20 revenue models for a successful business
- Gerdine Annaars
- 13 Aug 2019
- Edited 15 Dec 2022
- 3 min
A revenue model is a strategy for making money with your business. There are dozens of revenue models. You can set an hourly rate, use the freemium model, or personalise your products, for example. In this article, we list the 20 most common revenue models, so that you can determine which one suits your business idea best.
Usually, you start thinking about your revenue model while writing your business plan. The model is your strategy for making money in a nutshell. You can choose one or more revenue models.
20 most common revenue models
Some revenue models have been around for a long time. Other money-making strategies are newer, such as several online sales revenue models. These are the 20 most common revenue models:
1. Transaction model or product sales
The most common and simple model. The customer buys your product and pays you for it. It can be hard to build up a customer relationship if you use this model. So think of a customer retining strategy, if this is the one you go for.
2. Hourly rate
You charge your customer the hours you have spent on their assignment. Especially service providers use this model. To set a good hourly rate, you need to know what your fixed and variable expenses are.
3. Free model or freemium
You provide a service without charging the users. Online search engines, social media, and apps are good examples of a freemium. You make money by charging users for an ad-free version, or one that offers extra functionalities. Or you can sell ad space.
4. Service model
You sell your product or service for a low price. The lion's share of your turnover comes from service activities, repairs, or maintenance. This model is popular in the manufacturing industry, the IT sector, and with construction and installation companies. The service model makes for a stable turnover and a loyal customer base.
5. Baiting model
When you use the baiting model, you sell your product for a low price. You make your money by selling accessories needed to use the product. Well-known examples are: coffeemakers and cups, razors and razor blades, or printers and ink.
6. Subscription model
Your customer pays a fixed price per week, month, or year. In return, they receive access to your product or service. Magazines, streaming services, and gyms use this revenue model. Other types of businesses have discovered it as well: think of underwear or recipe box suppliers. One big advantage of the subscription model is that customers usually pay upfront. This means you can predict your turnover for a certain period.
With this model, you do not make money by selling your product or service, but by selling ad space. Think of magazines and websites.
8. Online platform model
Supply and demand come together via your app or website. Think of platforms for handyman services, or second-hand clothing. You receive a percentage or a set amount for every application or sale that goes through your platform.
9. Product as a service (PAAS)
You do not sell a product, but its services and use. You do so by leasing, charging a deposit, or sharing. More and more products are on offer as a service. The aim is to preserve the value of products, raw materials, and residual materials.
You make customised products, and this invests them with an emotional value. Think of clothing items, glasses, or sneakers. It allows you to distinguish yourself from the competition in terms of creativity, quality, speed, and price.
11. User designed model
Customers design their own product on your website. Or they use your software to design a product. Examples of this are photo albums, or wallpaper.
Consignment means you sell products on behalf of another business for a fee. Art dealers often use this model. They exhibit the works of an artist. If a work of art is sold, the gallery receives a percentage of the sales price, or a set amount per sale.
13. Usage model
The more a customer uses your service, the more they pay. Think of cloud services: users pay for the amount of storage space they expect to need.
14. Production model
Your customer pays you to make something specifically for them. For example, a machine for a foods manufacturer. Make sure you and your customer make clear arrangements about the expected product, if you choose this model.
Dropshipping means selling your products via an online market place, social media, or your own online shop. You place orders you have received directly with the supplier. The supplier delivers the goods directly to the customer. You do not have to keep stock, or set up logistics.
16. Online shop
You sell products in your own online shop. Advantages: you can reach a bigger audience than you could with a brick store, and it is easier to expand your range.
17. Renting model
You offer rental products. For example cars, machinery, or tools. The products remain your property, so you can offer the same product for rental time and again. You do need to factor in maintenance, insurance, and storage costs.
18. Affiliate marketing
You promote the products or services (in Dutch) of other businesses on your website or via social media. Does this lead to a sale or sales lead? You will receive a percentage or a set fee.
The user pays a one-time fee to gain access to your online product. This model is effective when there is high demand and little competition. Think of popular sotware licences and games.
20. Licencing model
You license other companies to use your (product) name or logo. For example, to print your logo on t-shirts or coffee mugs.