What is the business model?
A company’s business model represents its strategies and plans to make a profit. However, underneath that, the business model is much more than just a strategy.
It defines the products or services the company provides, its target markets, and anticipated expenses. Overall, a business model determines a company’s revenues and costs.
Whether it’s a startup or a well-established company, a business model plays a critical role in its success. The idea behind a business model is to give a company a defined path to success.
Usually, companies set their business plan at the time of incorporation. However, they also update or review the business plan after regular intervals to ensure it is working for them.
Several factors define what a company’s business model is. Usually, the size and nature of a company and the industry it operates in define its business model. That is why companies operating in the same sector usually have similar business models.
There are various types of business models commonly found in particular sectors. Some of the most commonly used business models are below.
1. B2C: Business to consumer business model
A Business-to-Consumer (B2C) business model is when a business sells directly to the end-user of its products or services. There is no middleman involved in their transaction.
B2C business model cuts the supply chain time significantly and results in better and faster decision-making by the business. There are further classifications of the B2C business model as well.
Usually, a B2C business model is perfect for online sellers that can use their website to sell their products or services. Similarly, all businesses that offer services use a business-to-consumer business model. B2C transactions may also be on a smaller scale as compared to other models.
Example: Target, Etsy, all service-based businesses.
2. B2B: Business to business, business model
A Business-to-Business (B2B) business model is when a business does not sell directly to the consumer, but rather to other businesses. The customer business may then sell the product or service to the consumer or consume it. Due to the higher number of supply chain participants, the B2B business model takes longer to complete a sales cycle.
B2B transactions are at a larger scale than any other models. Some of the products offered by B2B businesses may not be ready to use for customers and need further processing.
Example: Qualcomm and Intel are B2B businesses that sell their products to others, such as Samsung or Apple.
3. C2B: Consumer to business, business model
A Consumer-to-Business (C2B) business model is the opposite of the B2C model. The C2B business model allows consumers to sell their stuff to companies or businesses. The model has become more successful due to the advent of the internet, where users can interact with each other and businesses.
With a C2B business model, businesses can allow customers to offer contracts through their platform for which other businesses can bid. Some of the most common examples of a C2B business model are affiliate marketing networks or freelancing websites.
Example: Freelancer, Upwork, Clickbank and CJ Affiliate allow for consumers to interact with businesses.
4. C2C: Consumer to consumer business model
A Consumer-to-Consumer (C2C) business model isn’t unique. It is when a business, usually an online platform, allows consumers to connect or interact with other consumers.
Usually, there is some form of exchange between customers, for example, selling or buying goods. This model has existed for a long time, and some businesses have become an expert in it.
The focus of a C2C business model is to provide consumers with a platform that they can use for their dealings. However, some businesses may also introduce other features to enhance the user experience.
Example: eBay, Craigslist, OfferUp and Facebook Marketplace provide consumers with a platform to deal with each other.
5. D2C: Direct to consumer business model
The Direct-to-consumer (D2C) business model is popular among online retailers who sell products and services to consumers.
It focuses on providing the best customer experience and promotes brand loyalty among them. This business model also focuses on having good relations with customers for businesses to prosper.
Like the B2C business model, the D2C model also removes the intermediaries from the process and shortens the sales cycle. It is a great model for small companies as it allows them to compete with larger companies. It can also result in higher cost reductions for companies.
Example: Warby Parker, Everlane, Casper and The Honest Company are examples of D2C businesses.
6. White label and private label business model
White label and private label are two different business models that are closely related. The white label business model is for businesses that purchase generic products from distributors and apply their brand name to it.
Private label, on the other hand, is for retailers that hire manufacturers to create unique products for them, which they can sell exclusively.
Through both these business models, businesses can significantly decrease their manufacturing and other related costs. These businesses focus on various other aspects of providing services to customers, such as better technological or market features.
Example: Walmart purchases generic products and applies its own brand to it. On the other hand, Dollar Shave Club sells products from other brands.
7. Wholesaling business model
Wholesaling is one of the most common business models around the world. With a wholesaling business model, businesses can purchase products from companies and sell them in bulk quantities and at a discount.
