10 Business Models for Every Entrepreneur

Valuetainment

25 Feb 202004:32

Summary

TLDRThis video script outlines ten distinct business models for revenue generation, ranging from free products supported by advertising to low-cost, disposable items with profits from recurring purchases. It covers the freemium model, average value pricing, tiered pricing based on volume, and subscription services, among others. The speaker also offers a PDF guide for further exploration and encourages viewers to subscribe for more entrepreneurial insights.

Takeaways

🆓 The first business model involves giving the product away for free and generating revenue through advertising, as exemplified by YouTube.
💰 The freemium model allows users to start with a free service but requires payment for additional features or upgrades, similar to LinkedIn's approach.
📉 The average value to customer model sets prices based on the average value a customer receives, which can sometimes result in some paying more and others less than their individual costs.
👖 The cost plus margin model is a traditional pricing strategy where the selling price is set above the cost price by a certain margin, such as buying pants for $20 and selling them for $30.
📺 The recurring low subscription model, like Netflix, offers a low monthly fee that accumulates to significant revenue due to a large customer base.
📈 Tiered pricing based on volume offers discounts or incentives for higher volumes of purchases, which can encourage more sales.
💼 Commission-based revenue is a model where the business earns a percentage of each transaction, making the income variable and dependent on sales volume.
🛠 Low product price with additional support costs is a model where the initial product is affordable, but ongoing support or services come at an extra cost.
🚗 A low entry price with additional priced features model is common in industries like automotive, where basic models can be upgraded with various add-ons.
🪒 The disposable model involves selling a low-cost primary product with the expectation of ongoing sales of related consumables, like razors and their replacement blades.
📈 The script suggests that businesses can choose from various revenue models to suit their strategy, emphasizing the importance of selecting the right model to generate income effectively.

Q & A

What is the first business model mentioned in the script for generating revenue?
-The first business model mentioned is giving the product away for free and making money on the back end through advertising, like YouTube does.
Can you explain the 'Freemium' business model using an example from the script?
-The 'Freemium' model is exemplified by LinkedIn in the script. It allows users to use the service for free, but they have to pay a subscription fee for additional features or an upgraded experience.
What does 'Pricing based on average value to customer' mean, and how is it applied in the insurance industry?
-This model means setting a price point that averages out to the value a customer receives from the product or service. In insurance, this could mean charging a single rate that accounts for both high-risk and low-risk customers, with the healthy subsidizing the less healthy.
How does the 'Cost plus margin' pricing model work, as described in the script?
-The 'Cost plus margin' model involves setting the price of a product by adding a margin to the cost of production. For example, if pants are bought for twenty dollars, they might be sold for thirty dollars to include a profit margin.
What is the significance of the 'Recurring low subscription payment' model, and how is it used by Netflix?
-This model is significant because it provides a steady, recurring revenue stream. Netflix uses it by charging a low monthly fee, which adds up to a substantial amount due to their large customer base.
Can you describe the 'Tiered pricing based on volume' model and how it's applied in real estate?
-The 'Tiered pricing based on volume' model involves offering different prices depending on the quantity or volume of the product or service purchased. In real estate, this could mean offering lower commission rates for higher volumes of property sales.
What is the 'Revenue as a percentage of every transaction' model, and what does it imply for the business?
-This model, also known as a commission model, implies that the business earns a percentage of every transaction it facilitates. It's a common practice in industries like real estate or affiliate marketing.
How does the 'Low product price but support is extra' model work, and where is it commonly seen?
-This model involves selling a product at a low price but charging extra for support or additional services. It's commonly seen in software and technology industries where the initial product is inexpensive, but ongoing support or updates cost extra.
What is the 'Low entry price with priced features' model, and how does it apply to the car industry?
-The 'Low entry price with priced features' model offers a basic product at a low price but allows customers to pay extra for additional features or upgrades. In the car industry, this could mean a base model is affordable, but adding features like heated seats or a sunroof increases the cost.
What does the 'Low price but money is made on disposables' model involve, and how is it exemplified by Procter & Gamble?
-This model involves selling a durable product at a low price and making money on the consumables that go with it. Procter & Gamble exemplifies this with their razors; the razor handle is inexpensive, but customers must continually purchase replacement blades.
How can someone get the PDF mentioned in the script, and what does it contain?
-To get the PDF, one can either text the provided number and request it by saying 'business models' or subscribe to the newsletter through the link in the video description. The PDF likely contains information on the different business models discussed in the script.
What are the two other videos suggested in the script, and what topics do they cover?
-The two other videos suggested are 'Size versus Positioning', which discusses how to differentiate oneself in the marketplace, and 'How to Become an Entrepreneur', which is aimed at employees considering entrepreneurship within or outside their current company.

