A business model explains the way in which the company runs, earns money, and plans to accomplish its objectives. Conceptually, it is a structure supporting an organization or product’s viability. As far management consultant Peter Ferdinand Drucker is concerned, “a business model is supposed to answer who your customer is, what value you can create/add for the customer and how you can do that at reasonable costs.”
There are different types of business models, including the basic ones such as manufacturer, retailer, distributor, and franchise. However, here, we will look at some of the new ones.
Companies provide basic and free services to customers, and they charge a particular premium for add-ons. Therefore, they will have multiple packages to offer customers that come with a wide range of benefits. The basic solution generally has some limitations, like in-app ads and storage limitations to name two, which premium packages should not have. Dropbox’s basic version, for instance, has 2 GB of storage. For more storage, you can upgrade to its Pro package and pay an additional fee for it.
Certain online photo editing applications/services enable you to work on some pictures if you are on their free basic package, and unlimited photographs on the paid one. Freemium is among the most-embraced models for internet-based businesses.
In the subscription model, the customer should pay the business a recurring charge, usually on a monthly basis, to use its service or product. If the costs of customer acquisition are high, then it might be the best model for your planned or proposed business. It allows you to retain customers through a relatively long-term agreement and receive recurring fees from them. A new-age example of a business that follows the subscription-based business model is Netflix, the streaming service provider.
This is another recently formed business model, in which the company aggregates many different third-parties that provide a niche service and sells its solutions under its brand. It earns money in the form of commissions. An example is Uber. A more generic example is an online travel agent.
It aggregates different vendors into a single platform, and these sellers compete with one another to give the same service or product at competitive rates. This marketplace builds the brand of it through various things like quality sellers, trust etc., and it earn a commission on each sale done through its platform. For example, the Amazon business model falls in this category.