S06 - Product definition and Business Model Design

Question 1

A logistics company is struggling with retaining its customers due to competitors offering faster delivery times. The company wants to leverage its eco-friendly delivery methods (electric vehicles and carbon offsets) to appeal to sustainability-conscious customers.

Question:
Which strategy aligns best with improving the company’s value proposition in this scenario?
A. Offering discounts to compete on price.
B. Partnering with major e-commerce platforms to expand reach.
C. Highlighting its eco-friendly practices through targeted marketing campaigns.
D. Investing in advanced routing technologies to improve delivery speed.

Answer 1

C. Highlighting its eco-friendly practices through targeted marketing campaigns.

Emphasizing eco-friendly practices aligns with the company’s value proposition and appeals to sustainability-conscious customers.

Question 2

A SaaS company offers a freemium model, where 5% of users upgrade to a paid subscription. Operational costs are increasing due to server demands from free users, causing net losses.

Question:
What should the company prioritize to improve its profitability?
A. Introduce in-app advertising for free users to generate revenue.
B. Limit the freemium tier to a 14-day trial period.
C. Reduce server quality to cut operational costs.
D. Increase subscription fees for premium users to offset costs.

Answer 2

A. Introduce in-app advertising for free users to generate revenue.

Ads provide a revenue source while maintaining the freemium model and managing operational costs.

Question 3

A luxury fashion brand aims to expand its presence in emerging markets but struggles to reach customers due to low digital literacy in those regions.

Question:
Which channel strategy should the company adopt to increase its accessibility in these markets?
A. Focus on e-commerce platforms with local language support.
B. Open physical stores in urban areas of emerging markets.
C. Partner with local influencers to promote the brand on social media.
D. Develop a mobile app optimized for regions with low internet speed.

Answer 3

B. Open physical stores in urban areas of emerging markets.

Physical stores overcome digital literacy challenges while targeting high-traffic urban areas.

Question 4

A subscription-based fitness app relies on engaging workout videos and real-time user feedback. However, the company is losing users due to outdated content and technical glitches in the app.

Question:
Which component of the BMC should the company prioritize to address these issues?
A. Customer Relationships
B. Revenue Streams
C. Key Activities
D. Cost Structure

Answer 4

C. Key Activities

Updating content and fixing technical glitches are critical activities to retain users and maintain engagement.

Question 5

A home improvement retailer uses a customer intimacy strategy, offering personalized consultations and follow-up services. Rising costs of maintaining personalized services are reducing profitability.

Question:
What adjustment aligns with maintaining customer intimacy while improving profitability?
A. Introduce standardized consultation packages at a lower cost.
B. Reduce the number of staff involved in personalized services.
C. Automate consultations using AI while keeping a personal touch.
D. Shift focus to offering discounts and promotions instead of services.

Answer 5

C. Automate consultations using AI while keeping a personal touch.

Automation reduces costs while preserving personalized service elements, maintaining customer intimacy.

Question 6

An e-learning platform faces reduced user engagement due to newer platforms offering gamified content. The company’s current model relies on subscriptions for pre-recorded courses.

Question:
How can the platform adapt its business model to regain competitive advantage?
A. Lower subscription prices to compete on cost.
B. Incorporate interactive and gamified features into its courses.
C. Focus exclusively on corporate training modules.
D. Remove subscription fees and operate on a donation-based model.

Answer 6

B. Incorporate interactive and gamified features into its courses.

Gamified content directly addresses the competitive disadvantage and improves engagement.

Question 7

A ride-sharing app notices significant underutilization of drivers during non-peak hours. It currently charges flat rates regardless of demand.

Question:
What adjustment to its business model would optimize revenue streams?
A. Offer a subscription model for frequent riders.
B. Implement dynamic pricing based on demand and time of day.
C. Increase driver commissions to motivate availability during non-peak hours.
D. Expand to new markets with higher population density.

