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The most popular types of business models and how to choose the perfect business model for your business growth
introduction
A business model is a visualization of how you will create, deliver, and extract value from a product or service your company offers. A business model defines the sources of revenue, customer categories, distribution channels, strategic partners, key activities, resources and costs associated with your business. A business model helps you understand your market, identify your opportunity, test your idea, and build a successful strategy.
There are many different types of business models that you can choose depending on the nature of your business, your vision, and your goals. In this article, we will review the most popular types of business models and examples of companies using them, and give you some tips on how to choose the perfect business model for your business growth.
The most popular types of business models
1. The e-commerce model
This is the business model that online providers of products or services use, selling them directly to consumers or to other businesses. This model reduces costs, increases delivery speed, and improves customer experience. Some of the advantages offered by this model are:
Access to a global market and increase the customer base
The ability to customize products or services according to customer needs and preferences
Capable of collecting and analyzing customer and market data to improve value propositions
Possibility to use digital marketing channels such as search engines, social media and email
Some examples of companies using the e-commerce model are:
[Amazon]: It is the world's largest e-commerce platform, offering a wide range of products and services to consumers and businesses, such as books, fashion, electronics, games, software, cloud services, and entertainment.
[Souq.com]: It is the largest e-commerce platform in the Middle East, offering a variety of products and services to consumers in the region, such as fashion, electronics, home appliances, travel, health and beauty.
2. Subscription form
This is the business model used by providers of products or services that need to be constantly updated or renewed, selling them to customers for a periodic fixed or variable fee. This model helps build long-term customer relationships, increase cash flow and forecast revenue. Some of the advantages offered by this model are:
Potential to increase long-term customer value and reduce customer acquisition costs
The ability to continuously improve the quality of the product or service based on customer feedback
Possibility of increasing customer commitment and loyalty and decreasing the turnover rate
The possibility of exploiting market expansion opportunities or launching new products or services
Some examples of companies using the opt-in model are:
[Netflix]: It is the most popular platform for streaming entertainment content over the Internet, offering a huge collection of series, movies, and TV shows to customers for a monthly fee.
[Udacity]: It is an online education platform that offers courses and certificates in fields such as artificial intelligence, big data, and programming to clients for a monthly or annual fee.
3. Facilitation form
This is the business model used by platform providers that connects two groups of customers and makes it easier for them to interact, exchange and collaborate. This model helps to create shared value among the participating parties, increase the size of the market and network, and achieve mutual benefits. Some of the advantages offered by this model are:
The ability to provide innovative and effective solutions to customer problems or needs
The possibility of generating revenue from multiple sources, such as fees, ads, or commissions
Possibility to continuously improve the quality of the platform and service based on customer feedback
Possibility to benefit from the network effect, as the value of the platform increases with the number of users
Some examples of companies using the facilitation model are:
[Uber]: It is the most popular platform for providing delivery and transportation services, connecting drivers and passengers, and making it easier for them to book, pay and evaluate trips.
[Facebook]: It is the most popular social networking platform that connects people, entities, and events, and makes it easier for them to share, exchange, and interact with content.
4. The exclusivity model
This is a business model in which providers of products or services that have characteristics that are unique or superior to competitors sell them to customers at relatively high prices. This model helps to create added value for the customer, increase the profit margin and build a strong reputation. Some of the advantages offered by this model are:
The possibility of achieving high customer satisfaction and strong loyalty
The ability to charge higher prices than competitors without losing market share
The ability to define a unique identity for the brand and differentiate it from other providers
The possibility of exploiting opportunities for development and innovation in the product or service
Some examples of companies using the exclusivity model are:
[Apple]: It is the most famous manufacturer and seller of hardware, software and technical services, providing products with high quality, attractive design and advanced functions, such as iPhone, iPad, MacBook and iCloud.
[Starbucks]: It is the most famous company for providing coffee and beverage services, offering products with a variety of flavors, excellent quality, and upscale service, such as coffee, tea, juices, and desserts.
How to choose the perfect business model for your business growth
Choosing the right business model for your business is a critical decision that determines your success or failure in the marketplace. Therefore, you should consider various factors that influence your choice, such as:
Your Business Idea: You must define what product or service you offer, what problem you solve, and what value you add to the customer.
Your market: You must determine what the size and nature of your market are, what are the needs, preferences and behavior of your customers, and what are the competition and threat forces in your market.
