Pinterest Business Model Canvas

Executive Summary:

I have calculated that Pinterest can make a profit of around $5M using the business model canvas.  Pinterest is a social media website that allows users to discover new products or ideas from all over the internet and store them all in one place.  It is also a way for businesses to get new products or services in front of a large audience.  Pinterest has two customer segments; all social media users and businesses with an online presence.  Today there are 1.8B social media users in the world and 30M online businesses.  Pinterest's current market share is 4% of social media users or 70M and 1.65% of businesses or 500,000.

Pinterest can use their business users to make money through leveraging their 70M users.  Pinterest currently lets business users register as a business, which gives them access to analytic tools.  Currently this service is free, but I believe Pinterest could charge $100 a year for these tools and instantly make revenues of $50M.

In addition, Pinterest can make revenue through advertising.  They are currently testing this concept with promoted pins, which look like regular pins, but a created by companies to advertise their product or services.  Pinterest can charge for promoted pins in two ways.  For large companies that want to launch large advertising campaigns to targeted audiences, Pinterest can charge around $1.5M or $30-$40 CPM.  Pinterest is able to charge this premium because they have a high click through rate of 1.1%.  If Pinterest gets only 10 companies to use promoted pins it will create revenue of $15M.  Pinterest is also testing an advertising concept small and medium businesses can partake in.  They are calling it self-serve promoted pins, which allows users to create their own promoted pin and pay per click.  If Pinterest charges only $1 per click and has 500 companies interested in creating 2 promoted pins that each receive 1000 clicks, they will make 1M in revenue.

All three revenue stream add of up to annual revenues of $66M.  I have calculated the cost to run Pinterest's website to be $61M based off twitter's 2011 expenses.  Therefore, leaving a profit of $5M.

Works Cited:

Twitter's 2013 Annual Report

http://www.statista.com/statistics/278414/number-of-worldwide-social-network-users/

http://www.internetretailer.com/commentary/experts/how-many-online-retailers-are-there-worldwide/

http://searchenginewatch.com/article/2282835/Pinterest-Tops-70-Million-Users-30-Pinned-Repinned-or-Liked-in-June-Study

http://semiocast.com/en/publications/2013_07_10_Pinterest_has_70_million_users

http://marketingland.com/pinterest-advertisers-start-paying-promoted-pins-early-next-month-report-77645

http://blog.bufferapp.com/pinterest-marketing-guide-tips

Mo Data Mo Money

Big data is very interesting to me.  The amount of data we produce today versus even a few years ago is unbelievable.  "Demystifying Big Data" stated 90% of the world's data was created in the past two years! So the question is what to do with all of this data? There are so many uses for big data, but one of the more beneficial is targeted marking.  In my industry, retail, companies have actually been using big data for years.  Many companies have loyalty programs and they track customer spending habits and much more.  In fact, Target does this so well they are said to know women are pregnant before they even know!  I think that Target is one of the leading retailers in big data use.  They know have a mobile coupon app, cartwheel, that I think will evolve to personalized ads delivered to customers while they are in the store.  The sky is the limit when it comes to big data.

 Target, however, is one of the few companies that uses big data to its potential.  My company, BJ's Wholesale Club, has just as much data collected about its customers through membership cards, but does not use the data nearly as well as Target does.  There is so much data out there it can be overwhelming for companies. The key is to filter through it and decide what will most benefit your company.  It's kind of like what I do as a merchant; I have to edit the assortment presented to the end consumer otherwise they get overwhelmed and won't buy.

Lastly, I want to mention that big data is not something that just businesses can profit from.  We read an interesting article on how big data is being used in the health industry.  Below is an article on how the US Post Office can use the massive amounts of big data they collect/have the potential to collect.

http://www.forbes.com/sites/federicoguerrini/2014/07/03/how-big-data-and-the-internet-of-things-will-change-the-postal-service/

BJ's Wholesale Club Canvas Business Model

Executive Summary
BJ's Wholesale club is an East-coast membership based retailer that offers its members a wide variety of products at incredibly low prices.  BJ's is able to make revenue by selling merchandise at incredibly low prices in clubs, on its website, and at its gas stations.  The company operates 200 clubs along the east-cost from Maine all the way down to Florida, in addition to 3 distribution centers.  BJ's just recently redefined its target market as affluent couples, new moms, new homeowners, empty-nesters, and the growing Hispanic population.  I estimated the market segment of affluent couples, new moms, and new homeowners to be 9M, the empty-nesters to be 14.4M and the Hispanic population to be 10.4M.