Answer 7

B. Implement dynamic pricing based on demand and time of day.

Dynamic pricing optimizes revenue by charging higher rates during peak times and attracting users during non-peak hours.

Question 8

A cloud storage provider offers 5GB of free storage with an optional premium plan for additional features. Most users rely on the free plan, leading to minimal revenue growth.

Question:
Which strategy best balances user retention with revenue generation?
A. Reduce the free storage limit to 2GB.
B. Introduce ads for free users while keeping storage limits unchanged.
C. Offer loyalty rewards to encourage free users to upgrade.
D. Restrict premium features for free users to make the paid plan more attractive.

Answer 8

B. Introduce ads for free users while keeping storage limits unchanged.

Ads generate revenue without alienating users by reducing free storage.

Question 9

A tech company is launching a new smartphone with a high-performing camera. The production cost per unit is significantly higher than competitors’ models, reducing profit margins.

Question:
Which business model strategy should the company prioritize?
A. Operational Excellence: Reduce production costs to increase margins.
B. Product Leadership: Market the smartphone as a premium product at a higher price.
C. Customer Intimacy: Bundle the phone with personalized customer support services.
D. Marketplace: Partner with e-commerce platforms to expand distribution.

Answer 9

B. Product Leadership: Market the smartphone as a premium product at a higher price.

Positioning as a premium product allows the company to justify higher prices and protect profit margins.

Question 10

A startup providing renewable energy solutions lacks the manufacturing capacity to meet demand. Its focus is on designing efficient solar panels but relies on third-party manufacturers for production.

Question:
Which key partnership strategy should the startup adopt to ensure scalability?
A. Acquire a manufacturing company to control production.
B. Build exclusive contracts with manufacturers for guaranteed capacity.
C. Shift focus to licensing its designs to other energy companies.
D. Invest in crowdfunding campaigns to finance manufacturing.

Answer 10

B. Build exclusive contracts with manufacturers for guaranteed capacity.

Exclusive contracts ensure production scalability without requiring significant upfront investment.

Question 11

A food delivery app serves both customers ordering meals and restaurants seeking visibility. It generates revenue through delivery fees and subscription services for partner restaurants.

Question:
How should the app prioritize these customer segments to maximize revenue growth?
A. Focus on customers by offering discounts on delivery fees.
B. Prioritize partner restaurants by increasing subscription fees.
C. Develop separate strategies tailored to each segment’s unique needs.
D. Reduce delivery fees and subscription fees to increase adoption.

Answer 11

C. Develop separate strategies tailored to each segment’s unique needs.

A tailored approach ensures both customer groups (end-users and restaurants) receive value, maximizing revenue potential.

Question 12

A handmade jewelry business sells directly to customers through its website but incurs high advertising costs to attract buyers. The company is considering partnerships with boutique retailers to reach a wider audience.

Question:
How could this adjustment improve the business model?
A. It reduces cost structure complexity by consolidating operations.
B. It optimizes revenue by diversifying its channels without increasing marketing costs.
C. It minimizes dependency on physical store inventory management.
D. It eliminates the need for direct-to-consumer online advertising.

Answer 12

B. It optimizes revenue by diversifying its channels without increasing marketing costs.

Partnering with boutiques increases reach without the heavy advertising costs associated with direct-to-consumer channels.

Question 13

A drone manufacturing startup relies on a third-party supplier for specialized motors. Delays in motor deliveries have led to production slowdowns and missed deadlines.

Question:
Which solution aligns best with addressing the startup’s Key Partnerships and Key Activities?
A. Diversify suppliers to reduce reliance on a single partner.
B. Increase inventory of motors to reduce the impact of delays.
C. Invest in in-house production of motors to eliminate dependency.
D. Focus marketing efforts on explaining delays to customers.

Answer 13

A. Diversify suppliers to reduce reliance on a single partner.

Diversifying suppliers minimizes risk and ensures consistent production schedules.

