Understanding Business Models For a Robust Product Built

By Kiran Joshi, Sudeepa Raina

Sudeepa Raina
Globant
6 min readMar 1, 2023

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Business Model Strategy

“There’s not a single business model . . . There are really a lot of opportunities and a lot of options and we just have to discover all of them.” -Tim O’Reilly, CEO, O’Reilly

As a framework, a business model illustrates how a company creates, delivers, and captures value. It describes the processes and activities necessary to generate revenue and achieve profitability. Developing a sound business model is essential for any organization, whether a startup or an established enterprise. A good business model clearly explains the enterprise's value proposition and how it differs from its competitors.

There is a strong link between the idea or concept behind a product and the business model used to bring it to market. The idea or concept provides the foundation for the product, outlining the unique features and benefits that differentiate it from competitors. On the other hand, the business model outlines the processes and activities involved in creating, delivering, and capturing value from the product. Through this article, we will go through various business models that various organizations have implemented.

The product life cycle consists of four stages: Introduction, Growth, Maturity, and Decline. To ensure the success of a product, product managers must carefully navigate these stages by developing ideas into products that not only achieve growth but also generate revenue after maturing in the market. Incorporating differentiators that set the product apart from competitors is also essential for gaining a competitive advantage. By effectively managing these stages and continuously refining the business model, companies can position their products for long-term success in the marketplace.

Let's understand the significant role of how defining the Business Model helps in providing insights into a product idea…

Business Model Plan

The business model provides a holistic view and visual representation of primarily a company's business plan and fundamental strategy for making profits. According to Harvard Professor Clayton Christensen, there are four elements of a business model such as "Customer Value Proposition: to work on the problem statement of customers, Profit formula: to create and deliver value like revenue, profits for the customer, and the organization, Key Resources: Assets an organization has to interact within the market and Key Processes: works on to increase the value in the market by sales, branding, budgeting, planning, and manufacturing".

The business model comes into play when assessing the financials and revenue gained after selling a product. It helps the product managers/entrepreneurs with the financial forecasts and works on evolving in the market regarding cost structure and generating revenues.

Let's look through this article at a few of the existing business models that are popular and used by known startups and well-established organizations.

Subscription Model

The subscription model involves users paying recurring fees regularly to access the products and services. Customers are entitled to repurchase products and services. Retaining customers for future sales is one of the most important aspects of a business. Retaining customers and improving customer success are key objectives of subscription business models.

Life today revolves around digitalization. Nearly every industry has transformed by adapting to digitalization, and one of them is the Fitness Industry which is no exception. Here let's understand the vision and need of this fitness product or service.

While numerous offline-only fitness businesses had suffered from the COVID-19 lockdowns, many opportunities emerged for the online fitness industry. Owners of offline fitness businesses had to improve the experience of their members and include one-to-one connections.

To understand the subscription model better, let us take an example…

Bob, a product manager of a Fitness Product, has a clear vision to deliver seamless service to his end-users despite the situation. There is no dependency on location, and it can include customers across the world. Fitness service enables a personal approach and a long-established relationship. He has been working on a Fitness platform with virtual content that can connect trainers and end-users. This platform aims to target fitness people and provide the advantages after achieving the target leads to end-users retention. It will aim to accommodate the online sessions and build a personalization approach as a unique selling proposition. He has to consider which model will generate maximum revenue, attract investors, and provide value to its end users.

Monthly, quarterly, or yearly memberships influence customers due to their flexibility, also give recurring revenue to the business, and help build the brand and increase the community reach.

Subscription Model

On-Demand Model

On-Demand business models offer prompt delivery of goods and services at their doorstep. Multiple types of on-demand models exist, such as transportation on demand, food on demand, On-demand delivery, and Logistics on demand.

Let's say a business has adopted transportation on-demand, a platform connecting drivers and end-users to consume the ride and transact. The presence of cross-sellers leads to more revenue growth.

On-Demand Model

MarketPlace Model

The Marketplace model connects buyers and sellers on the information technology platform. It does not carry inventory; however, it helps buyers and sellers to do transactions for products or services on an efficient, transparent, and trustworthy platform.

The marketplace model accounts for 50% of income. The platform would charge sellers fees for promoting their products. On-time delivery, various product categories, and cost efficiency are the focus of the marketplace model.

Marketplace Model

Freemium Model

The Freemium model offers all users basic limited features of its products or services at no cost and then charges for advanced-level features.

Let's say for podcast/music apps, users will always have access to free content. However, users must pay to access premium features like Ad-free podcasts/music listening, Offline playback. There are few businesses that adopt freemium or subscription-based business models.

Freemium Model

Summing up

Every organization/startup follows a business model, but it comes down to the Product Manager to ensure that the right combination of business models is applied. They should be aware of the top trends to have strategic awareness of their business in the marketplace to offer their customers top-tier recommendations.

For a successful business, company management should evolve with the trending shifts in the market and revise and reinvent their business models to have a competitive edge and ensure triumph over their competitors.

In conclusion, a well-designed and carefully executed business model is essential for the success of any organization. A business model is more than just a description of a company's operations; it is a roadmap for creating, delivering, and capturing value. A solid business model should be aligned with the company's goals, customer needs, and market trends.

The business landscape is constantly evolving, and businesses must be agile and adaptive to stay ahead of the competition. This requires a commitment to innovation and experimentation with new ideas, as well as a commitment to continuous improvement. An effective business model must be sufficiently flexible to meet client needs, market trends, and technological advances.

Overall, a sound business model is a fundamental component of any successful organization. It enables companies to create value for their customers, generate revenue, and achieve sustainable profitability. Companies can position themselves for long-term success in today's dynamic business environment by developing and refining their business model.

Check out this article to learn more about key metrics for measuring a product’s success: Measuring the Success of a Chosen Business Model For a Robust Product Built

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