The most successful models are pretty much set, so it’s just a matter of learning about them and deciding which one best fits your business. I’ve analysed six different but powerful business models that you can review and study to see which one would be best for you and your startup.
The freemium model:
The term “freemium” comes from the combination of words “free” and “premium”. It’s a very common business model
for start-ups in all sorts of industries. The idea here is that the
company will provide both free and paid services to its customers. The business
gives out the basic services or features for free while charging for
the premium ones – usually through a subscription, but it may be
iterated.
Spotify,
a music streaming service, provides a free service for its customers.
On the free service you can listen to music anywhere online and as much
as you want. However, if you pay for the service, at just $9.99 a month,
you will receive premium features, including no ads between songs,
better quality of music, and offline mode.
Another example is OKCupid
which is an online dating service. Again, the app is free for anyone to
use. If you pay for the premium subscription, you will receive a bigger
inbox, more search filters, a full list of people who have expressed
interest in you, and a bunch of other features. Of course, if you’re
paying you won’t see ads while using the app either.
The subscription model:
The reason this online business model is so popular is because it is convenient for both the customer and the business.
A customer doesn’t have to worry about purchasing the same thing each
month. They know their purchase will be there as long as they are
subscribed to it. Netflix’s model has
got to be one of the most popular subscriptions. A customer picks a plan
they want to sign up for, like a $10-a-month plan. The customer is
charged monthly and has the service available to them at all times. If
the service provides a lot of value for the customer, they are sure to
stay on the subscription for years and years. That’s why it’s convenient
for the business as well.
Technically, both Spotify’s and OKCupid’s paid plans are subscriptions
because they occur monthly. Netflix is not a freemium service because
they don’t have a free plan.
Another example of a subscription is LOLA which delivers natural and cotton tampons to your door, monthly. A subscription model
is not only for digital services. If you’re selling physical products,
like tampons, and you know your customers will need it regularly, follow
in LOLA’s footsteps and create a subscription plan. This will ensure
that your customers stay regular customers. It can work for other
products like dog food, razors, or even wine.
The on-demand model:
The on-demand online business model relies on the immediate needs of their customers, aka instant gratification. This business model
relies heavily on technology and its ability to provide goods or
services at a moment’s notice. It’s all about providing fast services
whenever and wherever a customer needs it. The companies using this model
usually work with freelancers who work with a flexible schedule. The
company makes a profit by taking a fee off the service, then paying the
freelancer as payments are made through the company (UBER/Lyft as one of
the prominent examples)
Soothe
is a perfect example, and a fun one too. Soothe is an on-demand massage
service. The company provides vetted and licensed massage therapists to
come to the customer within just an hour. The company relies on
freelance massage therapists who are professional and will deliver the
most amazing services to the clients.
Washio
is an on-demand dry cleaning and laundry services. Depending on the
time of your service order, you’re even able to get same-day service,
too. A Washio employee comes to you, picks up your laundry order, and
brings it back to you at a time convenient for you. They are a beautiful
time-saver for chores like doing laundry and dropping off and picking
up dry cleaners.
The direct sales model:
This online business model
relies on people who need to supplement their income. It allows those
people to sell your product while they look for a new job, can’t find
one, or just need extra cash on the side. As a business, you’d produce and manufacture the good and get people to sell it for you by offering commissions and a flexible schedule.
Trumaker
is doing exactly that with selling men’s suits. The company
manufactures tailor-made suits by sending Outfitters to their customers
to take measurements. The Outfitter, as they call it, is a freelancer
who will meet the client and be part tailor and part stylist. They work
with the client to get them the best wardrobe as needed.
The customized goods model
Another online business model to consider is providing customized or personalized goods. Your business will provide a base product that the customer then can tweak to their liking. This model works great with different tier pricing, as well as custom pricing per edit. The customer pays for what they really want.
A great example of this is Artifact Uprising.
They are a company that sells custom-made photo albums, calendars, and a
few other printed paper goods. The customer creates their photo album
to their liking by uploading as many photos as they want. They design
each page of the photo album as well. There is a base price for each
album based on size and page count. If a customer wants more pages, the
customer pays for them individually. All the company does it print it
and ship it.
Another example is Blank Label
which sells custom-made men’s wear. They have everything from shirts to
polo t-shirts to suits. The customer picks a base product, usually
based on the fabric, and enters their measurements like height or how
loose they like their fit. The end product is a self-made tailored
shirt.
The marketplace model
The last model I wanted to mention is the marketplace model. It’s one of the online business models that relies on bringing the supply and demand of a product, or service, together. Your business
won’t hold any inventory, your suppliers will. Uber provides
transportation but owns no cars, Airbnb provides lodging but own no
properties, and Etsy provides goods but doesn’t manufacture any of them.
You’d be doing the same thing, whatever demand you choose to fill.
These types of companies are growing and make money off sales made
through them.
PS: Uber is on demand+marketplace/aggregator model
PS: Uber is on demand+marketplace/aggregator model
Which one of the online business models is best for you?
So now the question stands, what’s the best one of business models for you? Hopefully, these six models have given you insight into the possibilities of fine tuning to your business needs.
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