The components of a business model
A business model is a company’s plan to ensure profit. It specifies the products or services the business plans to sell. It also focuses on the target demographic, and projects expense cost. The term business model was first used in 1957.
Business Model Generation
There is also a book called Business Model Generation. It was written by Alex Osterwalder and his graduate supervisor Yves Pigneur. Alex Osterwalder was a Swiss business theorist and entrepreneur. Writing the Business Model Generation was for his PhD research. Within the book there was a more detailed explanation called The Business Model Canvas.
The Business Model Canvas is a business tool used to generate more of a visual representation of the building blocks of a business. This includes the demographic of the customers, the path to market, methods to showcase the worth of the product, and overall budget to implement the plan.
Effective business models
Minimum Viable Product method
The Minimum Viable Product or MVP is a product that has a minimum of features in its design and is streamlined for mass production. The concept is that the simple idea is more palatable for the consumer. This saves time and money. As time passes and consumer feedback accumulates, small revisions could approve the product. Essentially what was an entry level product will be approved which increases its value.
A more advanced version of the MVP is the Build-Measure-Learn method. For a BML if very little restrictions apply the startup will intend to get the product out as fast as possible. Startups really benefit from this. Build-measure-learn (BML) is a process of creating a product, gathering consumer stats, and thus discovering better ways to improve the product all based on the customer needs. This loop helps secure the company’s future.
Affiliate Business Models
Affiliate marketing is much more common in the past 5 years. Major industry staples such as Amazon’s Associates program, Shopify, BigCommerce, and HostGator Affiliate are great examples of affiliate marketing. This method of selling products has far less overhead and the gains are fiscally sound. Affiliates are companies and more commonly individuals that will promote a product or service. From each sale they will receive a percentage or fixed rate commission. The affiliates will work for the company that produces the product or they are part of an affiliate program. The far reach of the affiliate programs and social media marry well together.
Aggregator Business Model method
Essentially aggregators gather vast amounts of information from a plethora of sources and allow it to be easily accessible to consumers. Examples of aggregator companies are Airbnb, Feedly, and Google. Aggregators get their revenue from clicks (CPC), sales (CPA), paid ads, and from selling the data from the aggregator’s database. The network of aggregators stretches to the far corners of the internet.