In recent years, there has been a lot of talking about the need for changing business models. Traditional organizations need to be transformed and search for new methods of earning money, “the old approach no longer works”. A struggle that many companies are currently facing. But which models are there exactly and what are the pros and cons?
With 12 business models and examples, you will find some of the possibilities in this article. The main conclusion? The power is in the combination!
1. Subscription model
Already familiar, but reinvented by millennials. Think of SaaS solutions, Beautybox, Boldking and HelloFresh. All of these companies bind customers through a subscription form. Is this really so innovative? Not really, thinking of the Donald Duck which for a long time also fell on the mat through such a subscription form. The innovation is that traditionally traditional products are now offered on the basis of use and convenience and not so much on possession or traditional purchase. The advantage of such a model is definitely recurring revenue. The disadvantage could be the fear of the threshold that many customers have to sign up for the subscription. Transparency is therefore required.
2. Advertising model
The advertising model has grown through radio and TV, but the internet rapidly increased its success. There are internet companies that operate solely on advertising or advertising revenues.
For new entrants, the most common path is to find a niche market and focus content and advertising on that. For specific providers, advertising space may be interesting. The market has become quite crowded at the moment and advertising revenues alone are insufficient for a scalable model. The outliers, however, are for example the early years of Facebook, Yahoo! and Myspace. These parties have been able to address the masses.
3. Affiliatiate model
In this model, party A sells the customers of party B in exchange for a commission or percentage of revenue. They never own the product. There are various examples of this, including comparison sites for telecommunications, insurance, etc. Bol.com has recently started the ‘Affiliate Partner Network’ with which various other parties generate leads for this online wholesaler. Offline examples of affiliation are intermediaries such as recruitment and selection agencies. Offline, this model has lost a lot of ground.
4. Brokerage model
Synonyms for this model are of course our own Marktplaats and eBay. The essence of the model is that the offering and buying party determines the price themselves, with the intermediary being able to assist in the transaction. Werkspot.nl and Hoofdkraan.nl is another interesting example for the building industry.
5. Bait Model
Everyone knows the cheap printer that ultimately proves to be expensive when you want to replace the cartridges. This model is often applied in apps. A paid app that subsequently asks for extra costs when more functionality is requested. It is also often used in combination with the advertising model.
6. Direct Sales Model
The strength of this model is the ability to eliminate the “middle-man”. Dell computers became big with this by delivering directly to customers with an early customer disconnect point. In this way, customization is possible and a lower price for the end customer.
3D printing will give this model another impulse. Think of being able to make toys in the printer that was bought from the design website. Lego bricks in your own favorite color or Playmobil dolls with your company logo. The future of this is very close. Other concepts are directvandebron.nl or koopeenkoe.nl. These companies have been able to deliver directly to the customer and thus increase the transparency of the product.
7. Franchise Model
Also a well-known business model that can be very successful in growing markets. A concept or product is sold by a distributor who is close to the customer, knows the culture, and runs the store with the help of the franchisor. Popular in emerging markets but also popping up in our own country. Well-known examples are McDonald’s and Subway.
8. Freemium Model
The model of recent years, free to start for normal use but for the more extensive versions users have to pay. Examples of this are LinkedIn, Surveymonkey, Google itself, and many apps. This model looks a lot like the luring model and is often combined with advertising and/or data model.
9. Low-cost Model
This business model can be found in almost every industry. It is also more of a strategy than a business model, but because it can work in every industry it is on the list. Think of Aldi, Ryanair and Easyhotel. Clear and transparent, cheap in the basics and if you want more you have to pay more. There are industries where the low-cost model has not yet really taken off.
10. Data Model
The model of the future. Nielsen, Axiom, Google, Facebook, Twitter all collect data that they then sell to anyone who wants more insight into their customers to sell products or services. The combination with this model is becoming increasingly common because more and more data is available and valuable information can be made from better analysis. The ability to link systems is becoming easier than before, with detailed information as a result. Think for example of accurate location determination and search behavior. Google Flu Trends and Google Now are two examples where it becomes clear how important data is in this model.
11. Transaction model
And as the second to last, the traditional sales model, selling a product, service or service such as books, cars, clothing, the hairdresser, etc. anywhere in the world. Increasingly in combination with another business model or dressed in a contemporary way.
12. Hybrid model
Finally, more and more often there is a hybrid model. Think of Spotify, which is in a narrow sense a brokerage model, but also Freemium, low-cost, advertising, subscription and most likely data. Uber also belongs in this list as well as Facebook and Airbnb. Now, not every business model has to become the new Uber, but the strength of a new concept is in being able to combine different business models and being able to create the right balance between customer value and organizational value.
A powerful business model benefits from best of all worlds
Each model has a different perspective that can clarify the view of their own business model. Sometimes changing the model in a specific industry is enough to surprise the competition. Think of Uber, Dell, HelloFresh and Ryanair. Except Uber, the other organizations mostly offer the same product in a different package or bring the product to the customer in a different way.
Therefore, it can be important for every organization to regularly review and examine the business model and to see what new or additional possibilities there are. What new -or additional- opportunities does your organisation offer? Where are the biggest opportunities to strengthen your market position? This can be done on the one hand by comparing the own canvas model with the above 12 models or comparing it with the competition, a small adjustment can be the beginning of big changes.