Understanding Business models and Sale funnels

There are various types of business models and a company will choose a business model depending on its objectives.

focus will be on the product and product development, technology, revenues and revenue growth or customers

What is a Business Model?

You are at point A and you need to get to point B. You have never been at point B before. What you need is a map. A map will lead you to point B and guide you through the journey. Your goal will be to get to point B and not waste resources while trying to get there.

In a business setting your map is your business model. A business model will guide a business from point A (a point of reduced profits or customer numbers) to point B (a point of increased profits and customer numbers). Therefore a business model plays a vital role in the success of a business.

There are various types of business models and a company will choose a business model depending on its objectives.

These objectives may be but are not limited to increasing brand loyalty, increasing revenue earned, increasing the number of customers, increasing the number of transactions per customer, increasing the average transaction value per customer and establishing partnerships or acquiring new investors.

Your business can choose to focus on its product and product development, technology or revenues and revenue growth but Amazon has been profitable because it focuses on its customers.

Amazon had its market primarily in the United States but the company continues to grow its business globally, expanding into markets such as the United Kingdom, Japan and Germany.

Products: Thousands of products are sold by Amazon and Amazon users worldwide through its website. Amazon earns most of its revenue from service sales and has a growing subscription service rate.

The company focuses on two main areas:

· Selection – Amazon offers Amazon Prime which is an annual subscription with unlimited shipping and streaming.

· Convenience – Amazon offers fast, reliable and easy to use features.

Amazon also develops and sells devices such as Echo, Kindle e-readers, Fire televisions and Fire tablets.

Operational costs and pricing by Amazon focuses on its operational efficiency and the company is able to offer the lowest prices to its customers.

Customers: Amazon has developed a process that best serves its customers.

So as to meet market demands and new market trends, Amazon is able to make sound business decisions fast.

Innovation: Amazon has been very fast in adopting new technologies such as artificial intelligence and machine learning that drive the world today and will continue to in the future.

Other reasons for its success include:

· Amazon allows other sellers other than itself to sell products on its website.

· Amazon only charges a minimal fee that is a percentage of the total sales made through its website.

· Amazon provides a variety of services including database and storage services. Amazon also provides publishing and selling services to book authors, filmmakers, app developers and musicians. With a 70% loyalty package.

· The company offers its serves to government and government agencies and businesses of all varied sizes.

Starbucks is a company that retails coffee. Restaurants are designed to offer excellent customer service, reflect the cultures of the communities they operated in and build strong customer loyalty. It has licensed and company owned restaurants all over the United States. Before starting Starbucks, the owner Howard Schultz was first fascinated by the experience customers had in the Italian coffee bars.

Innovation: Coffee was about creating a sense of belonging in a community while selling the cup of coffee to customers.

The company also develops other ready-to-drink beverage products for the market.

The business was segmented into three: company operated restaurants, licensed restaurants and other food services.

Starbucks grew and begun establishing itself in new markets in America and worldwide including Canada, South America, Asia pacific and China, Europe, Middle east and Africa.

Partnership: Starbucks takes advantage of local partnerships it has established to share their knowledge on starting, developing and operating restaurants.

Through such strong partnerships Starbucks is also able to learn and get access to the most desirable restaurant locations worldwide.

Business model: Even though company operated restaurants fetch the company better revenue, licensed restaurants and partnerships are important to the company as well.

Franchised or licensed restaurants are seen as partnerships between Starbucks and the local investors and help to grow the company as well as the brand name which is today globally recognized.

Operational costs: To manage its expenses, Starbucks buys fixed price coffee from suppliers. It also has price-to-be-fixed purchase commitments made with suppliers of quality green coffee.

To meet and continuously guarantee customer satisfaction, Starbucks has set their own coffee quality standards by managing its own coffee purchase process, sourcing green coffee berries from different markets in the world, doing its own roasting, doing its own packaging and also managing the distribution process of its coffee globally.

Walmart focuses on customer experience to remain competitive.

Its business model has four components which are:

· Walmart United States

· Walmart international – comparing of wholesale and retail

· E-commerce

· Sam’s club that is a membership - only warehouse clubs that operates in the United States, Brazil. China, Mexico and Canada

Operational costs: Walmart processes and distributes imported and domestic products through distribution facilities located in the United Kingdom, Brazil, Canada, Mexico, Central America, China, Argentina, Japan, Chile and South Africa.

