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REVENUE MODELS 
FOR BUSINESS GROWTH

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Businesses in general are 'for profit'. It they weren't they would be hobbies. Furthermore, it's not money that makes the world go round; it’s the businesses revenue model. As a business owner or leader, regardless of how good your product or service or app is, it’s only useful and helpful to the future of your company when there are paying customers.

 

Once you've created your brand (i.e. Brand NamingIdentifying your WHYDefining your Tone of VoiceDefining Brand ImagerySonic BrandingLeveraging Colour PsychologyDefining your Positioning StatementCreating Brand Loyalty), Identified your ideal customer, developed a powerful Value Proposition and compelling pricing strategies (i.e. Conducting Market ResearchDefining Customer ProfilingUnderstanding Customer BiasesUnderstanding Behavioural PsychologyDefining Value PropositionsProduct Pricing Strategies), and begun creating Effective GTM Marketing Strategies and communication (i.e. Marketing FunnelsStory TellingCopywritingMulti Channel MarketingPaid Media (Digital Media Marketing)Social Media MarketingBloggingVideos), it should be relatively easy to get your first 1,000 or 10,000 customers, right? Well, not really.

There is another key ingredient that your business needs to become a sustainable and financially viable one. Revenue. Revenue is built not only basis the business model, but also the revenue model and revenue streams indicated within the business model.

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  • A Business Model is the overall structure of your business; it comprises all the aspects of the company, include revenue model and revenue streams.

  • A Revenue Model is the strategy behind the company’s revenue streams, including the resources retained for each revenue stream.

  • A Revenue Stream is the source of revenue for the company. Depending on the scale and nature of the business, it can have multiple revenue streams.

Revenue models broadly fall under 2 categories to capture value:

 

Category 1: If your business intends to provide the solution free to the customer/ user, then a third party has to pay the bills so that your company can capture value.

 

Category 2: If your business intends to provide the solution based around a Value Proposition (i.e. Value Creation), then it needs to leverage a pricing tactic that is compelling enough to capture value.

24 Types of B2C Revenue Models

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Free for User

  • Non Monetary Revenue Models - In this revenue model, users share their experiences/ usage data from one service that helps the company develop/ improve another service (i.e. Waze navigation tools help improve Google Maps in addition to collecting and creating improved Waze carpooling services)

  • Donation Revenue Models - In this revenue model, customers donate money to help entrepreneurs or even startup businesses (I.e. GoFundMe crowd-funding platform)  

  • Pay-what-you-want Revenue Model - In this revenue model customers pay what they want for a product or service (i.e. Humble Bundle game packs)

  • Freemium Revenue Model - In this revenue model the basic service is given for free and if the customer wants to use additional or premium features they need to pay for those functions (i.e. LinkedIn, Amazon Prime, HubSpot etc). While this model allows customers a fabulous way to experience a company’s product or service while simultaneously enticing customers to upgrade, its biggest downside is that the company has to invest considerable time and money in product development, and considerable effort to convert free users into paying customers.

  • Barter Revenue Model - This revenue model is a 3-way mechanism that works on the premise that everyone has a service that they can offer or are willing to trade, in exchange for a service that they need. The business earns a commission on the barter between the 3 customers.

 

3rd Party Pays the Bills

  • Advertising Revenue Model - In this revenue model, advertisers pay for advertising their products to targeted customers. Ad-based revenue models are earned by creating ads for a specific service, app, website, product or service and placing them on strategic, high-traffic channels. While this model is one of the most simple and easy ways to generate revenue for your company, it requires that your website attracts tens of thousands of viewers each day (i.e. Ads on Facebook or Instagram) 

  • Marketplace Revenue Model - In this revenue model the advertiser pays for gaining ad placement/ customer preference by paying a commission (i.e. Amazon or Alibaba or eBay)

  • Data Selling Revenue Model - In this revenue model, customer data is sold to help other companies improve their targeted ads