Wholesalers make an intermediary that connects multiple brands with costumers. Their customers can be both businesses and consumers.
Wholesale businesses buy products in bulk quantities and usually, sort, reassemble and repackage it to sell forward. The opposite of or alternative to wholesale is retail. Wholesalers do not have a brand for themselves and usually rely on products from other businesses.
Example: McLane, H.T Hackney and Alibaba are some of the biggest names in the wholesale industry.
8. Dropshipping business model
Dropshipping is a type of retail business model in which businesses don’t have to deal with physical inventory. The way dropshipping works is that a business selects products from other manufacturers and markets them, usually on their website.
When customers buy the product, the business orders the product from the original manufacturer and asks the manufacturer to ship it to the customer.
Multiple online platforms allow for easier drop shipping setups. These include WooComerce, Shopify, OpenCart, etc. Through the use of these platforms, businesses can easily effortlessly create a drop shipping setup.
Example: Inspire Uplift, Bluecrate, HYGO, Wikipedeals are all examples of a successful business that uses the dropshipping business model.
9. Subscription service business model
Subscription service business model allows businesses to subscribe to their services by paying a fee monthly or annually.
This business model has become common around the globe, most popularly in the streaming services industry. However, other sectors, such as online news websites have used the model for a long time as well.
The subscription-based business model is highly successful. It allows businesses to generate steady revenues while focusing on the increasing quality provided to customers. Similarly, it doesn’t stop businesses from only earning one time when they sell a product.
Example: Netflix, Amazon Prime, New York Times, etc. all use a subscription service business model.
10. Franchise business model
The Franchise business model is common in the hospitality industry. In this model, a franchisor licenses its resources, brand name, property, and rights to a franchisee to sell its products. In exchange for the license, the franchisor receives a royalty, usually based on every product sold by the licensed franchise.
The Franchise business model is mutually beneficial for both parties. For the franchisor, it allows the brand to expand in more locations resulting in more sales and customer satisfaction. For the franchisee, it provides them with the use of a well-established brand to make profits.
Example: McDonald’s, KFC, Pizza Hut, and Burger King, all have a franchise business model. Other businesses such as 7/11, Marriott Hotels, InterContinental Hotels, and Resorts also use the franchise model.
11. Multi-sided platform model
Multi-sided platform model represents a product or service that connects two or more users, usually a customer and a consumer.
The business that uses the multi-sided platform model acts as an intermediary between the two parties, allowing them to interact through its platform. It is a combination of the B2B, B2C, C2B, and C2C business models.
The Multi-sided platform model is common among large tech companies. The main feature of the model is the network available for users from which they can benefit. This kind of business model highly depends on customer interaction.
Example: Facebook, PayPal, Alibaba, etc. are all examples of multi-sided platform model.
12. Cash machine business model
A cash machine business model is for businesses that mostly transact in cash or generate high amounts of it. It depends on a business’s ability to convert its products into cash.
Usually, companies with a low-profit margin use this model but require a high volume of activity to make profits. These businesses use a metric known as the Cash Conversion Cycle to measure performance.
The Cash machine business model allows for higher liquidity for businesses. It also allows them to generate a cash surplus regularly, which they can invest in other projects or pay as dividends.
Example: The best example of the Cash machine model is Amazon, which generates a high amount of cash through its business.
13. Freemium business model
The Freemium business model is for businesses that offer both a free version of their products and a paid version. Usually, the paid version has advanced features that users cannot access in the free version.
There are many types of the freemium business model. For example, some companies use a trial or demo version which users can only use for a limited time.
This model is a great way for businesses to exhibit their products or services so users can test it before buying. Some of the free versions of products also come with advertisements, which allow them to earn from both versions.
Example: Dropbox, TeamViewer and Spotify allow users to use a free version along with paid features.
14. Peer-to-peer business model
The Peer-to-Peer (P2P) business model is different from the B2B or B2C business model. In the P2P model, businesses act as an intermediary between two customers or consumers and provide them with added value.