Outlines

00:00

💡 Introduction to Business Models

The video script begins with an introduction to various business models for generating revenue. The speaker invites viewers to subscribe to the channel and then delves into a list of ten distinct business models. The first model discussed is giving the product away for free, with advertising as the main revenue source, exemplified by YouTube. The second model is the freemium model, where users start with a free service but can upgrade to a paid version, as seen with LinkedIn. The third model is pricing based on average value to the customer, which balances costs for different customer profiles, such as insurance rates for drivers with varying risk levels. The fourth model is pricing based on product cost plus margin, a traditional retail approach where a markup is added to the cost of goods sold.

Mindmap

Keywords

💡Business Model

A business model is a conceptual framework that outlines how a company creates, delivers, and captures value. In the video, the term is central as the speaker discusses ten different models for generating revenue, emphasizing the diversity of approaches companies can take to monetize their products or services.

💡Free Product

The free product model involves offering a product or service at no cost to the consumer, with the aim of generating revenue through alternative means, such as advertising. The script cites YouTube as an example, where content is free but supported by ads, illustrating how businesses can leverage this model to attract a user base and monetize through indirect channels.

💡Freemium

The freemium model is a business strategy where a basic version of a product or service is offered for free, but users can opt to pay for premium features or an enhanced version. LinkedIn is mentioned in the script as an example, where the platform is free to use, but users can subscribe for additional features, highlighting a way to convert free users into paying customers.

💡Pricing Based on Average Value

This concept refers to setting prices at an average level that reflects the value customers receive from a product or service. The script uses health and auto insurance as examples, where premiums are averaged across different risk profiles, showing how companies can balance costs and benefits for a diverse customer base.

💡Cost Plus Margin

Cost plus margin pricing is a method where the selling price of a product is determined by adding a markup to the cost of production or acquisition. The script explains this with the simple example of buying pants for twenty dollars and selling them for thirty, illustrating a straightforward approach to setting prices based on direct costs.

💡Recurring Subscription

A recurring subscription model involves customers paying a periodic fee to access a product or service continuously. The script uses Netflix as an example, where customers pay a low monthly fee, demonstrating how this model can create a steady stream of revenue for businesses.

💡Tiered Pricing

Tiered pricing is a strategy where products or services are offered at different price points based on the volume or level of service. The script mentions real estate and insurance commissions as examples, showing how businesses can incentivize higher sales volumes through discounted rates.

💡Commission

In the context of the script, commission refers to a revenue model where businesses earn a percentage of each transaction they facilitate. This model is common in sales and marketing, where the script implies that the revenue is generated from the commission paid out, rather than from the product or service itself.

💡Support as a Service

Support as a service is a business model where the core product is priced low, but additional support or services come at an extra cost. The script does not provide a specific example, but the concept is common in software and technology industries, where basic software might be inexpensive, but premium support or features are offered at a higher price.

💡Low Entry Price

A low entry price model attracts customers with an initially low-cost product, with the intention of selling additional features or services at a higher cost. The script uses the example of buying a car, where the base model is affordable, but customers can choose to add various features, illustrating how this model can increase overall sales.

💡Disposables

Disposables refer to products that are designed to be used once and then discarded, requiring customers to make repeat purchases. The script uses the example of a razor and its blades, where the initial product is sold at a low price, but the company makes its profit from the ongoing sale of the disposable blades, exemplifying a model that relies on customer loyalty and repeat business.

Highlights

Introduction to ten different business models for generating revenue.

The first model: Giving the product away for free and making money through advertising.

Example of the free model: YouTube's business strategy.

The second model: Freemium model with paid upgrades, exemplified by LinkedIn.

The third model: Pricing based on average value to customer, like health and auto insurance.

The fourth model: Pricing based on product cost plus margin, a traditional approach.

The fifth model: Recurring low subscription payment, common with services like Netflix.

The sixth model: Tiered pricing based on volume, used in real estate and insurance sales.

The seventh model: Revenue as a percentage of every transaction, a commission-based model.

The eighth model: Low product price with additional support costs.

The ninth model: Low entry price with priced features and additional add-ons.

The tenth model: Low price but making money on disposables, like razors and replacement blades.

Offer to receive a PDF on business models by texting or subscribing to the newsletter.

Additional resources: Videos on size versus positioning and becoming an entrepreneur.

Encouragement to subscribe to the channel for more content.