Your strategy: You must define what is your vision and goals for your business, what are your plans and methods to achieve them, and what are your performance indicators.
Based on these factors, you can use the Business Model Canvas tool to visualize and design your business model in a simple and easy way. This tool helps you identify the nine essential elements of an AR model
king, namely:
The most popular types of business models
List of offers: What is the product or service that you provide to the customer, what value does it add to it, and what are the benefits that distinguish it from competitors.
Customer categories: What segments or groups are you targeting with your offer, and what are their needs, expectations and behavior.
Distribution channels: What methods or means do you use to communicate with your customers and deliver your offer to them, and what is their efficiency and effectiveness.
Customer Relations: What kind of relationship do you build with your customers, and what are the ways to attract, keep and increase their satisfaction.
Sources of income: What are the ways to collect money from your customers for your offer, and what are your prices, pricing, and market entry strategy?
Key Resources: What assets, tools or skills do you need to run your business, and what are their importance and cost.
Key activities: What are the steps or procedures you take to produce, market and deliver your offer, and what is its value and quality.
Strategic Partners: What entities or institutions do you cooperate with to support your business, and what are their benefits and obligations.
Costs: What expenses or exits do you pay to run your business, and what are their nature and size.
After selecting these elements, you can draw a simple outline of your business model as follows:
|-------------------------------|
| Offers List |
|-------------------------------|
| Customer Categories | Distribution Channels | Customer Relations |
|-------------------------------|
| Income Sources |
|-------------------------------|
| Resources | Activities | Partners | costs |
|-------------------------------|
In addition, you can use some principles or criteria to evaluate your business model, such as:
Fit: Your business model must fit your business idea, your market and your strategy, and it must strike a balance between the value you provide to the customer and the value you get from them.
Distinction: Your business model must be distinct from competitors, and it must show what competitive or unique factors you possess, and how to maintain and develop them.
Evolution: Your business model must be subject to development and modification, and you must respond to internal and external changes that affect your business, and take advantage of new opportunities.
5- Mediation form
This is a business model used by service providers that help facilitate transactions or agreements between two parties, and get a commission or fee from each transaction. This model helps create value for both parties by saving time, effort, security and transparency. Some of the advantages offered by this model are:
The ability to benefit from a large and varied database of offers and requests
The possibility of providing additional services such as verification, insurance or evaluation
The possibility of achieving sustainable and increasing income with the increase in the volume of deals
Some examples of companies using the mediation model are:
[Souq]: It is the largest e-commerce platform in Egypt, connecting sellers and buyers, and getting a commission from every sale.
[OLX]: It is a platform for classified ads, connecting people who want to sell, buy, rent or exchange goods and services,
And you get a fee from each advertisement.
6- Community model
This is the business model used by platform providers that help build, develop and manage communities of users around common interests or issues. This model helps create value for members by providing them with content, interaction, and support. Some of the advantages offered by this model are:
Possibility to generate rich and exclusive content by the users themselves
The possibility of increasing interaction, engagement and trust among users
The possibility of generating revenue from sources such as subscriptions, donations, or advertisements
Some examples of companies using the community model are:
Reddit is a platform for updates and news, connecting users on various topics and categories, and making it easy for them to post, comment, and vote on content.
[Wikipedia]: It is a platform for knowledge and encyclopedia, connecting users about different fields and concepts, and making it easier for them to create, edit and review articles.
7- Wholesale model
This is the business model used by suppliers of products that are sold in bulk and at low prices to dealers, distributors or importers, who in turn resell them to end consumers. This model helps create value for merchants by providing them with products quickly, efficiently and at competitive prices. Some of the advantages offered by this model are:
Possibility to benefit from economies of scale and scope
Possibility to reduce costs and risks associated with warehousing, transportation and merchandising
Access to wider and larger markets
Some examples of companies using the wholesale model are:
[Ali Express]: It is an e-commerce platform that connects suppliers and merchants in China, and collects a fee from every transaction.
[Carrefour]: It is a retail company that buys products from suppliers at wholesale prices and sells them to consumers in its stores or through its website.
Conclusion
In this article, we gave you an overview of the most popular types of business models and examples of companies using them, and gave you some tips on how to choose the perfect business model for your business growth. We hope you have benefited from this article, do not forget to share your opinion with us in the comments, good luck 😊
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