives to get help during the sales process or after the purchase is complete. This may occur on-site, at the point of sale, through call centers, online chat, email or other means.

■ A dedicated personal-assistance relationship that involves a customer representative specifically assigned to a client.

■ A self-service relationship, in which a company has no direct relationship with its customers. They help themselves.

■ An automated-service relationship, in which the company may use self-service in combination with automated processes.

■ A community relationship exists when companies and user communities become more involved with customers and facilitate connections between members. Many companies maintain online communities that allow users to exchange knowledge and solve each other’s problems. Communities can also help companies better understand their customers.

■ A co-creation relationship exists when companies go beyond the traditional customer-vendor relationship to jointly create value with customers. For example, customers’ reviews create value for other potential and existing customers. Some companies engage customers to help design new and innovative products.

Retaining customers is a lot less expensive than constantly having to replace them with new ones. Your goal should be to develop and enhance your relationship with each customer in every profitable segment.

Ideally, your happy and satisfied customers will refer new business to you, and these retained customers should be receptive to new products and services you may offer in the future. 

But if one of these types of relationships proves unprofitable, then consider changing the relationship to a profitable model or possibly discontinuing the relationship altogether.

Upselling is a method used to sell more units or more expensive products to your customers. Often, price is used as a draw to accomplish upselling. If you buy “X” at full price, then you get “Y” at a discount. Restaurants are notorious about upselling. Do you want fries with that? Super-sized?

Channels are another Business Model Canvas building block. They describe your touch-points and how a company communicates with its customers to deliver its value proposition. Various channels may be provided through your own (direct) efforts or through partners (indirect). They may be made through a wholesaler, internet sales, an inside or outside sales force or a combination of these. 

There are five basic functions of channels. The various phases include:

1. Raising awareness among customers about your products and services.

2. Helping customers evaluate your value proposition.

3. Allowing customers to purchase specific products and services from you.

4. Delivering a value proposition to customers.

5. Providing post-purchase customer support.

It’s your customers’ choice — how do your customers prefer to be reached? Review how you currently reach them. Examine which channels work best for your different market segments. Some channels will be more cost-efficient than others. Find the right mix of channels to satisfy how different customer segments want to be reached, as this will be crucial in bringing your Value Proposition to your market.

Remember that partner channels will usually have lower profit margins but they allow an organization to expand its reach and benefit from partner strengths. Channels you own, particularly direct ones, will have higher margins but they may be costly to install and operate.

Your goal should be to achieve a balance between the channels and to integrate them when possible to create a great customer experience and maximize your bottom line.

— Dennis Zink is a volunteer, certified mentor and chapter chairman of Manasota SCORE and chairman of the Realize Bradenton board. He is the creator and host of Been There, Done That! with Dennis Zink, a nationally syndicated business podcast series. He facilitates a CEO roundtable for the Manatee Chamber of Commerce, created a MeetUp group, Success Strategies for Business Owners and is a business consultant. Email him at [email protected].

Learn more

Manasota SCORE is offering a class on the Business Model Canvas on from 5 to 7:30 p.m. Feb. 21 at Selby Public Library in Sarasota. The cost of the session is $25, and you can pay at the door.