What is a business model? A business model is a comprehensive plan or strategy that outlines how a company creates, delivers, and captures value in the market. It serves as a blueprint for how a business operates, generates revenue, and sustains profitability. A well-defined business model outlines the key aspects of a company’s operations, including its target customer segments, value proposition, revenue sources, cost structure, and distribution channels. It is in practice a the way the company makes money. Facebook and Walmart have clearly different business model. One use advertisements, the other one sells goods. Probably, the number of business models that have been used in different context ranges between 70 or 80.
In in this article we cannot explore all possible models from franchising to community models. I just mention the interesting ones at the moment mostly releted to web solutions. Indeed, novel technologies, changes in society, and even just new online platforms create new business models. Therefore, even this list might be outdated in few years:
Brokerage and Infomediary Model
Community Model
Advertising Model
Merchant Model
Affiliate Marketing Model
Subscription Model
In medtech and biotech, the choices are bit more restricted to servire/product provider, license and acquisition model which will be not be covered here.
Whatever you will choose for you, consider whether the product being offer matches a true need in the market.
Brokerage and Infomediary Model
This model takes inspiration from the finance world. The brokerage business model used to refer to a type of financial services business that acts as an intermediary between buyers and sellers of various assets, such as stocks, bonds, real estate, commodities, and more. Brokers facilitate transactions by matching buyers with sellers and charging a commission or fee for their services. More generally, this can be expanded to other contexts than the finance. For example, a consultant company can charge client to prepare provide access to a third-party cloud company. In this way, your business is focused in bringing the buyers (your customers) and a further sellers together for carrying out business transactions.
The infomediary model, on the other hand, focuses on gathering, analyzing, and leveraging information about consumers and their behaviors. Instead of facilitating direct transactions, the infomediary collects data from users and provides valuable insights or services based on that data to other businesses or third parties. They act as intermediaries of information rather than goods or services. The difference is subtile, in practice the infomediary model company acts partially based on as a small consultancy.
Community Model
The community business model, often called the community-driven business model, focuses on creating and sustaining an active group of people who have similar interests, objectives, or beliefs. This approach focuses on encouraging community members to take an active role and feel a feeling of belonging, which in turn fosters various types of cooperation, support, and revenue generating for the company. Examples of these are Etsy, Redbubble, and even AirBnB.
This model focuses on encouraging people to feel a feeling of community and connection when they are brought together by similar interests, objectives, or values. Businesses can increase their customer base and income by creating a strong community around a good or service by leveraging the influence of social networks and word-of-mouth advertising.
In addition to fostering a sense of community, the Community Model places a strong emphasis on the importance of incorporating user feedback and input into the creation and enhancement of goods and services. By actively seeking out and incorporating user recommendations, businesses may demonstrate their commitment to addressing the interests and preferences of their community members. This approach not only results in a more satisfying and personalized user experience, but it also increases community members’ emotions of pride and loyalty since they see that their views are valued and taken into account.
In summary, the Community Model is a business strategy that relies on repeat business and robust social ties to generate revenue. By cultivating a feeling of community, establishing an engaging and supportive environment, aggressively seeking customer feedback, and achieving these three things, businesses can encourage long-term adherence to their products or services.
Advertising Model
The advertising model is a method of producing income used by businesses to make money by advertising their goods, services, or brands. In this strategy, businesses purchase advertising time or space to reach their target market and market their products. A crucial component of contemporary marketing, advertising has a big impact on sales, engagement, and customer awareness. Here is the advertising business model in action.
All social media (Facebook, Instagram, Youtube, etc) as well as many news websites are based on this model. Though, there is a growing interest in email marketing. Very often they charge their customers based on Cost-per-click (CPC), Cost-per-action (CPA), and Cost-per-impression (CPM).
Merchant Model
This is quite straightforward and it is substantially the case of a company that provides services and sells good whereas the merchant is responsible for the products. Amazon and Walmart fall into this cathegory. Ebay is an extreme case, where even private people can sell their stuff, and even run auctions.
Affiliate Marketing Model
Businesses that use the affiliate business model provide incentives to more affiliates who can direct clients to them. Dealing under this approach will give you limitless options to make purchases. They act similarly to sponsored partnerships, affiliate marketing enlists third parties to promote your business on your behalf. By implementing an affiliate marketing strategy, you’ll team up with affiliates who will promote your products on their blogs, social media accounts, and other online platforms. Affiliate links, which are specific URLs that track sales, allow the promoter to get paid for their contributions. The calculation of the revenues can be similar to the advertising model. Large ecommerce as Amazon, as well as new platforms trying to grow use this approach. For example, they offer you a cut if you bring new paying subscribers, or if the sale of a good was through a link you posted on your blog.
Subscription Model
The subscription model is a business model in which customers pay a recurring fee at regular intervals (such as monthly or annually) to access a product or service. Known examples of companies employing this model include Netflix, Amazon Prime, Spotify and newspapers/magazines. However, even medtech company selling a device and then a complementary support paid monthly uses the subscription model (in addition to the traditional good provided model).
Any subscription-based strategy that seeks to keep users engaged and satisfied over time must prioritize customer retention. Businesses can encourage customers to continue using the service by concentrating on providing outstanding customer experiences, fixing issues, and continuously enhancing the product. Retaining consumers helps the business expand and become more profitable by decreasing churn rates and increasing Lifetime Value (LTV) of each subscriber.
For consumers to stay interested in and committed to the platform, subscription-based services must incorporate strong onboarding and client retention procedures. This strategy fosters long-term business success by enhancing subscriber lifetime value in addition to customer happiness.
Taking into account these models before starting your organization can significantly boost your trading style but also advance your e-commerce endeavors. Models are not strict. In the sense, that people can adapt to their own specific situation and can even create hybrid circumstances leading to revenue.