Question 14

An online bookstore offers personalized book recommendations using AI but struggles to maintain active engagement with its users.

Question:
How should the company adjust its customer relationships strategy?
A. Provide loyalty rewards for users purchasing frequently.
B. Send regular personalized emails with curated book lists.
C. Allow users to customize recommendations manually.
D. Focus solely on increasing inventory diversity to attract more users.

Answer 14

B. Send regular personalized emails with curated book lists.

Personalized email engagement maintains user interaction and aligns with the company’s value proposition.

Question 15

A car-sharing service targets urban commuters and university students. The company’s app has a user-friendly interface, but many university students report technical issues with verifying their student status for discounts.

Question:
How should the company address this issue to optimize the BMC?
A. Focus on urban commuters and discontinue the student discount program.
B. Redesign the app’s verification process to simplify student onboarding.
C. Increase marketing to students, emphasizing the benefits of the service.
D. Remove discounts for students and focus on providing lower base prices for all users.

Answer 15

B. Redesign the app’s verification process to simplify student onboarding.

Simplifying the verification process aligns the channel strategy with the target segment (students), improving accessibility.

Question 16

A SaaS platform that provides data analytics tools for small businesses requires significant computing resources to operate. Rising infrastructure costs are limiting profitability.

Question:
Which adjustment to Key Resources or Cost Structure would best address the issue?
A. Transition to a hybrid cloud infrastructure to reduce costs.
B. Limit free trial periods to minimize non-paying users.
C. Charge additional fees for high-usage customers.
D. Offer a premium plan that includes exclusive analytics features.

Answer 16

A. Transition to a hybrid cloud infrastructure to reduce costs.

A hybrid cloud model optimizes infrastructure costs while maintaining performance.

Question 17

A sustainable clothing brand promotes itself as eco-friendly but struggles with visibility among environmentally conscious consumers.

Question:
What adjustment to Channels would improve its visibility?
A. Collaborate with influencers in the sustainability space.
B. Partner with mass retailers to reach a broader audience.
C. Focus on creating physical stores in urban centers.
D. Lower product prices to appeal to more customers.

Answer 17

A. Collaborate with influencers in the sustainability space.

Collaborating with influencers ensures the brand reaches its target audience effectively.

Question 18

A gaming company generates revenue through one-time game purchases but struggles to maintain consistent revenue after initial sales.

Question:
Which strategy best addresses this issue?
A. Introduce a subscription service offering exclusive game content.
B. Focus on developing additional games to drive one-time purchases.
C. Offer in-game ads to non-premium users.
D. Raise the price of new games to increase revenue per purchase.

Answer 18

A. Introduce a subscription service offering exclusive game content.

Subscriptions provide consistent revenue streams, addressing the issue of one-time purchase reliance.

Question 19

A meal-kit delivery service targets busy professionals and families but offers generic meal plans with limited customization options.

Question:
How can the service refine its value proposition to better align with its customer segments?
A. Introduce a flexible subscription allowing users to skip weeks.
B. Create meal plans specifically designed for each customer segment.
C. Lower the subscription cost to attract more customers.
D. Partner with grocery stores to offer meal kits in retail locations.

Answer 19

B. Create meal plans specifically designed for each customer segment.

Customization aligns the value proposition with the unique needs of each target segment, increasing satisfaction.

Question 20

A coworking space charges monthly memberships for desk access but struggles to cover fixed costs during low-demand months.

Question:
Which adjustment would best address the imbalance between revenue and costs?
A. Offer daily and hourly rental options to attract occasional users.
B. Increase monthly membership fees for all users.
C. Reduce the number of available desks to save on overhead.
D. Offer long-term contracts with discounts to encourage commitment.

Answer 20

A. Offer daily and hourly rental options to attract occasional users.

Flexible pricing attracts new customers, helping to cover fixed costs during low-demand months.