Have a great idea for something people want, but not sure how to make money from it? Consider the following business models:
If what you’ve got is really great, give it away. No, seriously. Let them have a taste, build a relationship with them, and only then offer an upgraded paid experience. Maybe the free version comes with adverts, or the paid version has extra features that they’ll want once they really start using the service. This model works best where customer acquisition costs are high, but the marginal cost of serving an extra customer is low.
Have you bought an airline ticket lately? If you bought it online, you probably saw some great low prices… prices which had nothing to do with the eventual amount you paid after fees, taxes, surcharges, etc. For a less rancorous example, consider a night out at the movies. Did you know that the theater makes more money from popcorn and sweets than from the ticket price?
Image from Scott Adams, Dilbert
Somali Pirate business model!
OK, don’t really consider this for yourself, but even pirates have a system for generating value. Pirates are great at creating a problem and then solving it (ransom, “protection,” etc.). If you’re not meeting an existing need, perhaps you are creating a new one, or pointing out a need that your customers don’t even know they have, until you show up with your parrot and your eye-patch… kidding.
Don’t get stuck getting your business started just because it doesn’t fit neatly into an existing, familiar, business model. The best new businesses out there are innovating in on everything from product and service offerings to pricing structures to customer relationships. If you can imagine it, you can do it.
Find more examples of effective business models at Bplans.co.uk.