A Data Observer and Opinionway survey titled “Which business models in the acceleration race?” », brings out the most frequent business models in our companies. If the Swiss University of Saint Gall has identified 20 possible, 9 would be much more used than the others. Some companies use more than one. Focus on the main types of business model.
The different types of business models
This business model has already proven itself in the sale of magazines or newspapers because it offers many possibilities: customer loyalty, liquidity reserve, simple inventory management, easy-to-implement forecasts and low risk of non-payment. However, this business model requires having a strategy that encourages consumers to subscribe without frustrating them too much. Among other things, we can give them access to 1 or 2 articles before blocking access, as the media do (les échos, le parisien, liberation, etc.), show only part of an attractive content, offer articles that are only available to subscribers, or even promise subscribers pages that appear without advertising… Every day we see the different media, for example, offer us subscriptions using different strategies.
The platform or marketplace (8%), a win-win business model
The marketplace’s business model occupies an increasingly prominent place. We especially think of Ebay, Rakuten or Le Bon Coin. The marketplace offers an exhaustive product catalog on its website, as it sells products other than its own. If you go through a marketplace for your products/services, your offer will therefore be mixed with others and the difficulty lies in your ability to separate yourself to stand out from the crowd. You can achieve a qualitative goal without having to spend a budget on marketing and communication, as it comes naturally to the market. On the other hand, you have to pay a commission when you sell, and you have no control over the development.
Renting has become an increasingly frequent consumption habit. If ownership was until recently a social recognition, it is no longer the same today: the two most striking examples are carpooling and coworking. This business model challenges the traditional “buy-sell” model, which is beneficial to consumers and businesses. According to a survey conducted by IFOP for Zuora – a cloud solution dedicated to subscription consumption – more than one in two French people feel out of step with traditional consumption patterns and say they are ready to rent their products rather than buy them.
Sale of licenses (8%)
Licensing is a business model that allows a company to either extend its brand to other areas or for an industrialist to develop other products bearing the image of an already known brand.
In case of sale of the sale to an industrialist, the recipient provides his brand and the industrialist his skills. This association may give rise to a derivative product. Compensation is generally provided by the industrialist, who pays royalties to the rights holder. The principle is to take advantage of the notoriety of a well-known character or a movie like Star Wars. The film can thus give derived products in e.g. toy stores.
In normal cases, it makes it possible to make extra margin, for example in an area that the brand does not want to exploit. The sale can be simple or even be subject to additional commission depending on the revenue achieved. Finally, it can be the opportunity to use a product.
Sales of auxiliary materials (7%)
The printer, the shavers, the coffee machines… are sold at attractive prices, which make it possible to sell the accessories in large quantities at much less attractive prices. This business model is based on a fairly simple method: you are sold a product at a very attractive price compared to the competition (this is the bait product). Then, to use it, you need to buy additional accessories, on which the company makes margins that sometimes exceed imagination (this is the hook). These accessories are generally disposable and have a relatively short lifespan, forcing you to replace them. It should be noted that products and accessories are covered by patents, which prevents competitors from producing cheaper accessories.
The business model is a mix between the “free” model and the “premium” model. The “free” offers a free service and the “premium” a paid and advanced service. The strategy is to get as many customers as possible to subscribe to its free service in order to lead them to the paid service. We then talk about the premium conversion rate. The so-called “premium” subscription is often a paid subscription, in return the company offers products or services that are better than the free basic version. Skype provides an Internet telecommunications service. Skype’s offer is shared between a free service, which makes it possible to communicate from one computer to another computer, and a payment service which makes it possible to call a landline or mobile anywhere in the world. It is through this service that Skype generates revenue, while the premium conversion rate is less than 10%. The Gameloft Company offers many games that are free but are attached to payment features. These functionalities make it possible, for example, to buy items in the game, which make it possible to pass the levels faster. Thus, a patient player can play his salary, while a player in a hurry to pass the levels will tend to pay to speed up his progress.
Low price with sale of additional products (4%)
Many sectors such as air transport, rail transport or mobile telephony have so-called “low cost” players.
The low price model offers very attractive prices to attract more customers by reducing the offered product or service as much as possible. The “low cost” has the special feature of focusing on the needs of the consumer. The first service or product is therefore without options, which must be paid if you wish to obtain them. Ryanair, an airline that has become one of the market leaders with more than 70 million passengers, generates profits of 100 million euros. They offer a place, but if you want to eat, drink a cup of coffee or take a large suitcase with you, then you have to pay extra. Ouigo is SNCF’s “low cost” service which allows you to take a TGV from €10 for a Paris-Marseille. Any other service such as the power outlet or extra baggage will be charged to you. Finally, the distribution system mainly uses the Internet which reduces costs considerably (no agencies at the station, fewer employees, etc.).
The number of franchisees has increased significantly because the advantages are multiple: the network in which a franchise wants to establish itself already benefits from its fame and visibility. He therefore does not have to have a marketing and communication budget for his brand. In addition, the franchisor possesses real market and customer experience and can support the franchisee. He will therefore have no strategic decision to make., the franchisor takes care of making all the important decisions that can help the development of the brand. The entry fee, the possible royalties as well as the ability to quickly develop a brand attract many entrepreneurs to use this business model to develop.
The white label (3%)
White label is an excellent practice for developing one’s turnover without investing colossal sums in communication or marketing. The brand is not known to the general public but the company benefits from the reputation of the supplier or customer, while the product is personalized in its image (graphic charter, design, color, etc.).
For the companies, this business model offers the opportunity to develop both a white label business by being, for example, a supplier of Toyota cars and at the same time have a visible presence outside and thus develop their business with many customers. . For example, customers believe that all accessories for a car are manufactured by the brand when they are manufactured by a company under the auspices of the white label.