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Overview Of Business And Marketing Models
Introduction To Overview Of Business And Marketing Models People in business often talk about their ‘business model’. By this, they mean the way that their business is organized to make money. Business models also have another meaning. They refer to the frameworks and analytical tools that are used in strategic planning. These are the business models that are the subject of this book. They are the methods by which people in business plan their strategy. They are generic models, tool kits if you like, that structure how we think about and find a solution to a business problem.
We use models all the time. If we are faced with a problem we try to answer the question ‘Where are we now?’ At this stage, we lay down our understanding of the problem and what has caused it. We then turn to the next question, ‘Where are we going?’ We set ourselves goals that will solve the problem. Finally, we ask ‘How are we going to get there?’ We work out what we are going to do, who is going to do it, what resources we need, and how long it will take.
Business models give us a sense of confidence. They are a sort of map; a plan of where we are and where we can go. Just as we would never attempt to walk up a mountain without a map, we should never address a business problem without a model.
There are hundreds of models and frameworks to help us develop our business strategies. There are models for our overall strategy such as SWOT, Porter’s five forces, and PEST (political, economic, social, and technological). There are models that help us to find a competitive edge such as Porter’s four corners, Porter’s generic strategies, and USP analysis. There are models that help develop marketing strategies such as customer journey mapping, Maslow’s hierarchy of needs, Roger’s diffusion curve, and the 4Ps.
It is important to familiarize ourselves with the different models. They each play to their strengths. Successful business models have a simplicity about them. Once someone is introduced to the model, it makes perfect sense. It is a formula that explains the situation. It is a tool kit for the user.
Often the model includes templates that, once completed, clarify the subject. The models eventually become a shorthand that makes it easy to have a conversation with colleagues. We refer to ‘our USP’ and everyone knows it is our unique selling proposition – the thing that distinguishes us from the competition.
Useful as they are, business models should not be regarded as the holy grail. Just as we can get tired of the use of SmartArt in PowerPoint, we should be careful not to use models as cookie cutters. They are there to be adapted. Each chapter contains a note on the development of the models and how they have changed. Indeed, you are encouraged to think of your own model.
Some years ago my company was commissioned to carry out a market research survey for a house builder to find out the satisfaction of customers who had bought one of their properties. The analyst who worked on the project presented the findings in the framework of a snakes and ladders board. Buying a new house had its ups and downs. The building society or bank could provide a ladder or a snake depending on the financial circumstances of the buyer. Some builders offered a part-exchange deal that could move the buyer higher up the board. Then there was the building phase, which could be a ladder or a snake and determined whether the house would be ready on time.
Moving day was another critical moment and when the keys were passed to the householder they could see if their new house was pristine or had a list of snags that needed sorting. The die that determined how quickly and easily someone moved up the board was the sales agent. A good sales agent helped the customer progress quickly onwards and upwards while a poor one left them languishing. The graphic image of the model was very powerful and was remembered long after the hard facts of the survey were forgotten. Companies have been in existence forever. The Industrial Revolution brought many innovations, including mass production, but it was not until we entered the 20th century that business models were developed.
In fact, most of them are a product of the last 40 to 50 years. Spurred by increasing levels of competition, more demanding customers, and new forces that put pressure on companies, solutions were found by consultants and academics. Models were born. The first models often focused on some aspect of marketing. The AIDA – attention, interest, desire, action – model is a rare example of a framework created in the early 1900s. After the Second World War, the development of models came in a rush following Theodore Levitt’s teaching on the basic principles of marketing. This was a period during which business schools were opened throughout the United States and Europe.
Their professors were inspired to make their names with new business structures and tools. Michael Porter’s name is synonymous with a number of business models on competitive strategy. He was joined by Ansoff, Maslow, Kano, Kotler, Rogers, Mintzberg, and Greiner. Consultants got in on the act too. McKinsey developed a number of famous models. The Boston Consulting Group gave its name to the matrix for portfolio management. Arthur D Little made a contribution. Latterly Edward de Bono has provided us with models to inspire lateral thinking. Daniel Kahneman has introduced the world to System 1 thinking, which is quick, emotive, and often subliminal; and System 2 thinking, which is slower and more logical. Many of the consultants are still practicing and we can expect that the development of models has not finished.
Knowing which model to choose is half the problem. In part, our choice is narrowed down by the type of problem that we face. Are we seeking help in the development of a new product? Do we face new competitive threats? Are we planning a high-level strategy for the business? We can look within these categories for a model that could be appropriate. The book covers 50 of the most popular business strategy models. They are laid out in Table 1.1 in chapter/alphabetical order and classified according to whether they are mainly used for marketing, general business strategy, pricing, innovation, product management, or customer analysis. Many of the models can be used in more than one application.
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