My estimations were calculated as follows:

Affluent couples, New Moms, New Homeowners:

4M affluent Gen X living on their own
45M Gen Y
49M market segment - 50% (assuming only half fit in above criteria) x 36% (percent of US population living on the east-coast)=9M

Empty-nesters:

80M Baby-boomers - 50% (assuming about half of baby boomers are empty-nesters) x 36% (percent of US population living on the east-coast) = 14.4M

Hispanic Population:

52M Hispanics x 20% (assuming less than 36% of Hispanic population lives on the east-cost)=10.4M

I estimated that BJ's currently has 27% of the affluent couples, new moms, and new homeowners market, 25% of the empty-nester market, and 27% of the Hispanic Market, which equates to 8.8M members (BJs currently has 9M members).  The membership fee at BJ's is $50, creating a revenue of $442M a year.  The average basket size at BJ's is $150 and the average customer shops 6 times a year.  This creates a revenue stream of $8,000M.  I assumed the online average purchase to be $75 shopped an average of 4 times per year, creating a revenue stream of $2,600M.  Lastly I assumed members spent and average of $40 on gas every time they came to the club (6 times a year), creating a revenue stream of $2,100M.

Therefore, the total revenue stream is as follows:
Membership:          442M
In club sales:       8,000M
Online sales:       2,600M
Gas:                   2,100M
Total Revenue: 13,142M

The biggest costs for BJ's to operate are the cost of goods sold, the cost to operate 200 clubs and 3 distribution centers, and the cost of acquiring new members.  Of these costs the biggest is cost of goods sold, which is about 90% of Revenues, amounting to $11,800M.  This may seem high, but BJ's whole concept is selling a lot of product at very low margins.  I estimated the cost of running the clubs/distribution centers, and the cost of acquiring new customers to be $500M each.  This brings total costs to $12,800M.

Therefore, BJ's is left with a profit of $342M, leaving room to still make money with other expenses, interest payments, taxes added in.  I think BJ's business model is viable as long as they continue to grow members and don't increase expenses.  Because BJ's cost of goods sold is so high, they really need to be careful with what other expenses they incur.

Works Cited:
US Census Bureau
BJ's Annual Report 2011
bjs.com
Lifetime Brand's Global Trend Report
Inside knowledge from working at BJ's

A new era of retailing

Today is an interesting time to work in retail because so much change is happening.  There are online only retailers, brick and mortar only retailers and everything in between, but what is the direction to move?  I have worked at 3 companies in the last 4.5 years and all have found themselves asking that very question.

While at Toys R Us I witnessed a retailer struggling to compete on price with Walmart, Target, and Amazon.  They were being attached on all fronts like they never had before and there next move was very important.  They decided to focus on omnichannel retailing, such as in store pick up, ship from store, ect.  There first year into this effort did not go so smoothly and they ended up loosing money on omnichannel transaction because they just hadn't gotten all the kinks out yet.  So was it the right choice for Toys R Us to try to go head to head with their biggest competitors?  I think the jury is still out on this, but I hear they are still struggling.

Next I went to Ross Stores, who had no online presence and no plan to get one.  I often wondered and asked if this was the right choice.  At Toys R Us online was the only growing business model, so it seemed crazy to me for a company not to have one at all.  However, Ross' whole business model was a treasure hunt, which was simply hard to manage online.  Similar retailers, such as Tuesday morning and TJ Maxx tried and failed to have an online presence.  However, TJ Maxx just launched a website for the second time, so they believe it is a necessity.  Again the jury is out, but for the Ross business model staying away from the internet might just work.

I now work at BJ's Wholesale Club, who was very late to the online party.  BJ's does not have the infrastructure in place for a website, so they're website is no where near where it should be.  The website has many many limitations, such as it is unable to do certain promotions, any area that is picked and packed can't be online, it is a hassle for a merchant to even get an item online.  In this case i think it is really hurting BJ's not having a robust online presence, like any other mass retailer.

As you can see different companies will have different strategies based on their business model and this will always be the case.  The key is to figure out what works best for you in this digital era.  I liked hearing about online only companies now showcasing in brick and mortar locations.  I firmly believe that brick and mortar stores cannot cease to exist.  They may change over time, but people will always need to touch, feel, and  try on product.

