Business Model vs Revenue Model vs Revenue Stream
- Before we delve into the different types of revenue models, we should spend a little time differentiating between the terms “business model”, “revenue model”, and “revenue stream”, as they are very often used interchangeably.
- A revenue stream is a company’s single source of revenue. A company can have zero or many revenue streams, depending on its size.
- A revenue model is the strategy of managing a company’s revenue streams and the resources required for each revenue stream.
- A business model is the structure comprised of all aspects of a company, including revenue model and revenue streams, and describes how they all work together.
10 most popular and effective revenue models
- AD-BASED REVENUE MODEL: Ad-based revenue models entail creating ads for a specific website, service, app, or other product, and placing them on strategic, high-traffic channels. If your company has a website or you have a web-based company, Google’s AdSense is one of the most common tools to get ads. For most websites, AdSense will earn about $5-10 per 1,000 page views.
- AFFILIATE REVENUE MODEL: Another popular web-based revenue model is the affiliate revenue model, which works by promoting links to relevant products and collecting a commission on the sales of those products, and can even work in conjunction with ads or separately.
- TRANSACTIONAL REVENUE MODEL: Countless companies, both tech-oriented and otherwise, strive to rely on the transactional revenue model, and for good reason too. This method is one of the most direct ways of generating revenue, as it entails a company providing a service or product and customers paying them for it.
- SUBSCRIPTION REVENUE MODEL: The subscription revenue model entails offering your customers a product or service that customers can pay for over a longer period of time, usually month to month, or even year to year.
- WEB SALES: This is an offshoot of the transactional revenue model, in which a customer pays directly for a product or service, except that customers must first come to your company via a web search or outbound marketing, and conduct transactions solely over the internet.
- DIRECT SALES: There are two types of direct sales: inside sales, in which someone calls in to place an order or sales agents calling prospects; and outside sales, which is a face to face sales transaction.
- CHANNEL SALES (OR INDIRECT SALES): The channel sales model consists of agents or resellers selling your product for you and either you or the reseller delivering the product. The affiliate revenue model is a good companion model to this one, especially if your offering is a virtual product.
- RETAIL SALES: Retail sales entails setting up a traditional department store or retail store in which you offer physical goods to your customers. Keep in mind that the retail sales model will require shelf space (that you’ll have to pay for) at existing stores, and is best suited for products that require logistics to reach your customers.
- PRODUCT IS FREE, BUT SERVICES AREN’T: This model is unique compared to others, in that you have to give your product away for free, yet require customers to pay for installation, customization, training or other additional services.
- FREEMIUM MODEL: The freemium model is one in which a company’s basic services are free, yet users must pay for additional premium features, extensions, functions, etc. One of the biggest companies to use this model is Linkedin, the most popular business/social media platform.
You should be able to answer these questions
- How do you make money from each customer segment?
- How is your product or service priced?
- Do you apply a different price for different customer segments?
- Why is this the best price to succeed in your market?
- What is the venture’s Break-Even point?
- How do you plan to Boost Sales?