Value proposition and revenue generation logic in circular business models

Aalto University’s Doctoral candidate Jukka-Pekka Ovaska has opened up his ideas about a company’s value proposition and revenue logic especially from the point of view of the Renewability business model. A value proposition refers to the company’s products and services, but in the wider sense also to the values the company represents, brand and the promise about how the company will solve a client’s problem with their products or services. Value proposition does therefore link closely to a client’s own values, identity and perception of the company’s brand. Ovaska gives Louis Vuitton as an example where the value proposition relates to luxury and status, whereas Patagonia’s value proposition, for example, is strongly based on environmentally friendly products.

“The Renewability business model offers a company a possibility to shape their value proposition especially in relation to the clients’ values. The value proposition in the Renewability business model is based on more environmentally friendly materials and their recyclability, which is of interest to many consumers and is worth bringing up clearly in communications and advertising”, Ovaska writes in his article.

In addition to value proposition, revenue logic – meaning where a company gets their turnover – is a central element in any type of business model.

“In the Renewability business model the revenue logic may very well remain the same as before: turnover is generated by selling textiles and clothes to clients. However, the revenue logic may be adjusted, for example, by changing the pricing along with the new value proposition. New products made of recycled materials may, for instance, be marketed to frontrunner customers with a premium price, which may also help covering possible additional material costs.”

It is, nevertheless, possible to combine different circular business models – and this way better respond to customers’ need and strengthen the company’s value proposition.

“By combining different strategies it is possible to improve the chances to recover materials back to the company’s use or in some other actor’s manufacturing processes. Touchpoint is a good example of combining different circular business models. In addition to Touchpoint designing their products for recycling, the company also offers various servicess, that prolong the products’ life cycle and improve their clients’ resource efficiency. Touchpoint enables a closed cycle for their products by taking in their clients worn-out workwear and recycling the clothes at the recycling plant of their subsidiary Rester in Paimio. Touchpoint’s value proposition is thus based on  that the client does not need to take care of their workwear but they may concentrate on their own business operations.”

Jukka-Pekka Ovaska’s article can be found on FINIX’s webpage in Finnish.