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