Revenue Models

Develop a business model which fits the preferred model of your customer – “charge” your customer in a manner in which your customer prefers. Keep in mind we’re using the word “charge” in the abstract, since your business model may involve “free” offerings where the customer is not directly charged. Many innovations are successful due to new or unique business models, not just a new or unique product or service.

Common Business Models

1. Unit Sales – Sell a product or service to customers for a fee.
Examples: Nike shoes, retail

2. Advertising – Sell opportunities to distribute messages to end users
Examples: The New York Times, network television, blogs. (see Free)

3. Transaction - Charge a fee referring, enabling, or executing a transaction between multiple parties. Examples: Visa, eBay,

4. Utilization - Sell goods and services on a per-use or as-consumed basis. Examples: Electric utilities, mobile phone minutes, GB storage

5. Subscription – Charge a fixed price for access to your services for a period of time or series of uses. Examples: 24-Hour fitness, Mobile Phone servic.

6. Franchise - Sell and support a replicable business for others to invest in, grow, and manage locally. Examples: McDonald’s, Edison Electric, Amazon store front.

7. Professional - Provide professional services on a time–and-materials contract. Examples: Consultants, architects, designers, etc.

8. License – Sell the rights to use intellectual property. Examples: NFL Team logos, patents, some software, see Quicken Loans.

9. Pay-per-performance – Customer pays only when desired outcome is achieved, typically based on value of the outcome. Examples: AdWords, affiliate commissions, GE service up-time guarantee, see Mint.com

10. Business Metrics (Internal Business Process Models)
Internal projects often drive metrics which may be different from direct revenue. When designing your internal business process model, identify these alternate metric as your “Revenue Stream” on your business model canvas. Example: A phone support team might use “dropped calls” as their business metric, instead of revenue. Or, a development team might use “reduce development costs by 10%” instead of top line revenue.

Also consider mixing and matching multiple business models, especially in multi-sided markets, ecosystems, and platforms.

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