Usually, the P2P business also earns a commission from the customers’ dealings through the platform, which is its primary source of revenue.
In the P2P business model, the business does not have to focus on its customer relations. However, some businesses provide additional services, which enable customers to stay safe in their dealings with others.
Example: Airbnb is a platform that allows hosts and guests to interact with each other, earning commissions through it. Other examples are Lyft, Fiverr, etc.
15. One-for-one business model
The One-for-one business model includes features from profit-making and not-for-profit businesses. Another name for this model is social entrepreneurship, which means it focuses on both caterings to the needs of a business, and its customers. Some people may also see the not-for-profit part as a promotion tactic to attract more customers.
The One-for-one business model has become more common due to the increased drive of customers towards ethical products.
Therefore, many businesses have adopted the model to not only benefit their sales but also help others. This model may not be the most profitable for businesses.
Example: Rolex, the well-known maker of watches, donates a significant amount of its profits to charities and social causes. TOMS shoes is also a business that uses the model and is the inventor of it.
16. Hidden revenue business model
The Hidden revenue business model is common among tech companies or apps. In this model, businesses earn money without their customers having to pay for it.
Usually, they generate revenues through displaying advertisements, gaining profits from other businesses, rather than their customers. For this model to be successful, businesses need a high number of customers and a platform.
The Hidden revenue model is mutually beneficial for both the business and its customers. For the business, it means it can earn revenues as usual. For the customer, it means they don’t have to pay to use services.
Example: Google, Facebook and Twitter earn revenues from ads showed to customers, without them having to pay for the services.
17. Razor and Blade business model
The Razor and Blade business model are for businesses that have at least two products, usually interrelated. In this model, a business sells one product (Razor) at a low price, while another related product (Blade) has a high price. However, this model still needs businesses to have a loyal customer base that buys their products.
The model also works great if the ‘Razor’ is a product that customers need to renew or repurchase repeatedly for the ‘Blade’ to work.
Example: Gillette offers a blade with replaceable razors, where the price of its blade is higher while the razor is low priced. Gillette is the creator of this model. Other examples are HP printers, XBOX and PlayStation, etc.
18. Reverse Razor and Blade business model
As the name suggests, this model is the opposite of the Razor and Blade business model. The Reverse Razor and Blade model is for businesses that offer products at a lower price to encourage customers to buy other products at higher prices. This model is a type of captive product pricing strategy.
Usually, the Reverse Razor and Blade model uses a one-time offer on premium products to generate more revenue on secondary items in the future. This model also requires businesses to have a loyal customer base.
Example: The best example of this model is Apple, which sells its products such as iTunes, AppStore, etc. at a lower price. Contrastingly, it sells its iPhones, iPods, MacBooks at a higher price.
19. Direct sales business model
The Direct Sales business model is for businesses that want to remove or avoid intermediaries from their sales cycle. The focus of this model is to sell to consumers directly.
Usually, businesses using this model have a dedicated sales team that visit consumers and pitch their products directly to them. Through this process, businesses can make more profits while also interacting with consumers.
There are many variations of the Direct sales business model that businesses can use. Usually, all the products that businesses sell through this model are not available in retail or wholesale stores.
Example: USANA, Amway, Stella & Dot and ItWorks all use the Direct selling business model.
20. Affiliate marketing business model
The affiliate marketing business model is common in the online world. In this model, a business recommends products or services from other companies to its customers or audience.
When its customers buy the product from the company, the business earns a commission. Businesses that follow this model are intermediaries in the sale cycle.
Usually, the business that uses the Affiliate marketing model uses a platform or network. These networks, known as affiliate market networks, enable businesses to earn a commission based on selling other company’s products.
Example: NerdWallet, Money Saving Tips, Survival Life are all websites that are successful in the affiliate marketing world.
21. Consulting business model
Businesses that use a consulting business model employ highly trained and skilled individuals that provide consultation to customers. These businesses do not offer generic products as every client will have a different need.
Due to the highly specialized nature of their work, they need to have expertise in the field for which they are providing consultation.
