Any CEO in the world who wants to join the list of successful companies knows that business models matter. Business plans and marketing strategies can only do so much but a successful business model will result in increasing revenue streams and most certainly a feature in The Harvard Business Review.
1. Subscription Model
In the digital age no business model has had as big of a meteoric rise as the subscription model. The subscription model revolves around the consumer paying a recurring fee every pay period (typically a month) for access to a product or service.
Subscription services are one of the most popular business models right now with people using them for products they consume every day.
If you want to watch TV there’s Netflix, if you are a comic book enthusiast then you have options like Marvel Unlimited, and if you don’t have time to cook you can even get meals delivered to you with Hello Fresh.
2. Freemium Model
Another business model that has gained popularity as businesses have started moving more digital is the freemium model. The freemium model is largely employed by Software-as-a-Service (SaaS) businesses.
The basis of the model is that users get access to a stripped-down free version of the service that the company provides. The users then have the option to pay for an upgraded version of the app with more features and in some cases removed advertisements.
Spotify is one of the most currently popular freemium services. They give you access to all of your favourite musicians, but with ad breaks included and features like being able to listen offline removed. This business model is also a favourite of many mobile apps, most notably dating apps like Tinder and Bumble.
3. Product to Service Model
The product to service model is a model used by businesses that have access to a specialized piece of equipment or have large amounts of equipment.
These companies then let people use their product for a certain period of time. For example, let’ say that you’re an artist looking to have shirts of your art made. You could ask another company to print your designs on a shirt for you. This is effectively how the product to service model works.
4. Leasing Model
The leasing model is similar to the product to service model but tend to be geared towards big ticket items.
With a leasing model a company buys a product and then allows another company or a person to use the product they bought for a specific period of time for a fee. For many people, these models are used for special occasions. For example, if you’re travelling and need to rent a car you can rent from a company like Enterprise and if you’re moving you can rent a truck from a company like Europcar.
5. Crowdsourcing Model
The crowdsourcing model involves a community of users building the content for your platform using social media or the internet. Rather than hiring a team of content creators these businesses allow their user base to do the work for them. One of the most famous examples of a crowdsourcing business model is Wikipedia where users write about a variety of topics and provide knowledge to other users.
6. Bundling Model
The bundle model is exactly what it sounds like. It includes a company bundling multiple products together as a single unit and selling the bundle for cheaper than if you had bought the products on their own. This model allows businesses to entice customers to buy greater volumes of their products but in return they have a smaller profit margin.
Most people associate the bundling models with telecom companies like Virgin Media or fast food combo deals that are offered at restaurants like McDonald’s.
7. Razor Blade Model
The razor blade model draws its name from, as you likely guessed, the razor blade industry. If you’ve bought a razor blade, then you know that the initial purchase of the razor is cheaper than the replacement blades themselves.
In recent years however many companies have flipped the idea of the razor blades model by having the consumer purchase the high margin item first and then having them buy smaller, more affordable products to go along with the higher margin items.
Apple and their iPhones are perhaps the most notable example of the razor blades model, where you buy the expensive phone and then pay a dollar or two for the apps on the phone. Another prevalent example of the razor blades model is video game consoles. Consoles like the Nintendo Switchhave gamers buy a video game console where they then have to buy games to play on said console.
8. Franchise Model
The franchise model is one of the most well-known business models out there. Most people have visited many franchises in their lifetime and for people looking to become business owners it’s an extremely attractive business model as it lowers the barrier to entry and takes away a lot of the risk that’s involved in starting a business.
The franchise model includes an established business (the franchiser) who then works with the buyer (the franchisee) to help them open up a new location of the established business. This includes helping with financing, marketing and contact with suppliers to help get the new location up and running.
9. Manufacturer Model
The manufacturer model is perhaps one of the oldest business models out there. Businesses that operate with the manufacturer model take raw materials and create or manufacture a product. Even tech companies like Dellor Microsoft who build pieces of tech using components made by other companies would be classified as manufacturers.
10. Retailer Model
The retailer model is what most people think of when they think about shopping in general. Even though retail isn’t as powerful as it once was, there are still many big retailers out there who show no signs of slowing down.
Retailers buy product from a distributor and then sell them to consumers for a profit. Retailers can be broad offering a little bit of everything or they may specialize in a particular type of products like clothing or kitchenware.
