Businessmodel of Zenefits

Customer Segments

Zenefits has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate:

• Benefits Providers: Benefits providers offer the following programs through the system: health insurance, flexible spending accounts (e.g., FSAs and HSAs), workers’ compensation, COBRA, property & casualty insurance, life & disability insurance, 401K plans, and stock options.
• HR Departments: HR departments sign up for the system and use it to manage the various benefits programs for their employees, communicating relevant information as needed. ### Value Proposition

Zenefits offers three primary value propositions: convenience, price, and cost reduction.

The company’s software simplifies the HR management process by enabling employers to work with HR service vendors/benefits providers through one party rather than through multiple brokers. It also makes the day-to-day processes involved with management easier by automating many of them (e.g., adding a new hire to payroll or removing a terminated worker from benefits) and integrating them into one interface. This saves time and increases productivity.

Zenefits’ business model enables employers to use its system for free. This is a significant incentive for organizations to sign up, as they can use the money normally associated with paying brokers for other purposes. Finally, the company’s automation of most processes helps reduce ongoing expenses for companies, as HR staff members do not have to print or fax as many documents.

Channels

Zenefits’ main channel is its software platform, through which its customers carry out most of their tasks. However, it also operates through the mobile channel. Customers can utilize its mobile app, Zenefits People, which enables HR staff members to connect automatically to their Zenefits accounts.

Customer Relationships

Zenefits’ customer relationship is primarily of a self-service, automated nature. Customers utilize the service through the main platform while having limited interaction with employees. The company has moved further and further in this direction – it has designed several new programs to automate previously manual tasks such as assisting employees with insurance enrollment.

A prominent example of such software is Zenefits Payroll, released in late 2015. It takes information from other Zenefits systems and automatically runs payroll, saving HR from having to do things such as handle address changes or input time sheets. Emphasizing this strategy has enabled Zenefits to slow hiring in its customer service department, as there are not as many questions. This in turn has reduced employment costs. Despite this, it still offers live support to help staff when needed.

Key Activities

Zenefits’ key activities focus on platform management. The company’s business model entails maintaining a common platform between two parties: benefits providers and HR departments.

Key Partners

Zenefits encourages third-party developers to partner with the company by integrating their applications into the system for use by customers. It also actively partners with accountants, as it shares many of the same small business clients as that group.

Its program Zenefits for Accountants supports those who wish to give their clients HR and benefits resources, in addition to tax and payroll advice. Members have exclusive access to the Zenefits’ accountant partnership team.

Key Resources

Zenefits’ main resource is its proprietary software platform, which connects more than 1,000 carriers with more than 10,000 employers.

It also depends on its human resources to ensure customer satisfaction, namely its staff of 1,600 employees.

Lastly, as a relatively new start-up it has relied heavily on funding from investors, raising $583.6 million from 30 companies as of May 2015.

Cost Structure

Zenefits has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. The company’s hiring slowdown is reflective of this reality.

Revenue Streams

Zenefits has two revenue streams. The company charges benefits providers a commission when customers purchase insurance through the platform. It claims that the fees are lower than those of most brokers.

However, the money it earns from this set-up is enough to allow it to make the use of its system free for employers, as the fees add up quickly. Zenefits also offers optional paid features through its core HR platform, such as stock options administration; also, in certain cases usage may incur an implementation fee.