The success of many companies depends on figuring out a clever way to grow, earn or operate that will change drastically change the game, stack the cards in their favor. There are many interesting business hacks that give this result. In this lecture I will show you how one of such business tactics – the low cost models has been successfully implemented in many businesses. This powerful tactic applied has already disrupted many industries like airlines, hotels, retail. One of the best known examples are IKEA, Southwest and Raynair In this lecture apart from the case studies of companies that implemented low cost model I will show you the math behind the low cost model that fuels the whole business and makes it so successful. In what way will you benefit from this presentation? The presentation is a practical, step by step guide loaded with tones of, tricks, hints, examples that will show you where you can go with your business. There is little theory – mainly examples, a lot of tips from my own experience as well as other notable examples worth mentioning. My intention is that thanks to the presentation you will know: 1. How low cost model work? 2. How you should build it in your industry? 3. Where you have to look for improvements to be competitive? 4. How to estimate your competitive advantage using data from your industry?

1. 1
Low Cost Business Model
How to create no-frills low cost business model and kill the competition

2. 2
Successful companies after achieving the product-market fit manage
to start growing almost exponentially
 Well executed business
hacks, tricks and tactics

3. 3
One of such business hack was the low
cost business model that required total
change of approach to specific industry

4. 4
Low cost model has been quite successful in many
industries
Airlines
Furniture
Buses
Retail
Hotels
Fitness Clubs

5. 5
In this presentation you will learn how low
cost business model works and how to
apply it to your business

6. 6
Click to check my course
What I will show you in this presentation is a part of extensive on-line
course where you can find also other useful business hacks
Business hacks, tactics and tricks -
practical guide
$90
$15

7. 7
Low Cost Model-
introduction

8. 8
In low cost model you have important pillars that fuel the
model
Simplified product and
services
1 type of assets
Better asset utilization
Efficient process
You target only 80/20
Scale matters
Simplified operations

9. 9
Low Cost Business Model -
examples

10. 10
IKEA

11. 11
IKEA has been very successful in implementing low cost
model in furniture
Model „big box” built outside the city
center
Design
Consistent message
Diversified revenue streams
Operational excellence
Business scale
Retail
Acquisition
Activation
Retention
Revenue
Referral

12. 12
Raynair

13. 13
Raynair is an example of a great execution of the low cost
model in airlines
B2C Services
Acquisition
Activation
Retention
Revenue
Referral

14. 14
They have used 1 type of aircrafts and increased their capacity
B2C Services
Acquisition
Activation
Retention
Revenue
Referral
1 type of aircraft
No classes
No reserved places
More places in the plane
Better Loading factor

15. 15
They do only point-to-point and use cheap airports
B2C Services
Acquisition
Activation
Retention
Revenue
Referral
Point-to-point
Regional airports
No waiting for passenger

16. 16
Raynair is also master of operational excellence
B2C Services
Acquisition
Activation
Retention
Revenue
Referral
Shortest taxi time and turn around time
More courses per day
Shortest time of preparing
Better usage of people

17. 17
Raynair has been also very creative on the revenue side
B2C Services
Acquisition
Activation
Retention
Revenue
Referral
Dynamic pricing and not so low prices
Unbundling
Charge for everything
Alternative revenue stream

18. 18
Biedronka

19. 19
Biedronka keeps it simple on the operational side
Retail
Acquisition
Activation
Retention
Revenue
Referral
Narrow range – they used to have just 1000
SKUs
1 retail format
Optimize supply chain and in-store process
Scale
Expansion model similar to Walmart and
Starbucks

20. 20
They went deep into product management
Retail
Acquisition
Activation
Retention
Revenue
Referral
Gradual move from discounter to
supermarket
Quality and origin obsessed
Own brands & selected premium brands
(often powered by)
No e-commerce
For long time excepting only cash

