What is a business model?
A business model in 2021 is an abstract representation of your company or organization, prior to the business plan. It is the value proposition that your company will offer to the market and to your customers. This analysis tool will allow you to clearly answer what you are going to offer, to whom, how you are going to do it and the way in which you will earn income.
The term business model has evolved over the years. Digital transformation, increased competition, the increasing importance of the customer and their level of demand have influenced business models.
In the past, business models were based exclusively on maximizing profits and reducing costs. The context has broken with this trend and has included other essential objectives that must be defined such as: “what to offer the market“, “why the market will accept my value proposition” and “what are the means with which we are going to achieve it”.
In this way, at Ibercenter we are going to review the 10 main business models for 2021.
10 business models in 2021
There are numerous business models and some companies even use several different models, so we are going to point out the most widespread. Some are based on the traditional business models pointed out by Guy Kawasaki, others are digital models.
1. Multi-Component Model
The multi-component model is based on selling the same product in different places, with different prices and presentations, all over the world. Compared to other business models, this one differs because the product remains the same.
A clear example would be Coca-Cola. Your product is sold in supermarkets, shops, vending machines, bars or restaurants with different prices and different presentations (glass bottle, can, etc.).
2. Market Leader Model
More than a model, it is a strategy. The market-leading business model is based on creating innovative products and new needs for customers, accompanied by high prices, but with greater value for consumers. Apple is the most representative case of this model.
3. Bait & hook model
The bait and hook model is based on selling a product with a low price until the limit of losses is reached (bait) to favor the purchase of another product or service that is acquired repeatedly (hook).
There are quite a few examples of this model. One of the most striking was Gillette which, in the First World War, gave razors to American soldiers (bait), later increasing the sale of the blades, which were more expensive (hook).
Another closer example is video game companies such as Nintendo, where the prices of consoles are lower (bait) so that users later buy the different games (bait).
4. Freemium Business Model
Widely used, the freemium model consists of offering your entire product or service for free for a limited time. This model is combined with a persuasion strategy, so that you finally sign up for the premium or paid version. The best known are Spotify, Netflix or HBO.
5. Eyesballs Model
The Eyesballs model is based on attracting user traffic and visits through relevant content for users to platforms such as websites or social networks. This is the business model of Google, Facebook or Instagram.
6. Virtual Goods Model
Virtual products are those with virtually zero costs and maintenance. A variant of these that has grown in recent years are info-products, i.e. training products that are sold online, usually in video, text or PDF format whose maintenance costs are very low.
In this way, the different online courses or video games such as Candy Crush are business models for virtual products.
7. Artisan Model
The Artisan business model is one of the oldest and consists of generating value through unique creations. Thus, furniture is an example of this model but large companies have been able to adapt and include it in their strategies. Another example: Mercedes designs some of the most exclusive car models only with expert craftsmen.
8. Affiliate Business Model
It consists of giving the option of earning money by selling your services to anyone, creating a network of salespeople willing to publicize your product in exchange for a commission.
These affiliates of that business act as ambassadors for the brand. This model can be seen in website hosting companies such as Siteground, analysis tools such as Semrush or companies such as Herbalife.
9. Subscription Business Model
This business model consists of paying for a subscription and in exchange receiving a value proposition that compensates for the fee you pay. Again, Netflix, HBO or Amazon Prime are a representative example.
10. Peer to Peer Model
Based on the computer network, a Peer to Peer business model uses technology as an intermediary between customer and buyer in products and services. Examples of this model: Airbnb, Blablacar or Mercado Libre.
Design your own model with the Canvas business model
Any successful business model should include:
- Profitability
- Scalability
- Repeatability
We know that it is not an easy path, so it will be necessary to carry out a detailed analysis. To start defining your business model, we must take into account a number of aspects. To do this, at Ibercenter we have developed a Canvas Model with the main elements to include in your business model.
Create your Canvas business model with our downloadable template.
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