From software that's free to virtual goods that cost real money, all the new models have their uses.
By Deji Atoyebi Jul 10, 2018
Note to reader: All social enterprises need a business model. Below are examples of new models to stimulate your thinking, research, and due diligence.
FYI, Module 8 of the Practitioner Guide provides Social entrepreneurs with an introduction to developing a Business Model.
Excerpts
“While a lot of business models exist, four of them are worth studying in the context of today's marketplace.
1. The on-demand model.
This model has been receiving a lot of attention because more and more startups are adopting it. As its name implies, the on-demand model pitches its tent on the real-time provision of goods and services. That is, all you're required to do as a consumer is to place an order for a good or service, using your gadget, and await its delivery. Dead simple…….
In fact, technology is considered to be its single major propeller, as technology serves as a fillip to its core pre-conditions, which include cost-effectiveness and speed…….
Better for you, the on-demand model is not just convenient to consumers but also to businesses. It's especially suitable for platform businesses that utilize already established infrastructure to solve a problem.
Uber, for example, doesn't own a car.
2. The freemium model.
The freemium model is mostly adopted by tech products when they group features into basic and advanced products. The purpose of this model is to promote the basic features for free, where anyone and everyone would be able to use them, but grant only premium users access to the advanced ones. Becoming a premium user usually comes in the form of an account upgrade, as seen in the case of LinkedIn.
A venture capitalist, Fred Wilson, aptly described the models as: "Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc. then offer premium-priced, value-added services or an enhanced version of your service to your customer base."
3. Shopping annuity.
The so-called shopping annuity is a not-so-talked-about business model, but one that's presently gaining some ground. The idea behind this model is simply to enable customers to earn from their own current spending. Consumers actually earn money when purchasing everyday items, such as paper towels, toilet paper, toothpaste, razors and so on. It can be a very compelling model that fits well into the ecommerce space.
A good example of a business that's pioneering the shopping annuity is Market America, through its ecommerce site, shop.com. Founder and CEO of Market America and shop.com, JR Ridinger, is seeing significant success with this business model in nine countries, including the U.S. In a recent interview, Ridinger said, "The shopping annuity -- converting everyday spending into earning -- is the foundation of our business model and is like rocket fuel for our UnFranchise business, overall.
4. The virtual goods model.
If you've ever played a game or used an app in which you were required to make in-app purchases for an intangible product, then you've experienced the virtual goods model. This model creates revenue by giving users the sense that they are gaining real value from purchasing a virtual good.
For example, since many people enjoy Candy Crush, its developers leveraged this to monetize the game by enabling users to buy stuff that would get players up and running quickly after losing a stage. The same thing goes for action games where buying weapons and abilities makes the experience way more fun.
If you're going to create a widely appealing app or game, then this model is one that you'll want to consider, as people will want to purchase virtual goods that make their experience with a fascinating product more fun.”
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