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10 Most Common Business Models 2023

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What exactly is a business model?

Your business model is your market strategy. The Business Model Canvas helps you make decisions by segmenting the model into key parts of the operations: where the company does business, revenue sources and cost structure, partners or third-party vendors, customer base(s), how the product or service reaches the end user, how much interaction your company has with the customer, and more.

various business model types

To adapt to changing consumer habits, companies often use multiple business models. Most business model strategies are:

1. Producing

Hilti, Coca-Cola, GM.

Manufacturing companies make products from raw materials or pre-made parts. Manufacturing companies only sell finished goods to consumers or other companies. Large production companies use this model.

2. Dispersal

Airgas, Anheuser-Busch, Morris & Dickson.

Retailers create and sell products, but what happens in between? Distributors link manufacturers to retailers and consumers. Distributors use supply chains and logistics because products enter many channels. Distributors want products to reach the right customers.

3. Franchise

Massage Envy, Subway, Hyatt Place.

A franchisee is licensed to do business with a trademarked company. Franchisees receive trademark, marketing, training, and management resources. Most franchises require $50,000–200,000 upfront and 4%–8% of gross revenue in royalties.

4. Traditional/Brick-and-Mortar Retail

Barnes & Noble, PetSmart, Mattress Firm

Retail sales are for consumption, not resale. The most common retail strategy is brick-and-mortar. E-Commerce has made brick-and-mortar businesses’ futures uncertain.

5. Online shopping

eBay, Amazon, Chewy

Internet commerce, also called e-commerce, involves buying and selling goods and services online. Online shoppers spent $453.46 billion in 2017. Alcohol, gas, animals and certain foods cannot be purchased online, but U.S. e-commerce grew 16% in 2017, prompting many business owners to start or modify their online businesses.

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6. Brick-and-Click

Walmart, Target, Best Buy

The brick-and-click model, also known as “click-and-mortar,” was created to fill the gaps in e-commerce and retail. Customers can buy products online and return them at their convenience. With the brick-and-click model’s wider financial resources, long-standing and larger-brand businesses can acquire new customers.

Note: This model is meant to make shopping easier, but businesses face the challenges of both brick-and-mortar and e-commerce retailers. Brick-and-click owners need help with manufacturer pricing, logistics, and combining overhead expenses.

7. Freemium

Spotify, MailChimp, Hootsuite.

Has a free media streaming service with commercials offered a commercial-free experience for a monthly fee? A “freemium” business offers free versions of a product or service with premium features.

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8. Signup

Netflix, Birchbox, Dollar Shave Club.

Subscription businesses depend on recurring revenue (weekly, monthly, annually). Subscription businesses must focus on customer acquisition, churn, and customer value.

9. Touchy

Supercuts, law firms, PR firms.

This model is where “having regulars” comes from—a high-touch business relies on customer trust and relationships. Customers in high-touch companies often deal with the same salesperson or consultant. Specialized businesses charge more for customer-determined quality.

10. Low-Touch

Swirll Yogurt, IKEA

The “touchless conversion sales model” requires little customer interaction with employees. Customers can enter, buy, and leave. Smaller staff, less personalization, strong self-branding, and social media-driven demand lower prices than the high-touch model. Logistics and product placement often facilitate grab-and-go.

Companies that want to make more money often have multiple business models. Amazon, originally a book e-commerce platform, now offers media streaming, subscriptions, and freemium. Wal-Mart offered curbside pickup/return with brick-and-click services. Wal-Mart sells some items online only, without an in-store pickup.

Keeping up with trends requires adaptability in today’s ever-changing world. However, having a vision, purpose, and business plan will help ensure that today’s fad stays within your business goals and success.

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