Fractionalization Business Model – How Does It Work?

Introduction

Complexity and disruption are two primitive examples that can be used to illustrate the modern-day business dynamic. With companies working day in and out to ensure survival, innovation and constant up-gradation is no longer a choice for them; it has become a necessity and the very core means of sustainability.

In this regard, a lot of businesses have innovated with products and tweaking their business style as per the demands and requirements of their customers. However, even that is not sufficient.

Current day business dynamic tends to somewhat guarantee positive results only if businesses are at par with all their service protocols, and that includes service delivery.

Customer facilitation can only be made possible if businesses have a clear cut idea regarding their customers. Therefore, they need to accommodate them to ensure that they get the largest slice of the pie, without having to worry about competition.

This increases the importance of a flexible business model tenfold. The fractionalization Business Model is one such prime example.

What is Fractionalization Business Model?

The fractionalization Business Model is directed towards ensuring that customers are able to sell a partial product. In other words, it is giving the customers the option to buy a portion of a product or service.

It gives the customers the opportunity to only buy the chunk of goods and services that they require to use, and not the entire product.

When not given an option to use partial services, customers are often indecisive about the purchase, because it often includes elements that they are particularly not very interested in.

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Therefore, this often results in abandoned purchases, that takes a strain on financial model of the business, to say the very least.

How does Fractionalization Business Model work?

Fractionalization Business Model is structured in a manner that facilitates customers by giving them the option to partially use a product of service.

This acts as a great incentive for the customers because it creates more value out of the purchase they are making.

It is more affordable, and more convenient for them to use a certain ‘fraction’ (hence the name, fractionalization) of the product, rather than keeping the whole sole product to themselves.

It is different from leasing in the sense that leasing normally comprises of a single user utilizing the product at a single point in time.

However, with fractionalization, a certain number of people can use the product at a single point in time too.

This mainly occurs with subscription and bundled services too, and they can also be considered as a part of fractionalization business model.

If someone does not want exclusive rights to a certain product, then they might accept sharing the platform with others.

This model works best in the case where the consumers want to use or consume the services on a partial basis. In this model, they are going to get the full benefits of using the product (or the service), without having to pay for it in full.

Examples of Fractionalization Business Models

The greatest example of disruption in fractionalization business models is perhaps the multiple-screen idea that was introduced by Netflix.

Although, by default Netflix is categorized as a subscription-based business model, yet it can be seen that with the multiple screen option, a number of people to use Netflix and watch content at the same time.

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The idea works great especially for families and friends who want to share their screens with other people, in order to split the bill.

On the contrary, if it was not the case, then a single user would have to pay the lump sum amount for the entire viewership.

However, within a family, people can share their accounts, in order to split the amount, and that can be referred to as a classic example of fractionalization.

Conclusion

Therefore, it can be seen that the fractionalization business model has managed to create a disruption in the industry (particularly the service industry) because of the fact that it has greatly facilitated people in terms of being able to use a particular asset without having to pay for the service lump sum.

This has proved to a double-edged sword for businesses because it has increased their business outreach, and has helped them to increase in revenue, on a holistic front.

The ability to inculcate this particular business model might be a challenge for businesses, and this might not be entirely suitable for all business types.

However, there is no denying the fact that it has greatly helped companies that have products or services that are structured around partial usage.

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