Blog 50: Pick an appropriate revenue model to acquire customers and expand

In blog 9, we looked at the business model canvas. With this framework, we are able to get a 360 degree understanding of our business. Value proposition is positioned in the centre. With activities, resources, and partners on the left. On the right of the value proposition, are customer segments, customer relationships, and channels. Cost structures and revenue streams encapsulate the above mentioned elements.

Let us expand on the 'revenue stream' bucket. Revenue stream is a source of revenue for a company and is its lifeline. Some businesses have a single revenue stream while some have multiple. Multiple revenue streams lower concentration risk. A dip in one stream can be offset by another. For example, Google is a product based company with multiple revenue streams. Such as Google cloud, Google search, YouTube Ads etc.

Note: The decision of revenue stream and monetisation model cannot be taken in isolation. There are multiple fits that have to be taken into consideration such as the Channel-model fit and Model-market fit (read blog 41 to learn more).

What are the various revenue streams available for digital products? 

Subscriptions: A widely used model. Several companies offer SaaS (Software-as-a-Service) subscriptions. For example, Netflix, Spotify.

Licensing: Licensing was the key model before the emergence of subscriptions. For example, Microsoft offers its operating system on a license. In addition, to monthly subscriptions for Microsoft 365.

Usage: In this model, customers pay a fee based on their usage. For example, AWS charges its users based on their usage of services, once users stop using them, there are no additional costs or termination fees.

Advertising: Sell ad space by leveraging the large number of daily active users on your platform. For example, Instagram. Businesses and brands pay Instagram to have their ads displayed to targeted users on the platform.

Brokerage: Companies earn a brokerage fee by connecting two parties. One that is offering a service and another that it is consuming that service. For example, Uber and Airbnb etc.

Lending/renting/leasing: This revenue model relies on having assets available for rent. For example, Drexcode a designer dress rental service in Europe, car rental companies across the globe etc.

Asset sale or product sale: Sell products or assets. GOAT app, an American online platform offering sneakers, luxury apparel and accessories through primary and resale markets.

Jump to blog 100 to refer to the overall product management mind map.

All the best! 😊