Through a Consulting business model, businesses earn an hourly rate for the time they give each customer. Some may even charge their customers if the consultation provided results in positive results. These businesses can relate to all fields of life.
Example: PwC, Endava, EY, Bain & Co., etc. are all companies using a Consulting business model
22. Agency-based business model
Businesses that use the Agency-based business model act as the agents of a company. Usually, the customer hires the agent business to complete a specific task. In exchange for it, the agent earns money or we call commission. It allows companies to hire experts to complete their tasks.
Agency-based businesses work in various fields of life. For example, there are advertising, marketing, survey, insurance, architecture, etc., agencies that complete specific tasks. Due to the uniqueness of each order, these agents can earn exceptionally well from their clients.
Example: REQ, SmartSites, and Daniel Brian Advertising are examples of advertising agencies. Ogilvy, BBDO, Havas are some well-known marketing agencies.
23. User-generated content business model
The user-generated content business model is for businesses that have a website or an online platform. Businesses following the model allow their users to generate high-quality content on their website, usually in the form of reviews, questions and answers, pictures, videos, etc. These businesses offer a platform for interactions through which they can earn money.
Most commonly, social media networks and some other dedicated websites use the User-generated content business model. The way these businesses earn is through ads generated on their platforms, which users prefer due to the high-quality content.
Example: YouTube is a prime example of a company that uses the user-generated business model. Other examples include Reddit, Quora, Stack Overflow, etc.
24. Online educational business model
The Online educational business model has existed for a long time. However, due to the events that transpired in 2020, this model has flourished.
It is a model used by businesses that offer users the ability to use the internet for their educational needs. Usually, these businesses provide paid courses that users can buy to access.
Some businesses following the online educational business model may also offer free content, from which they earn through ads. Some other platforms also have freemium features allowing users both free and paid content.
Example: Khan Academy, edX, and Coursera are some companies that use the online educational business model. Some other examples include Udemy, Duolingo, and Udacity.
25. Instant news business model
The instant news business model is for businesses that offer the latest and breaking news to their users. Usually, these businesses have a dedicated network through which they get the information.
Some others may also allow their users to update the latest news. These businesses usually avoid intermediaries and update news directly from the source for a faster process.
A prime example of the instant news business model is social media platforms that allow users to use different features for updating news. Due to their high user count and engagement, these networks allow users to share and confirm news reports.
Example: Twitter and Reddit both allow for instant news.
26. Multi-brand business model
The Multi-brand business model is for businesses that offer a wide variety of products, usually closely related. Sometimes, however, the products may also be alternatives or substitutes to each other.
For this business model to be successful, businesses need enormous resources to penetrate various markets. Mostly, multinational companies already follow the multi-brand business model.
Some of the businesses that use the Multi-brand business model organize their products or brands under various segments or subsidiaries. This model allows companies to enter different market segments at once and maximize profits.
Example: Nestle, Unilever, Disney and News-Corp are examples of companies with the multi-brand business model.
27. E-Commerce business model
The E-Commerce business model is a simplification of the online commercial activities’ businesses. With this model, buyers and sellers can interact and transact with each other through an online platform.
The E-commerce business model can take many forms, for example, B2B, B2C, C2B, or C2C. This business model is most common in developed countries.
The main idea behind E-Commerce business models is to have an online platform that allows either the business or its customers to interact with each other. Almost all businesses using the internet follow this model.
Example: Google, Amazon, eBay and PayPal are examples of businesses using the E-Commerce model.
28. Distribution based business model
Businesses following the Distribution based business model focus on having proper and well-defined distribution channels. The reason behind this is to integrate with its final customers.
Usually, the distribution channels include wholesalers, retailers, supermarkets, etc. that provide these businesses with a platform to sell to their customers.
While Distribution based business model businesses highly depend on distribution channels, they get a higher exposure to customers.
The business model provides them with a better way of reaching customers while focusing on their own expertise. However, it may result in the division of profits between the company and the distributors.
Example: Nestle, Proctor & Gamble and Johnson & Johnson make products that they distribute through other channels.
