We have reached the last leg of our journey with business models. So far we have seen ten types of business models. We still have five to go.
Companies that use a low-touch business style charge less for the services they do offer. Budget airlines and retailers of furniture like IKEA are two of the best examples of this type of business model. The low-touch business model dictates that in each of these scenarios, clients must either pay for additional services or perform some tasks on their own to keep costs low.
Marketplaces give customers simple options for connecting with merchants while allowing sellers to display products for sale.
The marketplace business model can make money from a number of different ways, such as transaction fees paid by either the buyer or the seller, extra services to aid in promoting the items of the seller, and insurance for the protection of the customer. Both goods and services have been subject to the marketplace model.
Example: HP Instant Ink
Customers are billed for actual usage at the conclusion of a billing cycle rather than having to pre-purchase a set amount of things, like power or mobile phone minutes. Although the pay-as-you-go concept is most frequently used for household utilities, it has also been used for items like printer ink.
14. Razor blade
The razor blade business model is named after the item that, in a sense, developed it: selling a long-lasting good at a loss in order to boost volume sales of a high-margin, disposable part of it.
Because of this, razor blade manufacturers effectively give away the razor handle in the hopes that you’ll buy a lot of blades in the long run. In order to ensure that there are numerous additional, continuous purchases over time, it is important to attach a consumer to a system.
15. Reverse razor blade
Example: iPhone & iTunes
By turning the razor blade concept on its head, you may sell a high-margin item while promoting the sale of a low-margin companion item.
Customers frequently decide to become a part of an ecosystem of products, much like the razor blade concept. The initial purchase, however, is the large scale where a corporation generates the majority of its money, unlike the razor blade model. The only purpose of the add-ons is to keep people utilizing the initially pricey product.
Well, these were the 15 types of models we were going to discuss. However, since we’ve stuck together for such a long time, let’s just discuss two more bonus models!
A reverse auction business model flips auctions on their heads by having vendors offer buyers their lowest pricing. The lowest price that is then offered to customers can be selected.
When contractors submit bids to complete work on a building project, reverse auctions are in effect. Every time you look for a mortgage or other form of loan, reverse auctions are also present.
More and more businesses are using subscription-based business models. Customers pay a subscription fee in this business model to access a service.
While subscriptions to magazines and newspapers have long existed, the concept is now present in software and internet services, as well as in service-related companies.