Posted on: Tuesday 2 May, 2023

Every company or business creates a plan for generating profit. They develop a model to determine the products and services to sell, the market they want to target, and the costs they expect to incur. These are known as business models.

Importance of Business Models: 

Companies’ consumer base can be targeted with the help of the business model. It aids in developing marketing plans and budget projections while taking into account various target markets. A good business model gives the company a competitive edge in the industry and provides the company a good reputation in the marketplace; encouraging investments. By strengthening the business model, you can expand your cash reserves and make new investments while sustaining a consistent profit. A proven business model also brings financial stability to organizations.

Moreover, investors require reviewing business models and financial facts to understand the competitive advantage of the company.

Types of Business Models:

There are as many different types of business models as there are business types. Traditional business methods include, for instance, brick-and-mortar storefronts, franchising, direct sales, and advertising-based models. There are also hybrid company models, such as those that combine online retail with traditional brick-and-mortar stores or with athletic associations.

For a better understanding, Checkout  5 different types of business models along with examples:

1-B2C – Business to Consumer

Businesses sell to customers, or end users, in this business model known as business to consumer (B2C). B2C is a well recognised and applied concept that encompasses a wide range of unique strategies.

The decision-making process for this business model is much quicker than it is for other models, particularly for lesser value products or services, like B2B purchases.

Therefore, B2C businesses typically spend less on marketing to make a sale due to the short sales cycle. However, its recurring orders and average order value are both lower.

B2C entrepreneurs are thinking about utilizing technologies like mobile apps, retargeting, and native advertising to promote to their customers directly and make their lives easier.

 Examples : amazon , Walmart

2- B2B Business to Business :

In this business model, a company sells its products or services to an additional business. In this case, the buyer is occasionally the customer but is typically the reseller.

Although the B2B business model has a longer sales cycle, the order value is larger and the number of repeat transactions is higher.

Modern B2B innovators have established a position for themselves by increasing targeting and substituting eCommerce stores for order forms and catalogs.

Examples :  Intel, Panasonic

3- Online educational business model

Targeting the educational industry, including students and teachers, this business model allows them to get access to educational resources via flat course fees or subscription. It can be said as a combination of freemium, course fees, and a subscription-based model.

Example : MentorWith  , LinkedIn learning, Khan Academy

4- E-Commerce Business Model

This model enables customers and sellers to interact and conduct business via an online  platform. It is the simplest yet greatest business strategy.

There are many different types of business models for eCommerce, including business-to-business (B2B), customer-to-business (C2B), and business-to-consumer (B2C) (C2C).

5- Freemium Business Model

Tech companies frequently employ a software as a service (SaaS) freemium strategy that combines paid and free services. Companies who need to expand their clientele and increase sales provide free versions or versions with fewer functionality. To access the advanced features or updated versions, consumers must select paying services.

Example :  Dropbox, Zoom

4 Elements required in a business model:

Your Target Audiences:

The first fundamental component of your business model is defining the target market for your product or service offerings. 

Your objectives may be multiple and appear to overlap, but classifying them into three groups and rating them according to how vital they are to your business focus is an important first step.

Once your target audience has been identified, it will be simpler to investigate historical assumptions about them, and your presumptions about your connection with them will change as your business model evolves.

Your Market Offering : 

Defining the needs your current offering is attempting to fill and mapping your product and service offerings against your target market gives your offerings a unique edge.

Your Essence :

In a business strategy, the idea of “essence” is directly related to the marketing strategy or brand development strategy. It’s essential to grasp the idea of it if you want to shape a unique position for yourself in a market that is nearly always crowded and highly competitive.

What are you best at and what is most important to you? As you look ahead, you will continue to invest and protect what you are best at and you will seek partners and collaborators that share what is important to you.  Making this obvious in advance prevents a lot of back-and-forth discussions during the planning process.

Your Unique Strategic Position :

We all want to be unique! A competitive imperative forces organizations to stand out from the competition. If you don’t work to establish an impression on the audience you serve, the market (your competitors, partners, and customers) will do it for you, and you might not like the outcome.

Identifying your ideal, one-of-a-kind strategic position is a crucial component of your business model that you must do as soon as possible and keep testing.

Need help drafting your business model? Stay tuned for our upcoming article!

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