In Business Models: Definition, Types and Success stories, we went through some basic business models to consider when planning a start-up. Subsequently, in this part we’ll go deeper into some models uses an overabundance of jargon, making them harder to understand let alone implement. They also have a huge importance in business models for entrepreneurs. How to make a business model for a start up? Why are business models required? Basic business models for product development.
Let’s dive into some more options for business models:
High Touch Model
After product development, Catering to customers at every possible touch-point is no more a stand-out point for a business. It has become a requirement. Whether you are an online portal or a brick-and-mortar service, if your customer does not fall through the last stage action of Customer Conversion Funnel then there are loopholes in service. This problem is catastrophic for high-touch business models that depend on building strong relations with the customer to continue getting business.
At every point from introduction to the point of selling, in a High Touch model businesses need to assist the customer. For example, salons tend to have a fixed clientele due to the nature of services they provide. They suit the customer, so he or she continues visiting.
Advantages And Disadvantages Of High Touch
Main challenge of creating a High Touch business is employing the right people. They must be sociable and patient to communicate with customers while tending to all potential problems. So it is not just the product or service that you sell, rather you sell your attitude and customer relations too.
Accenture Perfecting The High Touch Model
Product development requires hours of trying to understand the client’s needs, giving them an achievable form and creating it. But if you get the first stage of product development wrong, it all topples over. The client needs importance and to be heard. Accenture did exactly that. With prospering long-term relations with customers it has become one of the top IT Outsourcing companies worldwide.
Low Touch Model
A Low Touch company has an infrastructure set in place that enables less contact between customers and company representatives. Automation, or nature of the business itself leads to customers passing through the Conversion Funnel without any hands-on efforts by the company team.
Advantages And Disadvantages Of Low Touch
Low Touch provides the opportunity to try out the one-system-fits-all solution to gain consumers. The space to create a process that will automatically convert them without interpersonal communication. This removes the uncertainty that comes with sales pitches after product development and focuses all attention on the offering itself.
On the flip side, personal sales let officials understand the exact need of the customer and convince them of how the product fulfils it. So for consumers who do not quite grasp the purposes behind the offer change their mind by specialized skills of the salesperson.
Amazon Shows Successful Low Touch Model Implementation
Amazon has aced the Low touch model by establishing a portal that tends to all potential problems and needs of the customer. At the mart, a huge percentage of customers scan codes to check Amazon prices. Often demonstrating no need of speaking to a sales person about the price structures. Changing customer behavior has made a case for Amazon and its ability to generate repeat purchases from single customers through efficient infrastructure.
Ad-based Revenue Models create and post advertisements on channels that attract loads of traffic. Companies then earn through the clickthrough rates a campaign generates, which is basically the number of times viewers click on an ad.
Advantages And Disadvantages Of Ad-based Model
If a specific website attracts considerable traffic then ad-based model can be a source of massive revenue generation. On flip-side, no traffic means crunching clickthrough rates which ruins the point of the model.
Another point to consider is the general dislike of advertisements by the consumers. So filling websites with banner ads might turn viewers away from it, leading to a loss of traffic.
How Adsense Leveraged Ad-Based Model To Yield Success
Google AdSense pays 68% of the revenue generated from the ad to the publisher. It is a free service that you can sign up to and make money, only by communicating the message of a product or service seller. Such is the success of the product model that in the first quarter of 2014, Google earned about 22% of its revenue from AdSense.
Affiliate Revenue Model
The affiliate model works when an online portal shares the link of a product or service for their viewers to see. On every click thats converted into a sale, the portal receives a percentage of the sale. Thus, the lead-to-order or conversion cycle tracked and the affiliate business earnings are through the completion of the cycle.
Advantages And Disadvantages Of Affiliate Revenue Model
The main challenge is to ensure that the size of the industry that an affiliate marketing company targets, is adequate to attract enough viewers and browsers. If the audience of the product or service is limited then the chances of conversion will be bleak too.
However the benefit of affiliate companies is that they do not need to develop a product or service. Rather maintain its brand image so customers are comfortable buying from links published on their website.
Best Buy Offers You To Be Its Affiliate
The benefit of the Affiliate program is that they allow consumers to share the link to their website or products. Each affiliate is registered and their leads noticed. These individual partners then earn commission on every purchase made my customers through their links.
Dropshipping Models is a special type of business model. It is for platforms that do not produce, own or store any products or services. Instead they partner with sellers who ship products once the platform receives an order. Put simply, maintaining this model entails creating a platform and attracting customers. Oh and maintaining valuable business terms with partner sellers.
Advantages And Disadvantages Of Dropshipping
One of the major challenges of Dropshipping is how to maintain brand image and creating marketing campaigns that will attract potential buyers. Being the face of operations, the platform also requires using UI and UX to enhance ease of usability. Losing image in the market will be one of the major drawbacks a business with this model would face.
On the bright side, employing Dropshipping reduces the cost of maintaining inventory and delivery systems. Instead more infrastructure is spent in maintaining a smooth flow of information from the customer to the platform and then to the partner seller.
Wayfair Perfects The Dropshipping Model For Business
In 2019 the net worth of Wayfair calculated to be $984.58 million. These figures make a case in the favor of the model: do marketing right, maintain long-term ties and capitalize proper corporate strategy.
What Does All This Mean For A Startup?
Here we can’t help but go back to Peter Drucker’s farsightedness on what it takes to form a successful business model. It is not just about where the money will come from – the main questions are the Five Ws. What is the marketplace? Where is it set? Which niche does it cater to? Who will it cater the needs of? When is it being established? All these considerations will tell us how to guide the startup team in creating a relevant business model for times to come.