  • Affiliate Referral Revenue Model - This revenue model works by collecting commissions on sales of products and services generated by promoting links to those relevant products and services. While this type of model can generate more revenue than the Ad-based model, it is limited to the size of the affiliate network and the types of products or services you have to offer your audience

  • Get one, Give one Revenue Model - In this revenue model, companies sell their products to those who can afford them (at a premium price). After deducting all expenses (i.e. salaries, overheads, fees etc) the remaining profits are donated by the company to give away products to those who cannot afford to buy them but need them (i.e. Pampers Diapers)

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Value Proposition

  • Privacy/ Anonymity Revenue Model - In this model, customers pay for their privacy/ anonymity. (i.e. LinkedIn Premium where potential employees and employers can search anonymously when they have subscribed for a premium membership)

  • Loss Aversion Revenue Model - In this model, customers get something for free/ almost free up to a point (i.e. Google Cloud Storage or iCloud storage). Once they cross the free limit they have to pay. The reason why they pay is because it requires too much effort and time to shift to another service provider so to avert the perceived loss, they pay for the upgrade)

  • Vanity Revenue Model - in this model, customers desire to increase their reputations/ distinguish themselves from others by upgrading (i.e. Fortnight online game is an example where customer achieve skins, emoticons, weapons, music, dances etc. either by winning tournaments, levelling up or just buying the upgrade pack)

  • Exclusivity Revenue Model - In this model, customers pay a premium for a chance to win something that nobody else has (i.e. Owning a one-of-a-kind car, for example the Bugatti - La Voiture Noire)

  • Convenience Revenue Model - In this model, customers pay for a convenience or even a shortcut Vs. an existing model (i.e. Amazon Prime Membership) 

  • Surprise Mystery Revenue Model - In this model customers are given the opportunity to win big (i.e. the lottery)

 

Pricing Tactics

  • Subscription Revenue Model - A subscription-based revenue model is implemented or offered when the company has progressed significantly in their development process. The advantages to the business are that this model automatically generates recurring revenue and in some cases additionally benefit because some customers are too forgetful or too lazy to cancel their subscription (i.e. Netflix, Amazon Music, Apple Music etc)   

  • Leasing Revenue Model - A leasing revenue model works on charging customers a rental/ leasing fee to use a product for a limited period of time. (i.e. Leasing of cars, Rent a tux etc) 

  • Pay-per-use Revenue Model - This revenue model works on the premise that products are not used all the time and therefore it lets customers pay per use before upgrading to a subscription model or whole-owned revenue model

  • Dynamic (Smart) Pricing Revenue Model - in this model customers pay a dynamic price depending on the location, demand, time of day, profile etc. (i.e. Uber, AirBnB)

  • Upselling Revenue Model - in this revenue model, customers are offered additional benefits/ upgrades as customisations

  • Pre-sales Revenue Models - In this revenue model, customers are offered a product or service for sale before it’s fully developed for mass market (i.e. Kickstarter platform) 

  • Fractional Ownership Revenue Model - This revenue model works best for ultra high-value purchases that are otherwise too expensive to wholly own (i.e. Private Jets, Beach Houses or Destination Villas etc)

  • Razor Blade Revenue Model - In this revenue model, businesses earn revenue across the lifetime of the product (i.e. Coffee Vending Machines, Gaming Consoles etc)

24 types of B2B Revenue Models

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Free for User

  • Partnership Revenue Model - This revenue model works off the strategic and individual strengths of two or more businesses, without either having to internally re-create the strengths of the other business (i.e. Furniture manufacturer and Mattress manufacturer) 

  • Freemium Revenue Model - This revenue model works on giving customers the basic model free of cost. If the customer wants to use additional or premium features they need to pay for those functions. While this model allows customers a fabulous way to experience a company’s product or service while simultaneously enticing customers to upgrade, its biggest downside is that the company has to invest considerable time and money in the product development and considerable effort to convert free users into paying customer (i.e. Slack) 

  • Pay-per-use Revenue Model - This revenue model works on the premise that products are not used all the time and therefore offers customers to pay per use before upgrading to a subscription model or whole-owned revenue model

