Today companies like Netflix, Amazon, LinkedIn, and many others use subscription-based models to monetize part of their business. However, a subscription-based business model also needs a lot of resources. Companies likeApple, for instance, use an inverse razor and blade, business model. Apple has created platforms like the App Store and iTunes, which sell app and songs, movies or tv series at a convenient price. Indeed, the non-profit side of the business model works as an excellent propeller for the business. Anyone wants to take part in the growth of a company that not only sells shoes but takes care of kids around the world. This business today contributes to a small pie of Netflix revenues, yet at the time it was the core of the business, and it has been so for years.
When there are two sides of the market that cannot easily or effectively communicate with each other, a brokerage firm can be found playing the middle man and cleaning up in terms of profits. Markup models work best when the business isn’t selling their own goods. The hallmark element to watch for in considering this revenue model revolves around where the product is produced and how it is sold. If the product is produced in place x and sold in place y- you can bet there’s going to be a markup on it. The product, in most cases, doesn’t change at all from the point of purchase to the point of sale- meaning it doesn’t come in as coffee beans and leave as a cup of coffee. I’ve observed Amazon move from digital to physical, WeWork move from renting office space to selling homes, and Zara take on fashion in a way that led to the discussion of fast fashion.
It has been a crazy year but we have only scratched the surface of what is possible with revenue and business model disruption. Industries that have stayed stagnant for decades are now changing in days and it’s all thanks to outside the box thinking and intentional collaboration.
The essence of a digitally transformed business model is using the power of digital technologies to provide direct and personal solutions that create deep and long lasting relationships with consumers. The Founder Behind Furniture-Maker Poppin Explains Why the Company Needed to Transform ItselfAfter realizing it was selling to the wrong customer, the company had to change its brand voice, marketing, products and supply chain. If a business is trying to choose where to focus its efforts, however, the business model is a recommended place to start. Those companies are already delivering a product or service that their customers expect, making it more difficult for teams to strategize around what’s next or think through how the industry could be disrupted. The key to developing the best revenue model for your business is to understand the existing options and either choose one strategically or combine a few to create something new altogether. This revenue model is absolutely crucial to the success of a platform business.
At the same time, LinkedIn provides another subscription service to people looking for job opportunities. As long as the company can keep investing back on developing great products, integrating them with each other to create a seamless experience, and maintaining a strong distribution pipeline, that model might work. A locked-in experience can be great to have as much control on users’ experience and to incentivize customers to purchase more products from the company. It can also be a disadvantage in the long-run as those competitors leveraging on an open approach can grow more quickly. In the gatekeeper model, the dominant company has become the main middleman between the market and millions if not billions of potential customers. In the previous era, many middlemen captured value and retained distribution power, by fragmenting the market. A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product.
“On-demand” at the time was possible with the pay per rental business model. On a multi-sided platform, the company operating that offers services to both sides. For instance, LinkedIn sells subscription services to HR managers to find candidates to fill vacancies.
Most digital technologies themselves are understood, at least on the surface, by executives these days. Artificial intelligence, cloud computing, analytics, and virtual reality are common terms heard in conversations among C-suite executives and managers.
For instance, within a business model, revenue streams are an essential building block. A good business strategy makes sure to test out the revenue streams that best suit that model, thus helping it become viable. As a business scales or it creates options to scale, the whole business model will transform and the question on whether it will be sustainable for the next stage of growth and scalability stays open. Given this example, you can understand why the subscription business model is very powerful.