Products are categories into home and apparel, technology, office and entertainment, grocery and consumables, health and wellness and fuel and other categories.

Store formats include supercenters, discount stores and neighborhood markets.

Innovation: Location is a key factor when opening any new Walmart store.

Packages Walmart has in place include:

· Rollbacks - Walmart passes cost savings on to the customer by lowering prices on selected products.

· Money Back Guarantee - a 100 percent money-back guarantee on fruits and vegetables ensures freshness and high quality fruits and vegetables.

· Walmart Pickup - customers can place orders online and pick their orders for free.

· Pickup Today - customers can place orders online and pick their orders within four hours for free.

· Online Grocery - customers can place grocery orders online and have them delivered to them.

· Everyday low price - items are priced at low prices each day.

· Everyday low cost - each day efforts are made to control expenses and savings made are passed on to customers.

· Walmart has strategies to match or to be below a competitor’s advertised price.

If a model is to guide your business to success then surely there must be a guide to designing the perfect business model.

Keep in mind these important points below when designing a business model.

Profitability is very important when evaluating a business model since all businesses need to make profits to survive.

A product or service demand must stay constant and grow.

The operations of a business must be simple, clear and understandable to all relevant parties involved. All employees need to be trained to ensure that they know how to do the work that’s required of them. Growing your employees’ skills is necessary for the effective and efficient day-to-day operations.

It is important that you identify your audience, their buying behaviors, their demography, their pain points and precise solutions.

Identify your key partners such as who your suppliers are.

Identify what you need to actualize your processes every day. You will need trained and skilled staff, capital and a website.

Have a unique product or service. Provide a product or service that is better than what currently exists in the market. Differentiate your product or service from that of your competitors.

A business model has to generate interest in your business, let your prospects find you; create leads, increase sales and increase revenue.

Once your prospects start to become paying customers, you may have to change your business model to meet their changing needs. Therefore your business model has to be flexible and innovative. Startups may begin by offering free sample products and discounts so as to attract new customers. As the business grows and is well established in the market then there is need to expand the product lines to offer a wider variety of products, choices for customers and increase sales.

A good business model should be able to sell products or services in different niche markets.

A good business model requires very little tools to implement.

Revenue can be made from usage fees, subscriptions, issuing of licenses, leasing and renting out of property, the sale of assets, commissions and/ or advertisements.

Let us now go ahead and look at two sample business models 1 and 2 but first, business model 1.

Business model 1 explained:

Objectives of business model 1:

· To create a product or service that is better than what is already in the market.

· To increase the number of customers.

· To increase the average transaction value per customer.

· To increase the number of transactions per customer.

· To sell products and services in different niche markets for both small and large businesses.

· To have a unique concept and stand out from your competitors.

· To seek high quality leads.

Steps to business model 1:

Step one: Create your unique product

Creating a unique product makes you unstoppable in the market.

Ensure that you are passionate about the product.

Also ensure that your product has a mass appeal, your product is multifunctional, your product solves the customers’ problem, has credibility, proven results and good testimonials, it is easy to use, has unique qualities, it is well priced and has guidelines, instructions, demos or steps on how to use it.

Having a unique concept for your market involves understanding your customer’s needs.

Ensure that by buying and using your product the customer has a better life. The customer buys outcomes and you need to see what the customer will feel.

After you have understood your customer’s needs the next step is to communicate to your prospects. Let your prospects know that you have what they need.

Step two: Determine your market and traffic source

Traffic sources include: content marketing, SEO, paid searches, email marketing, social media marketing, digital display marketing and mobile marketing.

Step three: Offer free samples

A free sample in this case acts as an irresistible bribe that gives a specific chunk of value to a prospect in exchange for their contact information.

Step four: Build your email list

Collect names, emails, phone numbers and locations of your prospects.

WhatsApp allows you to immediately connect with your leads. Using WhatsApp you can get confirmations from your leads and send them information they requested for.

Step five: Offer discounts

Offering discounts in this case will help you convert leads into buyers and also help you build trust.