21. 21
Fitness clubs

22. 22
There are plenty of examples of successful low cost fitness clubs
B2C Services
Acquisition
Activation
Retention
Revenue
Referral
Get rid off things that do not generate sales:
reception, sauna, solarium, café, relax room
Unbundling (shower, fitness classes require
additional fee)
Low on staff; much more self service
Higher density of machines and usually
bigger format
Usually more technologically advanced
Available 24 /7
UK Germany USA
0
20
40
60
80
100
Price Join Online Opening
Hours
Club Design Technology Hospitality # of staff
Low cost gym Mid-market gym

23. 23
Hotels

24. 24
There are plenty of examples of successful low cost hotels
B2C Services
Acquisition
Activation
Retention
Revenue
Referral
Targeted at people who just want to sleep well
(sales reps) – extremely comfortable beds
Limited non-core space: reception, kitchen
Very small, densely located rooms with big king-size
beds.
Very limited breakfast; no proper restaurants;
vending machines available
Very clean and with great smell
Unbundling of services
0
1
2
3
4
5
6
7
8
9
10
Eating Design Room size 24-hour
reception
Furniture Bed
quality
Hygiene Silence Price
Ibis Budget 1-star 2-star

25. 25
Math behind the Low Cost
Business Model

26. 26
What drives the profitability
of low cost model?

27. 27
Just let’s have a quick look at the pillars of low cost model
Simplified product and
services
1 type of assets
Better asset utilization
Efficient process
You target only 80/20
Scale matters
Simplified operations

28. 28
Low Cost Models are great at optimizing the Profit to Assets Ratio
Better and longer
usage of assets
1 type of assets
Optimized processes
Quicker change of
assets
Using purchasing
power to get assets
Fewer processes
Reduce the complexity
and limit the choice
Profit
Assets
Unbundling
Dynamic pricing
Creating big
purchasing power
Innovative revenue
streams
Reduce the
dependence on people
Reducing non-core
assets

29. 29
Compound effect

30. 30
There are 2 types of compounding effect. The first one is related to
time
Time related
 Even if the growth is small applied over long period of
time gives big end-results

31. 31
Even if the start is modest with time you have the snowball effect. If you
grow 10% every period after 10 periods you have 2.6x what you had in
the beginning
Time related
 Even if the growth is small applied over long period of
time gives big end-results
= 2.6 x StartStart x (1+10%)^10

32. 32
Second type of compounding is related to operations. By having small
improvements in many areas you are generating big difference
Time related Operations related
 Even if the growth is small applied over long period of
time gives big end-results
 A lot of small changes in many areas may produce a
big end-results
= 2,6 x StartStart x (1+10%)^10

33. 33
Have a look for example on the effect you would have in retail if you
improved number of customers by 15% and the average revenue per
customer by 20%
Time related Operations related
 Even if the growth is small applied over long period of
time gives big end-results
 A lot of small changes in many areas may produce a
big end-results
# of customers Average revenue per
customer
Revenues
x
+15%
+20%
+38%
= 2,6 x StartStart x (1+10%)^10

34. 34
In low cost model you use both effects extensively
Time related Operations related
 Even if the growth is small applied over long period of
time gives big end-results
 A lot of small changes in many areas may produce a
big end-results
# of customers Average revenue per
customer
Revenues
x
+15%
+20%
+38%
= 2,6 x StartStart x (1+10%)^10

35. 35
For more business hacks check my on-line course. Below specially for you a
big discount. You will find there a lot of additional resources
Click to check my course
Business hacks, tactics and tricks -
practical guide
$90
$15

36. 36
Check also business modeling in Excel
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37. 37
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38. 38
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39. 39
Subscribe to our channels:
www

40. 40
Check my extensive presentation on productivity hacks to see
how you can me 10x more productive
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productivity hacks
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presentation

41. 41
If you need more detailed version on productivity hacks you
can check our course on productivity hacks
Click to check my course
Management Consulting Productivity hacks

42. 42
Check my presentation on restaurant business model to
understand it properly
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A practical guide
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43. 43
Check my presentation on on-line models to understand
them properly
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A practical guide
presentation

44. 44
For more check also my on-line course
Click to check my course

45. 45
Check my presentation on starting and running consulting
company
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A practical guide
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46. 46
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47. 47
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