  • Setting Industry Standards Revenue Model - This revenue model works when a company makes one or more of its core assets available for external partners to use/ build on and therefore make the technology an industry standard (I.e. Amazon AWS, Linux, Intel Chipsets etc) 

3rd Party Pays the Bills

  • Advertising Revenue Model - In this revenue model, advertisers pay for advertising their products to targeted customers. Ad-based revenue models are earned by creating ads for a specific service, app, website, product or service and placing them on strategic, high-traffic channels. While this model is one of the most simple and easy ways to generate revenue for your company, it requires that your website attracts tens of thousands of viewers each day (i.e. Ads on Facebook or Instagram) 

  • Affiliate Referral Revenue Model - This revenue model works by collecting commissions on sales of products and services generated by promoting links to those relevant products and services. While this type of model can generate more revenue than the Ad-based model, it is limited to the size of the affiliate network and the types of products or services you have to offer your audience

  • Matchmaking Revenue Model - In this revenue model, a company makes money by matching and bringing together two relevant parties with each other. (i.e. Tinder)

  • Data Selling Revenue Model - In this revenue model, customer data is sold to help other companies improve their targeted ads

  • Marketplace Revenue Model - In this revenue model the advertiser pays for gaining ad placement/ customer preference by paying a commission (i.e. Amazon or Alibaba or eBay)

  • Negative Working Capital Revenue Model - In this model, companies collect money in advance from customers and hold out on paying their vendors/ suppliers and business partners -  effectively running their entire business on other people’s money

Value Proposition

  • Loss Aversion Revenue Model - In this model, customers get something for free/ almost free up to a point (i.e. Google Cloud Storage or iCloud storage). Once they cross the free limit they have to pay. The reason why they pay is because it requires too much effort and time to shift to another service provider so to avert the perceived loss, they pay for the upgrade)

  • Exclusivity Revenue Model - In this model, customers pay a premium for the opportunity to have early access to a product or service (i.e. Hotel Reservations, Exclusive by-invite only Industry Events etc) 

  • Convenience Revenue Model - In this model, customers pay for a convenience or even a shortcut Vs. an existing model (i.e. Amazon Prime Membership) 

  • Certainty Revenue Models - This revenue model works on the premise of lowering risk and offering peace of mind by guaranteeing/ protecting an outcome on a monthly subscription fee (i.e. IoT services, Firewalls and VPNs etc)

  • Flexibility Revenue Models - This revenue model works on reducing high investments by allowing flexible scaling/ rentals (i.e. Amazon AWS platform, IBM On-demand solutions etc)

  • Reputation Revenue Model - In this model, customers voluntarily give businesses their data with the clear understanding that your company is going to make them feel more important or that the value proposition offered is going to improve their business significantly

  • Operational Savings Revenue Model - In this revenue model, businesses offer technology solutions that help reduce operational expenses and costs by either automating repetitive tasks or digitising or outsourcing manpower

Pricing Tactics 

  • Subscription Revenue Model - In this revenue model, customers get access to products or services for a period of time. (i.e. Google Suite, Netflix, online magazines etc)

  • Leasing Revenue Model - In a leasing revenue model customers get exclusive physical access to a product (i.e. arcade games, IT hardware, equipment etc) for a limited period of time

  • Pay-per-use Revenue Model - This revenue model work on the premise that products are not used all the time and therefore allows customers to pay per use before upgrading to a subscription model or whole-owned revenue model

  • Dynamic (Smart) Pricing Revenue Model - In this model customers pay a dynamic price depending on the location, demand, time of day, profile etc. (i.e. Uber, AirBnB)

  • Upselling Revenue Models - in this revenue model, customers are offered additional benefits/ upgrades as customisations

  • Pre-sales Revenue Models - In this revenue model, customers are offered a product or service for sale before it’s fully developed for mass market (i.e. Kickstarter platform) 

