Questions and Answers
Users/Consumers/Customers are charged a certain period of time to gain access to the service. This business model is called _____.
Subscription
The consumer is allowed to use the product for free, but if they wish to have full access to the system, they need to pay. This business model is called _____.
Freemium
The add-ons to the product are continuously paid to make use of the full product. This business model is known as _____.
Razor Blade
Providing information given from another business/company to promote their product, and you gain profit by sharing this information is known as _____.
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You simply help a business in selling a product, and you gain a portion of the sales. This business model is called _____.
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Compare and contrast Leasing and Fractionalization.
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Can toys that need assembly be considered a Low-Touch business model? Explain.
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What is the main source of income for businesses that utilize the brokerage model?
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In an affiliate business model, how does the affiliate typically earn income?
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Which of the following is a key characteristic of goods or services marketed through advertising models?
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What type of transaction typically involves brokerage services?
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Which of these options is NOT a known business model in the IT industry?
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What role does a brokerage serve in a real estate transaction?
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What distinguishes affiliate marketing from traditional advertising?
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Which of the following best describes an advertisement model?
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How do both affiliate marketing and advertising models generate revenue?
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Which of the following describes a significant benefit of using a brokerage model?
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Study Notes
Business Models Overview
- Business models define how a firm creates, delivers, and captures value for stakeholders.
- They are crucial for long-term success, particularly for novel products or services.
Impact of IT on Business Models
- The IT industry enhances income potential through online advertising and subscription access.
- Digital platforms have broadened the scope and application of various business models.
List of Business Models
- Advertising: Generates income from ads across digital platforms; prevalent on sites like YouTube.
- Affiliate: Involves embedding links within content where commissions are earned on sales (e.g., movie reviews linking to Amazon).
- Brokerage: Connects buyers and sellers, charging fees per transaction (e.g., real estate agencies).
- Concierge/Customization: Enriches existing products with unique elements tailored to customers (e.g., Nike custom shoes).
- Crowdsourcing: Engages many contributors to generate content, often paired with advertising models (e.g., Patreon).
- Disintermediation: Sells products directly to consumers, bypassing intermediaries (e.g., Dell selling computer parts).
- Fractionalization: Sells portions of a product rather than the whole item (e.g., Disney Vacation Club rentals).
- Franchise: Offers a business model to others (e.g., Jollibee or 7-11 for running local branches).
- Freemium: Provides basic services for free while charging for premium features (e.g., mobile apps with optional purchases).
- Leasing: Similar to renting, where the customer pays to use a product temporarily (e.g., car rentals).
- Low-touch: Reduces service levels to lower costs, requiring customer involvement (e.g., IKEA furniture assembly).
- Marketplace: Facilitates transactions between buyers and sellers, earning from various fees (e.g., Lazada, Shopee).
- Pay-as-you-go: Charges based on actual usage rather than upfront purchases (e.g., water supply utilities).
- Razor Blade: Sells primary products at low cost while profiting from recurring purchases of consumable components (e.g., Gillette razors).
- Reverse razor blade: High-margin products are sold initially, with low-margin add-ons keeping customers engaged (e.g., Apple apps).
- Reverse auction: Buyers select from lowest bids provided by sellers, common in contracting (e.g., construction projects).
- Subscription: Charges recurring fees for access to services, becoming increasingly popular (e.g., Netflix, YouTube).
- Access to Excess: Connects excess supply of services with buyers (e.g., Airbnb, Grab).
Skill-building Activities
- Identifying business models related to various business scenarios, like subscription for timed access or freemium for initial free use.
Common Questions
- Multiple business models can coexist within a single platform (e.g., YouTube's ads and subscription service).
Business Models Overview
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Concierge/Customization
- Businesses enhance products/services with unique customer elements.
- Example: Nike’s customized sneakers enabling personalized designs.
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Crowdsourcing
- Involves gathering contributions from a large number of people for content creation.
- Often paired with advertising models for generating revenue, as seen with Patreon users.
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Disintermediation
- Selling directly to consumers by bypassing supply chain intermediaries.
- Benefits include lower costs and direct customer relationships; Dell exemplifies this by selling computer parts directly.
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Fractionalization
- Selling partial ownership of a product instead of the whole item.
- Disney Vacation Club is a prime example, offering limited-time ownership of vacation homes.
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Reverse Auction
- Sellers offer their lowest prices in a reverse auction format, allowing buyers to choose the best offer.
- Common in contractor bidding for construction projects and mortgage shopping.
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Subscription
- Consumers pay a recurring fee (monthly or yearly) for access to services.
- This model has expanded from magazines to software and streaming services; notable examples include Netflix and YouTube.
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Access to Excess
- Connects buyers with excess supply of services, creating market opportunities.
- Examples include ride-sharing platforms like Grab Taxi and lodging services like Airbnb.
IT Industry and Business Models
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Diverse Business Models for IT
- Various options available, including freemium, subscription, and advertisement models.
- Future discussions will explore revenue generation from advertisements across different platforms.
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Economic Impact of IT
- Transition to online advertisements and subscription services has enhanced business income potential, highlighting the growing economy through IT advancements.
Specific Business Models in IT
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Advertising Model
- Revenue generated primarily through advertisements on platforms like YouTube.
- Historically found in print and broadcast media, now pervasive online.
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Affiliate Model
- Utilizes embedded links in content for generating sales referrals.
- Example: Movie review sites embedding links to Amazon, earning a commission on sales.
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Brokerage Model
- Facilitates transactions between buyers and sellers, charging fees per transaction.
- Real estate agencies are typical examples, earning income from commissions.
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Description
Test your understanding of business models in the ITE 351 course on New Venture Creation. This quiz assesses your knowledge of the concepts and techniques covered in Module 7. Prepare to apply what you've learned and deepen your grasp of effective business strategies.
