3rd May 2023, Business
Do you dream of a profitable business? Explore these business models!
Five business models that maximize your profit.
Even those who have no experience in running their own business will agree on one thing - business should generate profits. No matter what industry you operate in, what mission your company has, and what you offer your clients - to stay on the market, operate, and develop, a business must bring real income.
To benefit from it, you need an effective way to generate profits, the so-called “business model”. The most welcome are creative, revolutionary solutions that change the existing systems and cause a bit of “to-do” on the market. Nothing is lost yet, if you do not intend to introduce new products and base your business on one of the already popular models, you can learn more about some of them below.
Having read a blog or browsed social media, you have seen links and/or unique discount codes for the selected shop or for the services of a given company, which were recommended to you by an online creator. All within part of advertising cooperation. It usually looks like this: the creator recommends the equipment or service X, links to the brand's website, and often give their readers/viewers a discount code. As remuneration, the brand receives a percentage of the value of purchases made or an appropriate rate depending on the number of user actions (e.g. subscribing to a newsletter, filling out a form).
Mind you! Affiliation is a business model in which brands collaborate with web developers in return for a percentage of sales or a specific rate for user-made actions. Therefore, the remuneration depends on the effects of the advertisement.
Be careful! It's easy to fall into the trap of advertising whatever you can. Meanwhile, what matters is whether a given product or service is suitable for you, your blog/website/profile on social media, and your community. It’s about quality, not quantity!
Do it yourself literally means do it yourself. This business model is based on personalizing services and products adjusting them to the needs and requirements of an individual customer. This is a common activity for which we are able to pay more. No wonder, each of us desires to have something special, unique, and standing out from a wide variety of products commonly offered in chain stores. Engraved jewelry, bags with a choice of finishes (straps, linings, decorative accessories), personalized poster or graphics, your own muesli mixes. Also cosmetics with an option for ingredients selection. Such products are more and more often being selected and appreciated.
DIY is a business model in which the customer can participate in creating a product and has the ability to personalize it.
The customer must have a real impact on the product, and the development process should not be too complex as it will discourage them from purchasing.
Razor and blades, i.e. profit from add-ons
In simple words, this model is about "cheap base, more expensive accessories". You surely know a razor that is cheaper than matching blades. Or a printer where replacing ink is quite an expense? It is on these "spare parts" and accessories that the producers make money. Profit is largely generated from their sale.
In this model, you sell the main product with little or no profit. You earn on components on which a large margin is imposed. Without them, the product cannot function.
If the products you offer do not need additional accessories, then this model will not be remunerative for you.
Freemium – I buy because I want more
Do you listen to music on Spotify, but without the paid version. Do you have to listen to the commercials? Linkedin doesn't show you everything unless you buy the premium version? Do you note down your ideas and inspiration to Evernote, but can't share them with your colleagues? Welcome to the world of freemium products meaning we have something for free, but if we pay, we will receive “the more” and “the better”. The very phrase freemium is a combination of two words: free - that is, free or costless, and premium.
The freemium business model is about making the product available to users in two versions - basic (free) and extended (paid). Profits come from selling additional functionalities.
If you give too many functions in the basic/ free version, the users may not see the purpose to buy premium. Make sure that you will actually notice the difference between the versions and yet the free users won’t be too burdensome and discourage you from the product!
Subscription – that is, regularly and loyally
Recent months have shown that this business model is doing great and we are keen using it. Netflix, HBO Go, Storytel, Wyborcza – they are the first thing that comes to mind. Nevertheless, the subscription model is not only access to various content, but also products: regular deliveries of organic fruit and vegetables, animal products (e.g. a pet crate), cosmetics (American Dollar Shave Club), equipment rental (Philips), dietary catering or carsharing, as well as newsletters with the latest news and research from a given industry (eg dietetics based on facts). This model is well thought of. It doesn’t require signing special contracts and you can cancel the service whenever you wish. What does it mean for the company? Regular and predictable income, constant customer base expansion, and customer loyalty.
The subscription model is based on paying for access to a given service or product for a specified period of time. If you don’t cancel your subscription, it is automatically renewed for another period.
If the offer is unattractive, the customers will be unwilling to renew their subscription and your income will drop. Make sure you are able to maintain your appeal and get customer interest.