10 most powerful revenue models. |
The 10 Most Popular Startup Revenue Models.
With the invention of the Internet, traditional commerce is rapidly transforming into digital commerce. The online presence of any product or service has become a basic requirement. The purpose of any online product, service, or app is to generate revenue. To achieve this goal, you need to know your product's target audience. Once you have achieved this goal, it will be easier to take advantage of it. There are several factors that we must keep in mind when planning to market our products. First, look at your product to see what industry it belongs to. Today they are using digital channels, ranging from the sale of luxury items to online services. The growth of online commerce has given rise to many transactional channels and models. Here, I have written a comprehensive guide outlining the most commonly used revenue models that are used to sell initial offerings. I have listed the advantages and disadvantages of each model so that when choosing a model, all aspects of it are in front of you. All revenue models are a proven technique used in e-commerce and digital business. They use these models to generate revenue from online traffic through their websites, mobile apps, and digital channels, from startups businesses to global corporations. The 10 digital revenue models I have summarized in this article include both the advertising revenue model and the charging model for access to digital services. It also includes a freemium revenue model with limited free access to the entire service for a fee.
Business Model vs. Revenue Model vs. Revenue Stream.
Before we look at the different revenue models, we need to understand the difference between certain terms.
These terms are often used interchangeably. These terms include business model, revenue model, and revenue stream.
Various economists, a summary of which I am writing here, have defined and explained them.
Revenue stream.
Businesses or services that have different sources of income. These businesses make money by selling various goods or providing services.
The income that the business records on its accounts and depends on the various business activities.
Retailers have higher accounts and service providers have shorter accounts.
Revenue model.
The revenue model is a framework for generating income. This is an important part of the company’s business model. The revenue model identifies which brand or service will produce revenue and how the brand or service will be sold.
No business model can succeed without a clear revenue model. It is a strategy to streamline the revenue streams and resources of any business.
Business models
The business model describes how an organization builds its value. It delivers in economic, social, cultural, or other fields and builds its reputation and position. The term business model is used to refer to a wide range of informal and formal explanations of the basic aspects of an organization or business. This includes business objectives, business processes, customer identification, business strategies. Also Includes organizational structure, infrastructure, sourcing, business practices, and operational processes, as well as cultural and environmental policy.
Types of revenue models.
There are many types of revenue models being used around the world. It is very difficult to list them in a single list, as different names know most of them in the startup community.
However, in the list below are the ten most popular and efficient revenue models used by both large and small companies.
Economists in their articles mostly refer to the same business models that I am going to describe below.
1. Advertising based revenue model
We based advertising revenue on advertising on a website or app. If your company has a site or a site-based company, getting ads from Google AdSense is one of the most common tools. To generate revenue from this model, you need to bring traffic to your website. The more people who visit your site, the more revenue will be generated. Google AdSense pays around $5-10 per 1,000 page views for most websites.
Presenting consumer interest information for free generates more traffic and interest, which leads to higher earning potential with advertisers.
Advantages: The easiest revenue models are to make money from advertising. Therefore, many companies use advertising as a source of income.
Media houses, news websites, and online article writers are making money from this model.
Disadvantages: To make good money from this business, need to attract millions of people to your website, which is a challenge in today’s competitive environment. Because of the high volume of advertisements, people rarely click on the advertisements, which can reduce the revenue.
2. Affiliate revenue model.
We based it on the affiliate revenue model on commission. In this model, you resell items from other retailers on your site and earn a commission on them. Plus, you’ll be getting new customers to the merchant and rewards. The affiliate revenue model looks at those who access the site from which affiliate site they clicked. There are several payment methods within the affiliate model example:
Pay Per Click (PPC) - Payments are made to the affiliate by clicking on the affiliate link.
Payment per Impression (PPI) - When someone visits a merchant’s site, it is paid to the affiliate.
Pay Per Lead (PPL) - When an action is taken by clicking on an affiliate link, such as completing a form to create a new lead, the affiliate is paid.