29. Enterprise business model
The Enterprise business model is for businesses that want to focus on large clients. Large clients result in better deals and higher revenues for the business.
The model works for large businesses that have the resources to cater to the needs of its clients. The sales and other processes of these businesses are usually more complex as compared to others.
Usually, these businesses have a limited number of clients. Therefore, success in this business model highly depends on customer relationships and quality of work. This business model also requires higher expertise employees.
Example: Some Fortune 500 companies make an example for companies that use the Enterprise business model.
30. Social enterprise business model
The Social enterprise business model is close to the one-for-one business model. Companies that follow this model believe that generating profits shouldn’t cause harm to others or the environment. This model has become more prominent due to the increased drive toward ethical products throughout the world.
Companies that use the social enterprise business model spend on humanitarian or environmental projects that increase their image in the media.
This model can be helpful for both the company following it and the general public. Usually, companies have special projects for these activities.
Example: Disney has several programs that they carry out for social purposes. Similarly, SONY, Home Depot, Samsung and Walmart have several donation programs.
31. Family-owned business model
The Family-owned business model is for companies and businesses that are founded based on family values. The control of these companies lies within a close group of people, usually relating to the same family.
This business model is most common in Japan, where wealthy families control their companies and do not want interference from other people.
The Family-owned business model is one of the oldest business models to exist. According to research, almost 90% of American businesses are family-owned or controlled. Family businesses are long-term focused rather than short-term.
Example: Novartis, Walmart, Facebook, Oracle, Samsung and Volkswagen are all examples of family-owned businesses.
32. Blockchain-based business models
Blockchain-based businesses are relatively new as the other types of business models on the list. These are businesses that use Blockchain technology and have changed the world in many aspects.
Blockchain technologies facilitate transactions using a decentralized network system worldwide. Through this system, it enhances customer payments and transactions online.
Recently, Blockchain-based business models experienced a boom in the form of added popularity and demand. These businesses offer an alternative to online payments as opposed to traditional ones. The primary source of income for these businesses is the use of Blockchain technology to generate profits.
Example: The best example of Blockchain business models is Bitcoin.
33. Vertically integrated supply chain business model
Vertically integrated supply chain business model is for companies that own and manage most of their supply chain activities.
Through the management of these activities, companies get better control over them and how their products get delivered to consumers. Similarly, it allows companies to benefit from lower prices since they control the chain.
Similar to some other business models, the Vertically integrated supply chain business model requires a lot of resources. Therefore, only large multinational companies can afford to adopt such a business model.
Example: Samsung and Apple are two prime examples of companies that are vertically-integrated. Other examples are Amazon, Walmart, Netflix, etc.
34. Combination of chains and franchise business model
As the name suggests, the Combination of chains and franchise business model combines two models, the franchise business model discussed above and the chains model.
In this model, companies operate both chains and franchisees to expand their business. While there might be more franchises in this model than chains, companies can benefit from both.
The distinctive factor in this model is operated vs licensed stores. Operated stores allow companies to make more profits. However, licensed stores help them expand without requiring the same amount of investment.
Example: A prime example of this model is Starbucks, which owns both chains and franchises.
35. Data licensing business model
Data has become a crucial part of the technological sector. Therefore, it has given rise to the Data licensing model. Through this model, companies allow their partners or provide them with the license to use their data. Through this data, their partners can adapt or customize their products to cater to the needs of their customers.
The data licensing business model has also come under a lot of criticism recently. However, it allows both companies and customers to benefit. Companies can make profits through it, while customers get customized products.
Example: Google allows advertisers to display their ads to specific customers based on Google’s collected data.
36. Attention merchant business model
Attention-merchant business models are similar to other advertisement-based business models. In this model, companies profit from their customers’ “attention”.
Attention merchants are companies that allow third-parties to interact with their customers. Usually, these companies help advertisers show ads to users through the platform.
Many mobile games use the Attention merchant business model where they display video ads in between rounds or levels. It allows them to profit from offering freemium games. On the other hand, customers can enjoy free bonuses or rewards in exchange for viewing ads.
