6- BMC Patterns
Long Tail Business Model
About selling less of more: They focus on offering a large number of niche products, each of which sells relatively ex. Netflix/ ebay/ facebook
Free As a Business Model
At least one substantial customer segment is able to continuously benefit from a free-of-charge offer Non-paying customers are financed by another part of the business model or by another customer segment ex. Skype, Google, Flickr
Freemium
Blend free and paid ~10% Get the basics for free, pay for more Base of paying users subsidizes free users Platform is the most important assets Watch rate-free accounts turn into paying ex. Spotify / premium
Multi Sided
Brings together 2 distinct but interdependent customers Of value to one group of customers only if the other groups of customers are also present Creates value by facilitating interactions between the different groups May be dependent on Network Externality Effects Ex. Visa, Google, eBay
Unbundling the CD
CD was incredibly efficient product Distribution was everywhere and consumers paying $17 for "that one song" Music eventually unbundled from the CD through piracy, itunes, etc
Open Business Models
Can be used by companies to create and capture value by systematically collaborating with outside partners Can happen from the "outside-in" by exploiting external ideas within the firm or from "inside out" be providing external parties with ideas or assets lying idle within the firm
Unbundling
Concept of the "unbundled" corporation holds that there are three fundamentally different types of businesses: Customer Relationship businesses, product innovation business, and infrastructure business Each type has different economic, competitive, and co-exist within a single corporation, but ideally they are "unbundled" into separate entities in order to avoid conflicts or undesirable trade-offs.
Long Tail Pattern
Focus on niche customers Offer wide scope of "non-hit" products User generated content, users as partners Various revenue streams (advertising, product sales, subscriptions)
Free advertising
High traffic; one side of the platform designed to attract users with free content, products, or services. Another side of the platform generates revenue by selling space to advertisers
Long Tail Example
Lulu.com allows niche authors that wouldn't do well in mass market to publish their work. This allows authors to both publish their work and purchase new works to read
Bait and Hook
Lure initial customers to earn money from follow up sales Lock in from initial offering and follow out Delivery of follow up product important Strong brand required Ex. razor blades; razors are cheap but blades are expensive
Network Externality Effect
Multi-sided platform grows in value to the extent that it attracts more users Size of customer base effects what you do
Google Multi Sided Example
Providing target text advertising globally over the web. Advertisers can publish their ads and sponsored links on Google's search pages. This model only works, though, if many people use Google's search engine.
Inside- Out
Unused or little used internal assets may have external value Typical organizations have significant R&D infrastructure New revenue streams that before were not possible
Outside- In
You don't have to invent the research to benefit from it Requires dedicated activities to connect external parties Companies with strong brands well suited to this ex. proctor and gamble magic eraser brought idea to US from japan
Infrastructure business
build and manage platforms for high volume, repetitive tasks high fixed costs- economy of scale
Product innovation business
develop new and attractive products and services early entry is often key; battle for talent
Customer relationship business
finding and acquiring customers and building relationships with them high customer acquisition cost- economy of scope