  • Razor Blade Revenue Model - In this revenue model, businesses earn revenue across the lifetime of the product (i.e. Coffee Vending Machines, GPS devices, Gaming consoles etc)

10 types of Startup Revenue Models  

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  • Advertising Revenue Model - Ad-based revenue models are earned by creating ads for a specific service, app, website, product or service and placing them on strategic, high traffic channels. While this model is one of the most simple and easy ways to generate revenue for your company, it requires that your website attracts tens of thousands viewers each day

  • Affiliate Revenue Model - Affiliate revenue models work by collecting commissions on sales of products and services generated by promoting links to those relevant products and services. While this type of model can generate more revenue than the Ad-based model, it is limited to the size of the affiliate network and the types of products or service you have to offer your audience

  • Transaction Revenue Model - Transaction revenue models are much more direct in their approach towards generating revenue. A company has a product or service to offer; prospective customers pay for that service. Because of the direct approach of this model, most companies implement this themselves

  • Web Sales Revenue Model - This model is a subset of the Transaction Revenue Model. In this model customers are drawn to your company website from websites or other outbound marketing efforts and conduct their transaction over the internet. Web Sales enables businesses to sell a variety of offerings including hardware, software etc. Its two biggest limitations are that there is zero relationship build between the brand and the customer; and that high-ticket items are rarely bought via this model

  • Subscription Revenue Model - A subscription-based revenue model is implemented or offered when the company has progressed significantly in their development process. The advantages to the business are that this model automatically generates recurring revenue and is some cases additionally benefits because some customer are forgetful or too lazy to cancel their subscription.   

  • Direct Sales Revenue Model - Direct Sales revenue model is a time-tested model. While it could be inbound (where a customer has come directly to the company) or outbound (where sales people have reached out to a prospect), this model works wonders across enterprise sales cycles as well as relationship sales cycles where there are multiple buyers and influencers. The drawback in this model is that it requires the company to hire a sales team and that the product or solution being sold is of a higher value

  • Indirect (Channel) Sales Revenue Model - The Indirect Sales revenue model involves having agencies or resellers of the products or services for the company with either the company directly delivering the product or the agent delivering the product. While this model can increase the reach and sales numbers, a big disadvantage is if the agent/ reseller also stocks and sells competitor products and there is a higher revenue to be earned by pushing another brand

  • Retail Sales Revenue Model - The Retail Sales revenue model is a great way to offers deals and complimentary products to an existing customer base. For early-stage companies, adopting a retail model is inadvisable as the model requires shelf space which companies have to pay for within the retail store

  • Free Product; Paid Service Revenue Model - This revenue model is unique when compared with others as customers are given the product for free, however are required to pay for installation or customisation or training or using other services. While it is an excellent way to build a customer base and boost awareness, it means that your business is a service business with the product becoming your marketing cost (i.e. coffee vending machines where customers pay only for the product they buy off the machine)

  • Freemium Revenue Model - Freemium revenue model is similar to Free Product; Paid Service revenue model with the exception that the basic service is given for free and if the customer wants to use additional or premium features they need to pay for those functions (i.e. LinkedIn, Amazon Prime, HubSpot etc). While this model allows customers a fabulous way to experience a company’s product or service while simultaneously enticing customers to upgrade, its biggest downside is that the company has to invest considerable time and money in the product development and considerable effort to convert free users into paying customers

 

Conclusion: Developing a revenue model that truly works for your business is arguably the second most important decision to make (after identifying a critical problem that your business solves for customers). Without having a workable revenue model in place, the viability and sustainability of your business is almost guaranteed to fail. A well-thought-out revenue model not only will keep your business financially healthy but also create credibility with potential investors as the business grows and needs future investments.

Trigger Worldwide is a Brand Marketing Agency, built specifically for businesses to create Sustainable Growth. Our proprietary tools and process methodologies harness Technology, Creativity & Innovation, leverage Economic Drivers and Consumer Beliefs to help businesses overcome marketing inefficiencies and achieve their Growth Agendas.

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