Example: Facebook is a prime example of a social media network that allows advertisers to bid for customers’ attention.
37. Discount with a high-quality business model
The Discount with the high-quality business model is for businesses that operate in a highly competitive environment. Thus, for their survival, they must introduce discounts to attract the greatest number of customers.
It may also include keeping prices low as compared to competitors. However, the model doesn’t only focus on manipulating prices to gain a competitive edge.
The Discount with the high-quality business model also requires businesses to increase the status of their products. By providing the best quality possible for the lowest price possible, these businesses attract the highest number of customers.
Example: This model is most common in the retail or convenience store industry. Some big names including Tesco, Walmart, Costco and Kroger use the model.
38. Pyramid Scheme business model
The idea behind the Pyramid Scheme business model is fooling customers. The model is banned in almost all jurisdictions and often leads to controversies.
The model works by gathering as many members, offering them some form of reward for recruiting others. As the number of members in the model increases, it takes the form of a pyramid.
As the number of members increases, soon they realize that the promised reward does not exist. The original business gains a lot of profits by the time and usually dissolves or liquidates, leaving the members with nothing.
Example: Some large companies accused of running pyramid schemes are Amway, Herbalife, Nu Skin Enterprises and Vemma.
39. Nickel and Dime Business Model
The Nickel and Dime business model revolves around the idea that businesses can provide basic products and services at the lowest price possible. The basic product for them is not the one that brings profits. Instead, it uses other additional products or extensions to charge customers and generate profit.
With the Nickel and Dime business model, businesses can segregate their products to charge for every item separately. Similarly, it allows them to present their products at lower prices as compared to including them all in one package.
Example: The model is common in discount airline companies such as JetBlue Airways, Frontier Airlines, etc.
40. Aggregator Business Model
The Aggregator business model has gained popularity since the start of the 21st century due to the increase in tech companies.
In this model, a business collects or aggregates information about a particular service and sells that information as its own. The idea is to bring information under one roof, making it easier for customers to access.
The Aggregator business model is most common in the hospitality and travel industry. Usually, businesses using this model earn profits through commissions earned for each order they help generate for companies.
Example: Hotels.com, Trivago, MakeMyTrip and Booking.com are examples of companies that collect information about travelling and hotels and bring it under one roof.
41. API licensing business model
API (Application Programming Interface) licensing business model has become common in the world of technology. In this model, a company develops an API through which developers can access certain parts of their application and interact with it. However, these companies do not provide the API for free. They license it to developers.
The API licensing business model is beneficial for both the licensor and the licensee. The licensor generates income by providing the API. The licensee, on the other hand, gains access to the API, which they can then use to make applications or plugins.
Example: Twitter, Facebook, Apple and Google all provide API access licenses.
42. CrowdSource Business Model
Crowdsourcing has become one of the most common ways for startups to generate finance. Through crowdsourcing, startups can ask the general public to help them finance their activities.
Crowdsource business model is for businesses that use crowdsourcing. It presents one of the most effective ways for businesses to generate finance without having to care about financing.
With CrowdSource business model, businesses can achieve better optimization and reduced costs. Similarly, it allows them to focus on the quality of their products. Many online platforms facilitate these businesses in their goal of generating finance through the general public.
Example: Kickstarter, Indiegogo and GoGetFunding are all companies that facilitate businesses with Crowd Source business model.
43. High Touch Business Model
The High-touch business model is for businesses that prioritize customer communication and satisfaction. These businesses let customers interact with them and get involved in their ideas.
The goal of this model is to allow customers to have a say in the product, which leads to higher satisfaction while allowing the business to analyze customers’ needs.
The customers of businesses with High-touch business model are consumers rather than other businesses. Therefore, it creates a need for these businesses to have a high awareness of human complexity. High-touch is necessary for accounts with high revenue potentials.
Example: Audit companies like KPMG, PwC and Deloitte all employ a high-touch business model.
44. Low Touch Business Model
The Low-touch business model is the opposite of the High-touch business model. In this model, businesses do not require any input from customers.
