For any company to survive in this ecosystem of severe competition, they must have a very strong business model backing their idea or innovation. A business model is often termed as a plan according to which a company operates, it includes target consumers, target areas, price, offers and the future scaling. According to a management guru, “a business model is supposed to answer who your customer is, what value you can create/add for the customer and how you can do that at reasonable costs.”.
It also addresses to competition in the market, how to gain the trust of customers, how to broaden their market reach and other various factors affecting the business. However, one cannot depend on a single business model to keep his company secure. Therefore, this article will provide you with insights into different types of business models which can be fruitful for an entrepreneur.
TYPES OF BUSINESS MODELS
1. DIRECT MODEL
This type of business model includes, a seller directly selling to the consumer through different online portals or through dealers or middlemen. These middlemen are connected directly to the seller company and these dealers represent the company to the customers. For eg: the car dealers, each and every car company have a dealer and the customer buys a car and its accessories from that dealer if a customer encounters any problem he directly contacts the dealer and the dealer passes on the information to the company.
Another example is of selling smartphones through the online portal, where an interested customer can directly buy or pre-book the device. E-commerce giants are becoming exclusive dealers for various electronic & fashion commodities and a major chunk of their revenue is generated from this. The dealer settles for the commision on sales and the rest of the revenue goes to the supplier. The biggest impact this type of business model creates is, it leads people into entrepreneurship and results in increasing employment.
2. FRANCHISE MODEL
When a successful business forays into different parts of the world, it franchises itself i.e. a person buys the organizational business strategy of that company. By doing this the franchisor (a company providing its franchise) is able to expand itself into new geographical locations with ease without worrying about the capital. In return, the franchise (a person who takes up the franchise) is able to replicate all its prevalent strategies, business model, commodities, and brand.
The franchisee pays a royalty and licensing fee to the parent company and keeps the rest of the revenue for itself. This helps to attract the public in different areas. Sometimes the items being provided might change depending on the franchises geographical locations. The biggest advantage is that it helps in maintaining uniformity and leads to evolving the brand’s name.
The most suitable example from the business world is of Mcdonalds which has been able to scale itself and maintain its brand name through various franchises in various parts of the world. The menu might change from place to place but the hygiene, service, employee behavior is consistent. However, this type of business model is a win-win model for both the end.
3. AGGREGATION MODEL
This is one of the newest and popular type of business models of recent times. Many successful unicorns are based on this business model. This model connects users with providers through a platform, using technology and analytics. It basically brings uniformity in payments, service, front-end technology and back-end technology.
A user can book the service through an app or website and the fulfiller (one who provides and fulfills your demand of service) accepts his request, fulfills his demand and accepts payment through listed portals. Ola and Oyo are the best examples of such type of model. The reason behind the success is uniformity of service, safety, good customer care and simultaneously boosting up micro-entrepreneurship.
4. FREEMIUM AND SUBSCRIPTION
These type of business model is visible in OTT (Over the top) providers, where a customer can watch few entertainment programs for free and have to pay for some exclusive programs. Freemium is derived from the word Free+Premium i.e. some services are for free whereas some are not. This type of business model is helpful in attracting customers to one platform to make them habituated to its environment.
The revenue model mostly consists of advertisements. Hotstar and Byju’s are one of the best examples, Hotstar provides few shows, channels and sports for free but to unlock other shows and movies which are exclusive they have to upgrade to their premium program. Same is the case with Byju’s the learning app, where students can avail few tests and video lectures for free but have to upgrade their membership in order to access other study materials.
This model is a superset of another business model which is subscription based. Subscription-based mainly involves individuals paying up for entire service without any selected free shows. These type of services lure customers by providing a free fifteen or thirty day trial period. The revenue stream is the amount customers have paid to avail that service and the subscription fee varies depending on the duration. Amazon prime video and Netflix suite best into this business model. These sites keep on upgrading themselves by providing fresh content from different vernacular and international languages.
5. BRICK AND MORTAR
This business model consists of one company itself setting up different branches. This includes huge investments in real estate and products being sold through it. The advantage being, the company if successful is able to keep all the profits and revenue to itself. Also, it will be able to try a new service or product with ease along with in preventing the dilution of the brand’s image and name. At the same time disadvantage being, initially, it will be tough to earn profits as most of the money has been utilized in capital for setting up a new store. D-mart held by Avenue supermarts is a successful example for such type of business model.
Finally, various types of business models are implemented by startups and companies, they differ in different regions. Talking about India, each and every company invests and builds its business model with a sole aim of earning huge profits in long term. A business model if successful for one company in a specific domain does not guarantee the same success ratio for another player of that domain. So, keep in mind your vision, money, competition along with employee benefits while making a business model.