Pathways to Success - Business Models Part 1
[Music] you're listening to ecomonics a debutify podcast your resource for one-of-a-kind insights into the world of e-commerce and business in the modern age this is joseph i'll be presenting a wealth of industry knowledge from interviews with successful business people and our own state-of-the-art research your time is valuable so let's go [Music] good to have you here i want to give a big shout out today to 4weekmba.com for this absolute treasure of a list i have here a list of business models you might want to think about adopting some of these are more related to our world than others but every last one of these is a valuable insight i also want to go on record to say i think it'd be a bit beneath our standards for me to just rattle these off all one site so i did look to cross-reference this information with other sites if i could relate a different example than the one they list and of course a way in from my perspective the one counterweight and it's a major one to that sentiment is that four-week mba has gone on record to state other websites have been copying their resource so if they say they're the go-to source i believe them it's not like i can't take another 20 seconds to pull up another 10 tabs we're going to do 20 today with another set down the line there is a lot to do today so let's jump in the core of a business model is all about value it's how you provide value to your customers both in the short and long term to your own growth your stakeholders and yourself it's speculative while based on your research and experience in the field is a projection of what value you'll attain over the course of its lifespan which if all goes well would be indefinite as with branding we can find some pretty simple definitions for this term such as according to harvard harvardbusinessreview or hbr.com they quote michael lewis the writer of the new new thing who says all it really meant was how you plan to make money a quote from 1999 right before the dot-com bubble popped harvard business review also references another simplified definition in his theory of business which is assumptions about what a company gets paid for in an ironic way there could be as many definitions for the business model as there are models with a 10-point differential so let's go with our patented patent-pending economics approach your business model is how you solve the most amount of problems for others while also solving the most amount of problems for you and your business all right here we go a blend of chain and franchise this is a model i know all too well starbucks and mcdonald's rely on this and i've worked for a business that was under this system as well according to 4weekmba.com starbucks revenue from 2017 was 79 from company owned mcdonald's is statistically the opposite relying on franchising the franchise i worked for was a watch store not quite luxury more of a down-to-earth vibe and the franchise owner wasn't enjoying it so much here's a trade-off you buy a franchise like mcdonald's the whole thing you know you get your one and or three i knew one guy had three i didn't know him personally he came to our school for a presentation i was six at the time anyways mcdonald's has a ton of built-up brand recognition so you can safely expect lots of customers to come just on that alone all you really need to not fail cataclysmically is to find an area with good traffic i met with a friend for lunch at one once and he noticed how good the area was traffic always a street car a complex of popular retail chains many of which were also franchised out he told me that while mcdonald's by the way he does he does no business he's not just a random guy he told me that while mcdonald's as a franchise itself wasn't a huge cash cow it led to gentrification of the area eventually the land would transform into somewhere you'd expect to find people like me and then the franchisee could sell the property at a massive profit but getting back to my story about the watch store the owner was not happy at all with it because he had to order in the product hoping he got the products people wanted he had insane bills and overhead being right in the heart of the downtown core and on top of that corporate took a cut of his earnings all in all profitability was far too difficult and eventually corporate took over the benefit of being a franchisee was minimal because well the brand didn't have that much recognition next up we have ad supported and subsidized this is a mixture of a service that provides something for free as well as something premium example four week mba sites is spotify of the 6.7 billion euros which
translates to 7 billion usd ish 10 was from ad revenue which supports the free users the other 90 are premium users but the platform does have value propositions such as a family plan which like netflix lets users share the cost under one package for spotify there are some drawbacks as they are a music platform they pay royalties out to artists so as the user base grows so do the royalty payments when i saw this model the first service that sprung to mind was youtube and i've got a little issue with youtube i've been using them consistently for years and some time ago back when i used my blackberry passport i had the ability to lock my screen so i could just listen to the audio and not burn screen time well i don't recall exactly when it happened but this feature which may have just been a happy accident stopped working and then some time after that youtube started advertising its premium service which would allow me to keep playing the media like i did before now for me the reason why i'm reluctant to use youtube premium is because it was a feature i used freely and then it was taken away which didn't solve a problem it caused a problem from there was offered back to me as a service i could pay for that aside there is a fair logic to this if i were youtube the case i'd make is we are a video platform and as such our intended experience is a video one we do not feel it is right to let users stream video only to listen to the audio nor is it fair to creators who set out to make video content however if you choose to become a premium member you offset this cost little details like that do add up when they're relevant on a day to day basis all right let's keep going affiliate business model this is for people who have a popular website but aren't necessarily looking to earn money through direct transactions while you can sell products no one's stopping you affiliate marketing is a means to generate revenue by letting interested companies advertise to your audience on your platform according to affilorama 16 of all e-commerce sales in the us are the result of affiliate marketing a stat of 2016. this is ideal if you're into something exceedingly niche which i guess makes it a niche and you have a lot of passion for it the more energetic you are about the content the more dedicated and trustworthy you are perceived it's also worth mentioning you're likely to attract companies who are also carving a path in their niche i'm pretty passionate about video games but i suspect due to competition i'd have to get to be a pretty big deal to appeal to nintendo i took a shot in the dark to see if i could find information on their program there is one but it's not as easy as the first page on google and therefore is beyond my scope one of my missions on the show is to try and lift up small businesses as well as big ones so thankfully affiliorama.com has a few websites that use this program there is this is why i'm broke which scarra is a net for innovative gift ideas they're affiliate products being sold through amazon associates and etsy datingadvice.com which keeps the advice relatively clean dating apps can lead to a dark path and in doing so earn the trust of zeusk eharmony and other dating sites there's nerdwallet.com which provides financial