These businesses usually identify customers’ needs and develop products without needing any interaction with customers. Usually, companies with generic products and a high number of customers use this model.
The Low-touch business model is great for software companies that build and market software and have a smooth sales funnel.
These companies don’t need to customize their products for specific customers. Similarly, these companies rely on marketing techniques to generate more customers.
Example: Companies like Zoho Desk, FreshDesk and Amazon are prime examples of Low-touch business model.
45. Flex Pricing Business Model
The Flex Pricing business model is for businesses that offer products or services with negotiable prices. Almost all businesses around the world have fixed prices.
However, with the flex pricing model, businesses can allow customers to negotiate the rates for their products or services. In contrast, a flexible pricing model can also mean businesses change their prices according to the market or competitors.
The Flexible Pricing business model is best for industries with a high amount of competition or with customized products. This model allows them to allow customers to bargain to benefit both sides.
Example: Sprint Wireless, DIRECTTV, SiriusXM and Dish Network are all examples of companies that allow customers to negotiate bills.
46. Auction-Based Business Model
The Auction-Based business model is for businesses that have unique items and allow customers to bid on those products or services. It used to be more common in the past.
However, due to the internet, the business model has faded away. However, there are still many industries that use the model, such as real estate, memorabilia, antiques, etc.
With an Auction-Based business model, businesses can generate the maximum amount of profit by allowing customers to outbid each other. Customers can also benefit from auctions by getting inexpensive rates.
Example: uBid, eBay, eBid and ShopGoodwill are examples are companies that have auctions-based products.
47. Reverse Auction Business Model
As the name suggests, the Reverse Auction business model is the opposite of the auction-based model. In this model, a company sets the highest price for products and allows buyers to bid accordingly.
As more buyers place a bid, the bid value becomes lower. With the reverse auction model, the goal isn’t to attract customers but to attract suppliers that offer the lowest prices possible.
The reverse auction business model is similar to tenders, where suppliers can outbid each other for specific contracts. This model isn’t common since businesses usually deal with suppliers individually.
Example: Priceline is a company that offers reverse bid functionality.
48. Brokerage Business Model
The Brokerage business model is for businesses that act as intermediaries matching buyers and sellers. The broker business serves as a platform to allow two parties to come together for a business deal.
For every transaction, the broker charges a fee, usually paid by one of the two parties. The brokerage model has several variations used by many businesses around the world.
The Brokerage business model has become less common due to businesses trying to reach their customers directly and cutting the intermediary during the process. However, some businesses still use the model.
Example: Expedia, Booking.com, TripAdvisor, Century 21 and Amazon are examples are brokers.
49. Bundling Business Model
The Bundling business model is for businesses that have several products, usually interrelated. These businesses combine or bundle their products and sell them to customers.
Usually, they also offer a discount when selling bundles, allowing them to sell more products and making more profits. The bundling model is common in the software and gaming industry.
The Bundling business model is also beneficial for customers. They get various products for a cheaper price, which would cost higher if bought individually. This model is prevalent in several industries around the world.
Example: AT&T (Internet, TV, Phone bundle), Microsoft Office (Word, Excel, PowerPoint, Outlook bundle), and Adobe Elements Bundle.
50. Disintermediation Business Model
Disintermediation, as the name suggests, is the process of removing intermediaries from a supply chain. The Disintermediation business model is for businesses that remove or avoid intermediaries in their sales.
It is a type of other common business models such as the Direct-to-Consumer (D2C) business model. There are several reasons why this model is prevalent among businesses.
The Disintermediation business model allows businesses to make more profits without having to divide it with intermediaries. Similarly, it helps them provide better services to customers and increase their satisfaction.
Example: Dell and Apple are two big names in the technology industry that follow a Disintermediation business model.
51. Fractionalization Business Model
Businesses that have products that they can sell as parts or as a whole can follow the Fractionalization business model. It’s a great way for businesses to generate more profits without having to limit their sales to complete products. Similarly, customers can also benefit from only buying the parts that they need.
The fractionalization business model has become more common in various industries due to increased customer demand. Similarly, businesses can also create variations based on using different combinations of their individual parts.
