Customer Relationships Business Model Canvas

In the Business Model Canvas, the Customer Relationships building block describes the type of relationships a business creates with different customer segments. In short, these represent the set of actions a company needs to take in order to grow and maintain its customer base.

Understanding customer relationships in the Business Model Canvas

In defining the ideal customer relationships, businesses should put themselves in their customers’ shoes. That is, what would they consider to be the ideal relationship? Would it be automated, personal, or somewhere in between? It is important to remember that consumers have certain expectations regarding the sort of relationship a business establishes with them.

Indeed, the quality of customer relationships has direct consequences for the customer experience. Organizations with consistently high-quality customer interactions across multiple touchpoints will be rewarded with devoted and brand loyal followers. These relationships can also be used to acquire new customers or upsell existing customers to boost sales volume.

Under this section of the Business Model Canvas, the business should consider the following questions:

  • What type of customer relationship does each of our customer segments expect?
  • Which relationships are already established?
  • How much do they cost?
  • To what extent are they integrated with our business model?

Six types of customer relationships

There are many different customer relationships types, with many co-existing within a single customer segment.

Here is a brief look at six of them:

  1. Dedicated personal assistance – in the first type, the business may assign a dedicated customer care representative who takes the time to understand the customer’s unique and specific needs. Banks and casinos employ this strategy to look after wealthy individuals.
  2. Personal assistance – perhaps one of the most common relationship types, where customers can interact with a single sales representative before making a purchase. Personal assistance also encompasses after-sales support.
  3. Self-service – where the business gives the customer everything they need to provide a service to themselves. Furniture maker IKEA is one example, selling flatpack furniture that must be assembled by the purchaser. Supermarkets and retailers that offer self-serve checkouts are another example.
  4. Automated services – essentially, this is a self-service relationship with automated processes that can identify specific customers and make tailored recommendations. Though automation will never replace a human touch, it can nevertheless provide excellent and efficient customer service.
  5. Communities – customer communities which the business owns and manages are also used to build relationships. Customers assemble to solve common problems and exchange knowledge, with this information used by the business to deepen its understanding of each segment. GlaxoSmithKline launched an online community for a prescription-free weight loss product. The pharmaceutical company wanted to understand the challenges overweight adults faced to better manage their expectations during treatment.
  6. Co-creation – where the business asks its customers to help them design a new product or service. This is a customer relationship that is highly beneficial for both parties. For the business, the inclusivity of the approach builds brand loyalty and trust. For the user, they get more say in a product designed around their needs.

Key takeaways:

  • In the Business Model Canvas, the Customer Relationships building block describes the type of relationships a business creates with different customer segments. For best results, the business needs to maintain high-quality interactions with customers across multiple touchpoints.
  • Customer relationships are designed around three major goals: customer acquisition, customer retention, and upselling. 
  • The six most common types of customer relationships include dedicated personal assistance, personal assistance, self-service, automated services, communities, and co-creation. One or several may exist in a single customer segment.

Alternatives to the Business Model Canvas

FourWeekMBA Squared Triangle Business Model

This framework has been thought for any type of business model, be it digital or not. It’s a framework to start mind mapping the key components of your business or how it might look as it grows. Here, as usual, what matters is not the framework itself (let’s prevent to fall trap of the Maslow’s Hammer), what matters is to have a framework that enables you to hold the key components of your business in your mind, and execute fast to prevent running the business on too many untested assumptions, especially about what customers really want. Any framework that helps us test fast, it’s welcomed in our business strategy.

fourweekmba-business-model-framework
An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run.

FourWeekMBA VTDF Framework For Tech Business Models

This framework is well suited for all these cases where technology plays a key role in enhancing the value proposition for the users and customers. In short, when the company you’re building, analyzing, or looking at is a tech or platform business model, the template below is perfect for the job.

business-model-template
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.
Business Model Template - FourWeekMBA

Download The VTDF Framework Template Here

FourWeekMBA VBDE Framework For Blockchain Business Models

This framework is well suited to analyze and understand blockchain-based business models. Here, the underlying blockchain protocol, and the token economics behind it play a key role in aligning incentives and also in creating disincentives for the community of developers, individual contributors, entrepreneurs, and investors that enable the whole business model. The blockchain-based model is similar to a platform-based business model, but with an important twist, decentralization should be the key element enabling both decision-making and how incentives are distributed across the network.

vbde-framework
A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
VBDE Blockchain Business Model Template

Download The VBDE Framework Template Here

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Business Engineering

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Tech Business Model Template

business-model-template
A tech business model is made of four main components: value model (value propositions, missionvision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.

Web3 Business Model Template

vbde-framework
A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.

Asymmetric Business Models

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In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Business Competition

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In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.

Technological Modeling

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Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.

Transitional Business Models

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A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.

Minimum Viable Audience

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The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.

Business Scaling

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Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.

Market Expansion Theory

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The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.

Speed-Reversibility

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Asymmetric Betting

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Growth Matrix

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In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).

Revenue Streams Matrix

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In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.

Revenue Modeling

revenue-model-patterns
Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.

Pricing Strategies

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A pricing strategy or model helps companies find the pricing formula in fit with their business models. Thus aligning the customer needs with the product type while trying to enable profitability for the company. A good pricing strategy aligns the customer with the company’s long term financial sustainability to build a solid business model.

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