• Daywey Chen

Formulating a business model that sells

Updated: May 26

Lets look into 6 areas where the company can build up its competitive advantage to fight off the competitors. At the end of the day, if you can't find sufficient advantage in the 6 areas, then go back to the drawing board. Your business model will not work!




Product

"We have a very strong R&D team with abundant of capital that allows us to produce the product with the best specification. We are either the (fastest, easiest, safest, most stable, most reliable, most efficient, ...etc) product on the market. If our customers don’t get it from us, they don’t get it elsewhere, because no one else on the market can deliver it"


This usually is a premium product strategy that targets the high end customers. In this scenario your R&D is your core advantage. In this business model, you need to be affluent in your capital to keep the product innovation and specification ahead of the game.


Service

"We have an excellent service team. Our customer service is the best in the class. Our customer service is trained to communicate effectively with our clients, and we have systems in place to help us achieve maximum operation efficiency. A large global team that is constantly servicing our customers taking care of maintenance, error fixing, Q&A, and complaints. Our response time is among the best in the industry"


Is your company a people driven company? Have your company established a culture where your employees will stop at nothing to achieve customer satisfaction. Do you have enough resource to keep your customer happy? Service on a local scale is thing, service on a global scale is a whole other story.


Cost

"We have the most efficient (manufacturing, development, service, sales, maintenance...etc.) operation. We have an economy of scale that allow us to deliver products at a cost that others can’t match. Our supply chain is very efficient that allows us to deliver our products with a very short lead time. The combination of low cost and short lead time gives us the competitive edge"


Cost has always been one of the top consideration factors for any customer purchase. Some product and services are less elastics than others, but no doubt that cost is always in the equation. There are many company's that have succeeded tremendously with their cost advantage, despite they only have a mediocre product & service. In the recent years, due to the shaky and pessimistic economy, the cost factor have became evermore important than before.


Niche Market

"We are able to produce personalized products. We can customize to each individual. We can provide a service that money can't buy"


Providing the right to a product, service or experience make you stand out in the market. For instance, high end concierge service an get you concert tickets that are already sold out. An event could only be sold to a exclusive group of people. A car could be customized to your personal favor. This business model usually targets a premium market.


Unique business model

"We don't have the best product and service or competitive pricing but do we have a business model that targets the pain point of the customer that allows us to separate ourselves from the competition?"


Let me provide a example. In the machinery industry, most often customer invest in new equipment based on a forecast. However, the problem is that nowadays forecast are never accurate! Traditionally machinery is sold to customer, and the customers will bear the risk on the expected sales. Hoping that there will be enough sales volume to cover the cost of the equipment investment. To target this pain point , why not rent the machine instead of selling it to the customer? Another example would be to provide an installment for machine purchase at an attractive interest rate. This is the place where business can get creative to help solve the customers' pain point.


Brand

"OK! We do not have a competitive product, service, pricing, niche market or business model. Lets look at our brand. How valuable is our brand to the customer?" Does our brand alone allow us to compete in this market?"


Branding usually comes with marketing cost. Yes, emphasizing greatly on marketing is a strategy. However, this strategy is often not sustainable if you don't have an advantage in your product, service, cost, niche or business model. The marketing effort can help you grab the attention of the public, but at the end of the day, when people realize that there is insufficient value to what they are paying for, they will leave you. The word will spread.


Go back to your business and review if your product and services has an advantage in the 6 areas mentioned. Off course we should always consider the degree of advantage that you have in each of the areas. For instance, if you have a very high degree of advantage in your cost, then you might not need to have much advantage or even any advantage in the other 5 areas. However, if you only have an slight degree of advantage in cost, then you might also need an advantage from the other 5 areas. Most often, companies don't standout alone in only one area. Most often its a combination of advantages from the 6 areas, that makes a company separate itself from the competition.


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