Example: The prime example of this model is computer companies that sell PCs and also individual PC parts, such as RAM, processor, monitor, etc.
52. Pay as Go (Utility) Business Model
The Pay as Go, also known as Utility, business model is for businesses that charge customers based on their usage. It gets the name utility because utility companies charge their customers per unit of consumption.
Customers can also unsubscribe or leave the product or service whenever they want without having to pay extra charges.
More recently, many online businesses have adopted the Pay as Go business model, which allows them to increase their revenues. This model works great for consumables that customers can control and use as they please.
Example: Utilities such as electricity, water and cell phone companies are examples of this model. Similarly, Microsoft Azure also has utility-based charges.
53. Product as a service
Product as a service is a prevalent business model used by many businesses around the world. Instead of selling an actual product in this model, businesses sell the services of a product.
It is usually the case when the item itself is expensive, and the return from it is less. Therefore, customers cannot afford the item, or the benefits do not justify the cost.
With the Product as a Service business model, businesses benefit by providing the services of a product to a large number of customers. This way, they can justify the cost of the item while also generating revenues from it.
Example: Getaround and Car2go are two examples of companies in the car industry using a PaaS business model.
54. Standardization business model
A Standardization business model is for businesses that have uniform processes and procedures. These businesses make products standardized through their production process.
Through standardization, businesses can make their services universal rather than make them customized or unique. It allows them to cater to the needs of a wider audience.
The Standardization business model can also help customers get lower prices as services provided will be constant to everyone. Similarly, it is more convenient for both a business and its customers. However, not all businesses can use the business model for their needs.
Example: Healthcare Clinic at Walgreens, Concentra, and MedExpress are prime examples of this model.
55. User Base Communities
As the name suggests, the User-base Communities business model is for platforms and networks that depend on their users to interact with each other.
The role of these platforms is to provide a channel for users to connect. Usually, the primary source of revenue for these networks is through advertising and sometimes through subscription-based services.
Due to the internet, the User Base Communities business model has evolved. Since these businesses mostly rely on customer interaction, keeping a close tab on customers and their needs is the key to success for them.
Example: Facebook Marketplace, Craigslist, OfferU, and Locanto are prime examples of businesses that use this model.
56. Leasing business model
Leasing is when one entity provides the right to the use of an asset to another entity. Usually, there is a lease contract involved that dictates the terms of the lease.
The Leasing business model is for businesses that rent or lease high-value assets, for example, vehicles, machinery, property, equipment, etc. It is a highly successful business model around the world.
The Leasing business model requires a high amount of investment from businesses. However, these businesses can easily recover their losses on the asset as the responsibility gets transferred to the lessee.
Example: Crest Capital, MachineryLink, Hertz, and Enterprise are some top leasing companies.
57. Software as a Service business model
Software as a Service (SaaS) business model is a modern-day business model used by companies worldwide. Businesses that use a SaaS model offer customers the ability to use software through cloud services.
The base of this model is to have cloud-based software. Usually, these businesses earn a monthly fee, often subscription-based, from their customers.
Software as a Service business model provides customers with some advantages as well. These customers don’t need to install any products or software on their computers. It allows them to benefit from high-end resources in exchange for a small fee.
Example: Salesforce, Microsoft, Adobe Creative Cloud, Amazon Web Services and Google are some top examples of companies that use the SaaS business model.
58. Platform as a Service business model
Another business model based on SaaS is the Platform as a Service (PaaS) business model. In this model, companies offer customers access to a cloud-based environment where they can develop, manage and deliver applications.
The company, in exchange, provides the underlying infrastructure. Similar to SaaS, the PaaS model also comes with a monthly fee, usually subscription-based.
While there are some similarities between the PaaS and SaaS business models, they are different. With SaaS, companies provide specific software, usually low-end basic software. With PaaS, however, the infrastructure is more complex and designed to cater to specific customers.
Example: Almost all companies that provide SaaS solutions also provide PaaS solutions. These include Google, AWS, Microsoft and Oracle.