How to explain your business model in 5 questions in one minute?

Before reading this article, please think about the following questions:

• How can small businesses stand out in the fierce market competition?
• How should a company differentiate itself?
• How to explain your business model in 5 questions in one minute?

First-mover advantage and differentiated thinking: two magic weapons for competition

Please think about this scenario: starting from the same starting point and sailing in the same sea, how can a small boat compete with a large ship?

Three assumptions:

• First, a large ship is better than a small ship in every way, even less likely to run aground and more flexible;
• Second, the two ships knew nothing about the sea area, and did not know where the dangerous shoals were, where the wind was against them, and where the wind was favorable;
• Third, the two boats are not allowed to cooperate with each other or cause sabotage, and there is no third party external force to help the small boat.

What is the strategy by which a small ship might defeat a large ship? Conversely, what is the strategy for the big ship to defeat the small ship?

With limited resources, there are two ways for a small boat to win:

• First, start first and compete with your competitors;
• The second is to take a different path from competitors.

Differentiation is important for corporate competition, but timing is actually more important than differentiation. I often talk about three "shi": one is the situation, one is the market, and one is the matter . The highest level is to study the trend of the industry and work backwards from the future to determine what the industry should do. This is the trend of the situation. Your marketing manager and vice president are concerned about the market situation, including price positioning, channels , budgets, etc. As a leader, you must remind yourself not to do things that are not done properly.

Only when you don't seize the opportunity should you consider differentiation. If the timing is right and there are no competitors, even if the product is not very good, it will not affect the business because the demand is there and the supply cannot meet the demand. But if you fail to seize the first-mover advantage in time, the market will already be a red ocean, and the only way out is differentiation.

How to differentiate yourself from eLong’s overtaking of Ctrip

In 2007, eLong’s market value was only 1/14 of Ctrip’s and it was almost forgotten by the market, but two years later, eLong turned a profit. In 2012, eLong’s market value had risen to one-fifth of Ctrip’s, and its growth rate had exceeded Ctrip’s for eight consecutive quarters.

How did eLong do it?

Elong follows the combat principles proposed by Clausewitz (author of "On War") and does not launch a frontal attack on a powerful enemy. Instead, it adopts a differentiated flanking strategy, shifting from homogeneous imitation to looking for differentiated opportunities everywhere, and ultimately using the Internet to integrate the long-tail market and encircle Ctrip.

First, customer differentiation. How to achieve customer differentiation? Ctrip's frontal battlefield is four- and five-star hotels and big cities. Elong decided to abandon four- and five-star hotels and big cities and actively expand into small and medium-sized hotels and second- and third-tier cities on the flanks.

Second, product differentiation. While Ctrip continued to expand its product line, eLong cut off its vacation and travel services, set its hotel business as its center of gravity, and used its air ticket business as an auxiliary product, concentrating its superior forces on one specialization.

Third, how to provide product differentiation. With customers and products, the next step is how to provide the products to users. For example, in terms of marketing channels, eLong shifted its marketing from offline card issuance to online marketing, and adopted a "clinging to the thighs" strategy, turning Oak Pacific, the company behind Renren, the largest campus social network in China, into a shareholder of eLong, and later carried out online cooperation with Tencent and China Merchants Bank.

Fourth, differentiated profit models. In terms of how to make profits, eLong tried to open its platform and explore new profit points: in addition to B2C , it also does B2B and opens its inventory to Dangdang, JD.com , China Merchants Bank, Suning.com , etc. JD.com's travel channel was launched, with eLong providing technical support and more than 20,000 partner hotels. It obtained commission income from hotel bookings through the JD.com platform, and the two parties split the profits in proportion, with eLong taking the lion's share. Although B2B has low profit margins, it can grow in volume. When the volume accumulates, the cost can be spread out and it also plays a role in brand communication.

1 minute 5 questions to explain your business model

After reading the above two cases, how can we explain the differentiated business model of a company in 1 minute through 5 questions?

Here are five questions you can ask:

The first question is, who are my customers? Who should we sell the products to and who should we not sell the products to? Are there any customers you’re neglecting? The most important point of Xiaomi’s success is that it has attracted the so-called “diaosi customers” that Apple and Samsung do not, and the same is true for Yu’ebao.

The second question is, what is my product and what is it not? Clarify the differentiated value of the product, such as brand, price, style, packaging, customization, variety, etc. When it comes to value creation, small and medium-sized enterprises need to add while subtracting.

The third question is, how can I successfully deliver the product to customers? In the value chain, do you have your own factory or do OEM (original equipment manufacturer)? Who will help me with distribution among my downstream partners? Will it be through franchising or direct sales? What are the marketing channels? Do you have online channels? What is the user experience like? Can I return or exchange my product? Another thing is my marketing team. Compared with my competitors, does my marketing team have more or fewer people? Are they stronger or weaker? These are the core issues to consider, namely: the reconstruction of the value chain, who are the partners, what are the marketing methods, what is the user experience, and what are the team's guarantees.

The fourth question is, how do I make money? When it comes to making money, the most important issues include: how to charge; how to set prices. If my prices are higher than those of my competitors, I will tell you why they are so expensive, such as because I use high-quality materials; how to improve costs. If there is a chance to cut overall costs by 30% in 2018 and sales do not fall, how should I optimize the cost structure?

The last question is, how do I differentiate myself from my competitors in the above aspects?

