In today’s highly competitive environment, finding the right business model and emulating successful strategies can provide companies with a significant competitive advantage and contribute to significant revenue growth. While product quality and well-established processes play a critical role, they do not by themselves determine a company’s future success or failure. Rather, a company’s fate depends on its ability to identify, effectively implement, or create a completely new business model. For a definition of business models, see the article titled “The Importance of a Well-Defined Business Model: A Guide to Building a Successful Venture”
1. Freemium (“Start for Free”):
The freemium model offers a basic version of a product or service for free, with the option to upgrade to a premium and more valuable version for a fee. The key metric here is the conversion rate from free to paid users. By offering a free version, companies can attract a large customer base while generating revenue from premium users who typically represent a smaller segment. Internet companies and software designers often adopt this model. Examples Tradingview, which offers free, Pro, Pro+, and Premium versions catering to different needs in the cryptocurrency trading community.
2. Lock-In:
The lock-in model focuses on building customer trust by lowering barriers to entry for the base product and increasing the price to switch to a competitor. Once customers become dependent on the seller, additional necessary products are sold at higher prices, ensuring a significant stream of revenue. This model often connects technologically related products, reinforcing the effect. One of the most prominent examples of the lock-in business model is Apple’s ecosystem. Apple has created a tightly integrated ecosystem comprising hardware, software, and services that work seamlessly together, fostering customer loyalty and making it challenging for users to switch to competitors
3. Dropshipping:
Dropshipping is an e-commerce business model where companies do not own the products or inventory but operate online stores. When a customer places an order, the seller-partners fulfill the order by directly delivering the product to the customer. This model is popular among marketplace sellers as it requires minimal financial investment.
4. Aggregator:
The aggregator business model involves a company offering various services within a specific industry (e.g., taxi, apartment rentals, loans) under its own brand and earning revenue through commissions. Booking.com is the example of successful aggregator models.
5. Franchise:
Franchise is a form of collaboration between legally and financially independent entities, where one party (franchisor) allows the other party (franchisee) to operate using its successful business system, brand, know-how, commercial secrets, reputation, and other intangible assets. This model is suitable when the franchisor aims to expand its network and generate passive income from franchise sales. McDonald’s and Subway are prominent examples of franchise-based businesses.
6. Customization:
Some companies enhance existing products or services by adding elements that make each sale unique to a specific customer. Examples include specialized travel agents arranging trips for affluent clients or creating customized merchandise like mugs or T-shirts featuring personal photos or designs. Similarly, services that transform old clothing based on customer preferences to create unique fashion statements have gained popularity.
7. Subscription:
The subscription business model allows customers to regularly receive goods or services they frequently need. Subscriptions save customers time and money, while providing companies with predictable revenue streams, brand loyalty, and a stable customer base. Netflix offers subscription plans at monthly prices ranging from 7.99 EUR to 17.99 EUR.
8. Penalty Model
In this model, the main source of a company’s revenue comes from penalties paid by customers. Examples include online loans and credit cards, where late payment fees or interest on late payments generate significant income for the companies.
This is not a complete list of existing business models, you can combine two, three or create your own unique. Speaking of entrepreneurship, if you want to start an exciting startup journey or learn more about different business models, come to I wanted Startup Iceland camp. This event brings together aspiring entrepreneurs, industry experts and seasoned professionals for a weekend of networking, learning and idea generation. It’s a great opportunity to gain valuable knowledge, present your startup ideas and get feedback from experienced mentors.
Whether you’re a seasoned entrepreneur or just starting out, the Startup Iceland camp event promises to be an inspiring and educational experience. Join us September 15 – 6pm – September 17 – 10pm GMT 2023 at Reykjavik University 1 Menntavegur 101 Reykjavik and become part of a dynamic startup community. Don’t miss the chance to network with like-minded people and take your entrepreneurial journey to new heights.
Register now. Participation is free. We’d love to see you there!
Remember that choosing the right business model and the ability to adapt are key factors in creating a successful startup. We wish you the best of luck in your entrepreneurial endeavors!
Startup Iceland Camp 