Activities and costs (v. 2017 eng)

Activities and Costs

Frieda Brioschi / Emma Tracanella frieda.brioschi@gmail.com / emma.tracanella@gmail.com

IED, 28 Mar 2017Lesson 5/2017

5. Actiivities & Costs

Course program

1. Start-ups

2. Business Model & Canvas

3. Value Proposition Design

4. Customers & Market

5. Activities & Costs2

The Business Model CanvasDuring last lesson we discussed what is a business model and how fulfill a business model canvas, looking into each part:

• Value proposition

• Customer segments

• Channels

• Customer relationship

• Revenue streams

• Key resources

• Key partner

• Key activities

• Cost structure

List the costs you foresee if your core business is making bicycle

…according to you/1 - Money

• 5,000 • 20,000 • 100,000

…according to you/2

• material, distribution • Money spent for the materials, for the items used to build it,

for the time I spend building it, for the clothes I will ruin while making the bike, for the place where I will make it, for the person I will ask help to

• Cost of materials, stocking costs, producing costs, employees • materials to create the bike. ex. tire, steel, etc. • Producing, stocking, distribution, • Production, sell and distribution

…according to you/3 - ?

•I don't know•I have no idea.Engineer cost and saler•???

All you need to know about costs

In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore.

Two kind of costs:

• Direct costs

• Indirect costs

Direct costsCosts that can be identified specifically with a particular project or activity, or that can be directly assigned to them with a high degree of accuracy.

Direct costs generally includes:

• Salary and wages

• Material, supplies and equipment purchased directly for the specific project

• Communication and travels costs

Indirect costsCosts that are not classified as direct

Indirect costs generally includes:

• Salary of administrative staff providing normal support activities

• Office supplies, computers

• Local telephone calls

• Memberships

=> Overhead

5. Actiivities & Costs12

BykesDirect costs:

• Metals

• Wages for assembly

Indirect costs:

• Abrasive, glue, pink

• Rent

• Insurance13

Actual cost of doing business

Before you can price a product or a service, you need to know your cost to produce it.

A start-up usually should divide costs in one-time and recurring.

Common start-up costs• market research • preliminary accounting and legal advice • tenancy/lease bond, stamp duty and lease agreement

advice • telephone/internet installation • statutory requirements such as licences and insurance • power connection and bond • signage and initial marketing • equipment, fixture and fittings purchases • staffing and wages • initial raw materials and/or stock purchases.

15 https://www.business.qld.gov.au/business/starting/starting-a-business/calculating-your-costs-when-starting-a-business

Photographer

• How much charge a photo?

• Minimum fee?

• No costs?

A useful tool: the Cost of Business calculator. It list annual expenses, but it depends on your inputs which can be hard to estimate.

Cost of doing business calculator/1

Expenses

• Office and/or studio (rent, mortgage payments, taxes, insurances, home maintenance, …)

• Phone (cell and/or landline and faxes) – remember to include also the cost of the phone itself

• Photo/Video/Audio Equipment and Accessories

• Equipment services and Repairs

https://nppa.org/calculator

• Computer(s) (harware and software)

• Broadband internet

• Web hosting/Portal services

• Vehicle Expenses (Lease, Insurance, Maintenance)

• Office supplies and Furnitures

• Postage and Shipping

https://nppa.org/calculator

• Professional Development

• Advertising and Promotion

• Subscription and Dues

• Equipment and Business Insurance

• Health Insurance/Deductibles/Copays

• Legal and Accounting Services

19 https://www.calcxml.com/calculators/bus02

• Taxes and Licenses (Business and Self-Employment)

• Office Assistance (Payroll, Answering Service, Intern, etc.)

• Utilities

• Travel and Entertainment

20 http://www.wsj.com/public/page/news-small-business-startupCalculator.html

• Income factors

• Desired Annual Salary

• Non-assigment Income

• Number of Days You Can Bill Per Year

21 https://www.business.qld.gov.au/business/starting/starting-a-business/calculating-your-costs-when-starting-a-business

Cost of doing business calculator /6

https://nppa.org/calculator22

Perceived Value

5. Actiivities & Costs24

The extent to which a good or service is perceived by its customer to meet his or her needs or wants, measured by the customer’s willingness to pay for it.

It depends more on the customer’s perception of the worth of the product than on its intrinsict value.

How do we create the perception of value when we talk to our customers?

5. Actiivities & Costs26 https://beyondphilosophy.com/comparing-perceived-value-drivers-employees-customers/

4. Market and Value5. Actiivities & Costs

Gillette Fusion

• Amazon price: 19.25$

• 8 cartridges

• Cost/cartridge: 2.41$

• You need the razor (11.49$)

4. Market and Value5. Actiivities & Costs

Gillette Custom Plus Disposable

• Amazon’s price: 20.97$

• 30 razors

• Cost/razor: 0.70$

4. Market, Value and Business Model5. Actiivities & Costs

Gillette Fusion vs. Custom Plus

• Prices

• 19.25$ vs. 20.97$

• 8 cartridge vs. 30 razors

• Cost in use

• 2.41$ vs. 0.70$

• Additional perceived value justify the additional cost in use

• Durability of blade

• Comfort

• Less irritation

Gillette idea

By providing something at below the market price (the razor), you can create a market for a secondary product (the blade) upon which you make ongoing profits.

The mark-up on the secondary products is disproportionate relative to their cost so were highly profitable for the manufacturer.

3M Scotch® Tape

• Amazon’s price: $1.70

• Lenght: 650 inch

• Cost/inch: $0.003

• Cost to hang a poster: $0.01

3M Scotch® Command Strips

• Amazon’s price: $2.70

• 12 strips

• Cost/strips: $0.08$

• Cost to hang a poster: $0.32

Tape vs. 3M Scotch® Strips• Price

• $1.70 vs. $2.70

• Using Scotch Tape, the user can hang 75 posters vs. 3 for the command strips

• Cost in use

• $0.01 vs. $0.32 to hang 1 poster

• Additional perceived value justify the additional cost in use

• Less damage to wall

• Simplicity to remove

• Durability

CocaCola

5. Actiivities & Costs5. Actiivities & Costs

Nespresso

What else?

A-Style• Logo

• 1989 stikers on the walls of Milano and Roma

• Patented by Italian designer Marco Bruns

• Clothing Brand

• Italian brand founded in 1999

• A-style has used street-level buzz marketing to grow to international prominence

Lacoste

• Founded in 1933 by the tennis man Rene Lacoste

• At the end of 1990 the company change its strategy: marketing, retails outlets, product range, ...

• Sale of t-shirts in limited series

• Re-establishing Lacoste as “a distinctive premium brand”

Making an app

4. Market, Value and Business Model5. Actiivities & Costs39 https://www.comscore.com/Products/Audience-Analytics/Mobile

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