To summarize, regarding the business model, you can simply ask yourself five questions: first, who are my customers and who are not; second, what are my products; third, how do I deliver the products to customers; fourth, how do I make money; and fifth, compared with my competitors, how do I differentiate myself from my competitors in the above four dimensions.

Therefore, when considering differentiation, we cannot just have a straight line in mind, that is, experience and price. Differentiation has four different dimensions. Which differentiation is the most important? client. Why? Customers may not be clear about this, and the marketing methods, marketing channels, marketing products, cost models, etc. behind the business model will all change. The real source of our differentiation is customer differentiation.

The three major parameters of differentiated positioning from the Hammer smartphone

Let me share a story about the positioning of the Hammer phone. Not long after the Hammer smartphone came out, I analyzed the five problems with the business model I shared earlier and concluded that it would be difficult for the Hammer smartphone to succeed in the future. I drew the following picture at that time.

In the picture above, I wrote down some of the factors that consumers pay most attention to when buying a mobile phone, and then compared these factors with industry competitors to see what differentiated and unique advantages the Hammer phone has.

These factors include quality, stability, price, hardware configuration, system, software, ecosystem strategy, design, speed of new products, credibility, security, whether three networks are integrated, brand influence, photo effects, standby time, etc. After comparing with its competitors, it was found that only one "sentiment" can be regarded as the characteristic of Hammer.

Unfortunately, the mobile phone industry is not the coffee industry. “Sentiment” is not the KSF (key success factor) when most users buy mobile phones. When most users buy mobile phones, what they value most are performance, speed and other factors. Simply put, Luo Yonghao chose an unreliable reason, a reason that only a very small number of "Hammer fans" would buy the phone, and this reason is not the top reason for buying a phone.

From the case of Hammer smartphone, I would like to elaborate on the three positioning parameters, namely: the intersection of most user demands, competitors’ shortcomings and one’s own capabilities is the real reason for differentiation.

Most consumer demand

MIT professor Tracy proposed the strategy of "excellent operations, customer proximity, and product leadership" from the customer's perspective, and warned companies to choose a customer value expectation and make customers remember it. When we talk about consumer demand, I think the demands of most consumers are the real demands; not every consumer is God.

Users have different needs. If you gain one group of people, you will inevitably lose another group of users with different needs. Users need to make choices, and you need to promote the most important selling point based on the needs of the vast majority of users.

For example, if you sell luggage, and you ask three users why they buy your products or not, there will be three answers. But if you ask 300 people, there can't be 300 reasons. We once assisted a luggage brand in conducting market research on Tmall users. The data showed that 56% value quality, 28% focus on the right size, 6% care about the brand, and 5% of the people each think style and price are the most important. If this data is true, then you should focus on quality and size rather than style and price.

Not enough competitors

Michael Porter, a Harvard professor known as the "father of competitive strategy," proposed the strategy of "overall cost leadership, differentiation and specialization" to create a competitive advantage that is difficult for companies to imitate. He is more focused on studying his competitors. My understanding is that when doing business, you have to attack your opponent’s weak points.

When positioning, you must first clarify who your opponent is. Different opponents require different playing styles. If you want to snatch the same type of users from similar competitors, you must hit the enemy's weak spot, otherwise it will not be enough to impress the users.

For example, if you are Haidilao , you are very proud of the taste of your soup base, but if the taste of the Little Sheep across the street is just as good or even better, then I suggest you not to say that your taste is good, but to point out something that Little Sheep is not good at and that users care about, such as excellent service.

Self-ability

Strategic masters Prahalad and Gary Hamel mentioned "cultivating and enhancing core capabilities (also known as core competitiveness)" in their book "Competing for the Future". This was their discovery from studying the Canon case. They found that although Canon produces dozens of products with different functions, they believe that Canon actually only has three core capabilities: precision mechanical technology, precision optical technology, and microelectronics technology. It is these three core capabilities that ensure Canon's market position.

Hammer once made a vivid metaphor: a company is like a big tree. The root of the tree is the core capability, the trunk is the core product derived from the core capability, the branches are the company's business units, and the leaves are the company's final products. It can be seen that the core product is not the final product of the enterprise, but only the physical embodiment and material carrier of the core capabilities. Therefore, the competitive advantage of core products exceeds that of the company's final products. Amplifying and enhancing the radiation capacity of core products is a unique path to corporate success.

Think about it again, what are your company’s core capabilities? When we talk to users about the selling points of our products, we must base our discussions on the core capabilities of our own company. Otherwise, it would be like the "Cultural Revolution," which is bold but cannot be implemented. If a rich man without cultural genes says that he sells an elegant lifestyle, would you believe it?

Usually, companies need to consider all three circles together, namely industry analysis, competition analysis, and company analysis. When you analyze a value plan without considering the industry, the market competition environment, and the company's own strength, resources, money, people, and time, this value is in danger. It is also worth noting that the influencing factors in these three circles are dynamic, including demand, which is also dynamic, and companies must pay close attention.

In this VUCA era, the speed of product iteration and update is accelerating, marketing channels are diversified, and market competition is intensifying. Only by starting from the user pain points, providing differentiated products that meet the needs of most users, and achieving differentiation from the source of the business model can enterprises ensure continuous output of innovation.

The author of this article @关苏哲 is compiled and published by (Qinggua Media). Please indicate the author information and source when reprinting!

Product promotion services: APP promotion services Advertising platform Longyou Century