The goal is to fundamentally change the relationship from leads to paying customers.

Ask your leads important questions during the sales process. These questions will help you understand their needs and also help you position your product.

Step six: Keep constant communication with both buyers and prospects

Frequent communication with your buyers and prospects helps you retain your buyers and prospects. Frequent communication also gets your buyers to buy your product repeatedly.

Let’s move on to business model 2.

Business model 2 (Combining affiliate marketing and email marketing)

Business model 2 (Combining affiliate marketing and email marketing) explained:

Objectives of business model 2:

· To create a product or service that is better than what is already in the market.

· To increase the number of customers.

· To increase the average transaction value per customer.

· To increase the number of transactions per customer.

· To increase profits generated.

Steps to business model 2:

Step one: Affiliate marketing

Sell a product or service you are passionate about.

Step two: Build your email list

In steps 1 and 2, all you need is to send out emails endorsing other existing products in the market. In exchange you get to earn commissions which are a percentage of the sales you made.

In this case you get to focus on your subscriber base. Focus on the number of subscribers in your email list and not on the money you are making as an affiliate marketer.

The bigger your email list is the better for you since you have a higher chance of raising your earnings.

Your earnings will also depend on the promotions and your sales page.

In step 2 you will focus on getting visitors to your site, convincing visitors to leave their email addresses and other information and putting together an autoresponder. An autoresponder will help you maintain email addresses, plan your messages even before it is time to send them and allow you to send batch emails in just a few seconds.

Step three: Create and introduce your unique product

As long as you have the passion, the information, the will to share it to help others and there are people in the world that share your passion; then you have an opportunity to create your information product.

Step four: Develop your sales funnel

A sale funnel is the experience your customer will have had going from a prospect, then to a lead, then to a paying customer and finally a repeat customer.

Let’s look at three sample sales funnels 1, 2 and 3 starting with sales funnel 1.

Sales funnel 1

Prospects are all potential customers picked out based on their financial abilities and willingness to buy your product.

Leads are the contact information of prospects that may be future customers.

A good pitch should show your passion, have some humor, highlight all shared contacts and customers, be clear, short, simple, to the point and share only what is essential. Your pitch should not be overly emotional or expressive. Build trust and be encouraging with your potential customers. Be passionate about your product, understand your product well, briefly share about your business, product and yourself, focus on the potential customer and develop a customized pitch. Share some essential statistics and future plans and prepare a plan to deal with objections.

Your evaluation should come up with a list of potential customers depending on their reactions to your pitch. Move on to prepare customized products depending on their different tastes and needs. Step up the next meetings with your potential customers.

A good proposal should show your passion, should be easy to put together, should make use of videos, allow for good story telling, highlighting important points and explaining the benefits of your product. Have a good understanding of the problem being addressed, your product and solution being offered. Your proposal should be comprehensive, simple and have clarity, show your collaboration and commitment. Keep the potential customers in mind first, focus on their needs and customize their products. Have some social proof by making use of testimonials and endorsements from experts and leaders in your field; showcase your credentials, qualifications and experiences. Provide free samples and discounts and your personnel and partners should be communicated in your proposal.

During negotiations it is important to find out which proposals require more time and engagement.

It is important to find out who to negotiate with, where to carry out the negotiations, what the best time to carry out the negotiation is, how to best plan the negotiation and how to break any deadlock and win the negotiation.

For the best negotiation you should be passionate, be patient and confident, listen to your potential customers, be sensitive and show empathy but focus on winning. Focus on what can be done and not what cannot be accomplished, opportunities and solutions. Understand the negotiation process and be well prepared. Be innovative, creative and flexible and point out the decision makers.

During the purchase order it is important to accurately and timely monitor your expenses, avoid unnecessary and legal expenses and stay within the set budget.

It is also important to study new trends, find ways to close lost deals and improve on your sales funnel.

Sales funnel 2

A group of products are sold one after the other to existing customers. In this case your business gets to increase its revenues and lifetime customer value.

Sales funnel 3

A group of products are sold one after the other to existing customers eventually leading to the purchase of the high income product.

Cheers,

Peter Kirimi Mburugu.

Please subscribe, like, leave a comment and share.

Read exciting, sighting and latest articles under: All Features