Pay Per Sale (PPS) - Payment is made to the affiliate when it is sold through the affiliate’s site. The affiliate receives a fixed percentage of the value of the item.
The Affiliate Revenue model is one of the most popular e-commerce models, as it benefits both the original seller and the affiliate revenue chain.
Advantages: The affiliate revenue model earns more money compared advertising revenue model.
Disadvantages: If you use an affiliate income model for your startup. They may also limit your income because of limited resources.
3. Transactional revenue model.
This revenue model is the way to generate direct revenue. In this, the company provides its service or product directly to the customer and the customer pays the company directly.
Technology-based companies strive to adopt a transactional revenue model.
Advantages: It’s a simple method for consumers and gives them a wide range of choices. That’s why consumers are more attracted to it.
Disadvantages: In this model of revenue, the transaction takes place directly between the company and the customer. The profit margin is lower because of the wider choice of customers and business competition.
4. Subscription revenue model.
In the subscription revenue model, you offer customers a product or service that the customer uses for a long period, usually monthly or year after year, and pay you in return.
Advantages: If your company maintains its quality and service, this model can generate consistent revenue.
Disadvantages: In this model, it is necessary to maintain the subscriber rate, which requires a lot of effort and resources.
5. Web sales.
This model is a branch of the transactional revenue model. In this, the user pays directly for a product or service, but for this, the customer must first come to your company through a web search or outbound marketing and the transaction must be done completely on the internet.
Advantages: Web Sales works with a wide range of offers. Sells software, hardware, and even subscriptions through web sales.
Disadvantages: The use of this model does not establish a lasting relationship between the product and the customer. So if your business is heavy goods like cars, machinery, etc. then you should look for a suitable model.
6. Direct sale.
In the direct sales model, they sell directly to the product to the consumer. In this model, they increase the profit by eliminating the role of middlemen.
There are two types of direct sales models.
Inside sale, in which the customer places an order by calling.
Outsourcing, which is a face-to-face sale transaction.
Advantages: The direct sales model creates a lasting relationship and influence between the consumer and the company, and the opportunity to build the company’s reputation.
Disadvantages: Direct sales models often require a sales team. If your business is a low-cost item, it will be difficult for you to afford a sales team.
7. Channel Sales (or Indirect Sales)
The channel sales model comprises sales agents or resellers. In the channel sales model, the company also sells its products through third-party partners - affiliate partners receive a commission on each sale. They bundle your product with you or work directly for you.
Advantages: The channel sales model is ideal for companies that have a product that is an additional sale to their channel and can generate additional profits.
Disadvantages: Do not use this model when your product competes with your partner’s product. In that case, he will promote his product.
8. Channel Sales (or Indirect Sales)
The channel sales model comprises sales agents or resellers. In the channel sales model, the company also sells its products through third-party partners - affiliate partners receive a commission on each sale. They bundle your product with you or work for you.
Advantages: The channel sales model is ideal for companies that have a product that is an additional sale to their channel and can generate additional profits.
Disadvantages: Do not use this model when your product competes with your partner’s product. In that case, he will promote his product.
9. Product is free, services are not.
This model is extraordinary compared to other models. In it, you offer your product for free. Customers need to pay for installation, customization, training, repair, or other added services.
Advantages: This model is dominant for building trust between your product and customer and increasing product awareness. Many offers for free are attractive to many people.
Disadvantages: In this model, you are running the business of services with the cost of the product. This kind of model can’t last long, move on to other, better revenue models.
10. Freemium model.
In the Freemium model, the company provides its basic services for free. They charged customers for added premium features, extensions, functions, etc. LinkedIn is one of the largest companies using this model.
Advantages: The Freemium model offers customers free, which is a great way to attract them to your product or service. It is easier to influence them for more services.
Disadvantages: It takes considerable capital and time to reap the benefits of this model. Convincing free service users to pay for services is a further enormous challenge.
Final thoughts.
You are selecting a startup model, do your full research first. Take the time to decide. Once you adopt one model, then it becomes difficult to move on to another model.
In this article, I gave you an overview of each model. Do more research on the model of your choice.
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