Being Buzz-worthy

I found this week's lesson very interesting, especially Seth Godin's Ted Talk.  I thought everything he said was spot on.  Marketers can no longer push their messages on consumers like they use to because consumers simply don't care.  I am most definitely one of those consumers who skips commercials with DVR and deletes all the marketing emails I receive (I actually created a separate account so I don't even see them!).  The only way to get consumers (including me) to check out something new is for them to hear/see people talking about it.  I may delete emails, but I religiously check my social media accounts and if several people I know post or tweet about something I almost always check it out.  Therefore, it is the goal of companies to create something buzz-worthy that gets people talking.  One company that comes to mind that kind of started this movement of creating buzz was Godaddy.com.  They used prime expensive superbowl commercial space to create buzz, rather than explain who they were and what they did.  I along with I'm sure millions of others immediately went to godaddy.com after their commercials aired just to find out more about them.

I also thought the article "Death of Segmentation" was interesting.  The article talks about how companies targeting customers through segmentation is a way of the past.  With all of the data available to us now the way of the future is targeting individual consumers.  The author gave companies 18 months to make this transition.  This really makes we wonder about my company.  Just this past year we updated who our target segments were and I do not see any movement to individual targeting.  I feel the movement from segments to individuals will be a slower process, but I do think the companies that move first will be the most successful.  I hope my company doesn't get left behind in this movement.

The power of the people

This week's lesson is all about how the internet has give the power to the people.  Before the internet businesses use to be able to push product on the people and the people had no say in the matter.  Now the tables have turned.  The people now have a voice and it can make or break businesses.  In order to operate in this era the internet can not be ignored; it must be leveraged to your advantage.  I think this was made very clear in the article "why the groundswell and why now."  It was clear the people had spoken and wanted the DVD encryption number to be seen.  The DVD companies clearly didn't like this, ignored the people and made Digg take down the article.  The people then took matters into their own hands and posted the number all over the internet anyway.  The DVD companies should have listened to the people and worked with them rather than trying to silence them.

The internet must be used to a business' advantage or it will fail.  Their are all sorts of sight now that allow customers to write reviews on companies.  These reviews can really propel a company if the reviews are good and leveraged in the company's advertising.  On the flip side negative reviews can be the company's demise if they are ignored.  I have seen several company's now on Yelp responding to customer's negative reviews trying to make things write.  This is exactly what all company's need to be doing.  More often than not the customer writes an updated post saying what the company has done to turn things around and that now all is good.

Good or bad the crowd will be heard.  It's up to the company how they leverage it.

Emotionally Connecting with Consumers

This week's readings were all about how today's blogs and social media sites have forced marketers to rethink how they market to the customer.  We are moving out of segmented marketing into interactive marketing.  No longer is it okay to push your message onto your audience; today the audience has to invite you in to tell them your message.  It is harder to target an audience in a traditional way because people are watching less live TV and reading less and less print newspapers and magazines.  All of this has changed the way marketers get their messages across to customers.  With an incredible amount of information available at the click of a button people want more than just to hear what a company has to say, they want to interact with the company and feel they are a part of the process.

As a consumer I am grateful that this is they way the industry is moving.  I don't like feeling that messages/products are being forced upon me and when I do feel that way I easily turn the page/channel.  Companies needed something to rethink what the customer was to them; I think often times they took consumers for granted.  The consumer/company relationship should be a partnership, as both parties need each other.  One of the ways companies have started interacting with consumers is through twitter.  Companies are actually answer consumers tweets making each consumer feel important.  Another great example of companies interacting with consumers is Yelp.  I have seen several instances on yelp where people post a negative experience and the company responds and does whatever needed to make it up to the customer.

In addition to interacting with consumers online, I think this shift in marketing has also made companies really think out of the box on all marketing tactics.  Recently Coke came up with a brilliant marketing tactic of putting special Coke bottles on college campus that only opened when two bottles were put together and twisted.  This forced freshman college students to interact and meet one another.  Now Coke as created an emotional experience with their product.  These students will always remember meeting their friends over a Coke.  It isn't just about the company interacting with consumers, it's also about the company creating an emotional connection to the consumer.

Below is an article about the ingenious Coke marketing.

http://www.adweek.com/news/advertising-branding/ad-day-coke-designs-friendly-bottle-can-only-be-opened-another-bottle-157988