advice and reviews for credit cards loans bank accounts they receive income from financial products and service vendors i notice as i was looking through this reviews are a common theme here it makes sense in order to gain the trust of your readers you have to be able to form opinions consistent opinions the downside is that it's not like if i review cell phone cases i'll be able to sell dog food through affiliate marketing one can run into friction reviewing products and services that may also be a source of income i'm not saying anyone is doing anything but it's clear to me it could be an issue so keep it in mind i also want to wrap up this model by pointing out that affilorama sells services directly rather than doing affiliate marketing of their own which makes sense because i don't really get not quite sure how they would but anyways in case you haven't noticed we've been doing this in alphabetical order next on this list is an aggregator which for wake mba refers to as a form of platform business model so let's define that now a platform model can be something like uber or airbnb where it connects the users with the service providers one very interesting way it's described is that it's a state which collects a tax for allowing others to conduct business the issue with that is that the value is self-reliant and by that i mean i can run a moving company or move a running company haven't decided and i have my truck and my movers so the value is all set it's just a matter of getting business a service like uber depends on the popularity of its platform to be in business at all otherwise the infrastructure can sustain itself no point in booking a ride if 100 other people are waiting for it that point you might as well just get on a bus so that said an aggregator pulls in information from a wide array of sources and condenses that information to the audience in a way this podcast functions as an aggregator i go all over the net to find information viable to you and in doing so condense that information into one resource that you can go to on itunes and leave a positive review on its income is generated through advertising the more popular the aggregator the more the advertisers compete for top spots i should mention that a business model is not one-to-one with a brand company or service google for instance as a search engine has a number of services but because their search engine is an aggregation of information advertisers mesh their services within that next we have agency based the upfront value of a website such as the one by neil patel is that as he grows in popularity he attracts a greater user base who are then directed to his marketing agency scalability is considered an issue here in that you do need people in the agency to handle the clientele but they're quick to point out that the revenue can still arrive in billions taking a different approach the scalability inherent in this model is not so much in scope as it is stature a business scales because it attracts higher paying clients who are more likely to sign up as a reputation and quality of work advances so the same amount of work you might be doing with one group of people can then be the same time spent with maybe we're gonna pay you a lot more money next is asymmetric models this is where google and facebook fall into most prominently while users are not paying any money to use the bulk of their services the user data is collected and disseminated to advertisers of which many of us rely on that information to sell our services but simply an asymmetric model treats its users as the asset and the advertisers as the customers google and facebook also qualify for the attention merged business model in this model the merchant is the one out to capture the attention of users which is the asset although google and facebook have secured the place in the market and then some four week mba points to a rather unfortunate incident where a kylie jenner tweeted out that she wasn't using snapchat a tweet like that can do billions of dollars in damages i wanted to find some other examples of attention merchants and an online search yielded only a book called attention merchants by a tim wu a rather scathing expose on the pervasive advertising in our lives as big tech companies collect our data and sell back to us me i'd have to be invited onto another show so i can talk about this particular issue at length but let me just say i understand that i'm as much of an asset as the next user but if you really want to know what i have a problem with it's not the dopamine rush of being online i found ways to distract myself for hours the moment i had a sega genesis we're all in charge of our own discipline i don't have a problem with my data being collected so i can be shown products i might find useful i have a problem with the way other people could easily enter my mind while i'm supposed to be in the government of my own home i had to switch off most of my notifications because i was tired of being bothered constantly they don't know how long i might spend thinking about what they say and i treasure the time i can spend with my own thoughts heck i'd love to hear what this book has to say but remember the internet is a resource that can transmute anything you want or need it's boundless in its potential and infinite in scope it's given me a life to live i'm in control of what i get out of the internet and what it gets out of me don't be scared be in control speaking of which sort of we now go to the blockchain business model you can refer back to our cryptocurrency episode for a refresher on blockchain but what's going on here is a counterweight to what i was just talking about feel free to check out steemit.com that's with two e's to quote their frequently asked questions steemit has redefined social media by building a living breathing social economy a community where users are rewarded for sharing their voice it's a new kind of attention economy rather than post something on facebook and be rewarded with self-satisfaction which is viable of course no doubt cmich provides its own digital currency to users based on how well-received the content is rewarding the big players big and the small players small encouraging them to gain in stature the core value of e-coins is speculative at this time but as more energy is invested into the content the value of these coins can increase next up is bundling this is where a manufacturer can create unbeatable incentive by providing several products services in a single package the example cited here is microsoft where you can buy the whole suite of office products adobe offers a creative cloud suite which is of tremendous value if you can use all the programs and it's pretty darn good value if you can use half of them i could use at best three and then made it mediocre value i can also think of our communications provider bell who offers us a bundle of home phone internet and television we opted for the second two because i'm sorry who has a home phone anymore you can write and let me know if you do podcast debutify.com next up is cash conversion cycle or cash machine model which is what amazon's marketplace falls under for more on that we give amazon the rundown on our back end episode but to sum up the model briefly amazon has a window of about a month to use the money they make to expand their business before having to pay back the suppliers next up is discount business model with priority on quality it seems a bit puzzling how does one generate decent revenue while also offering good product while also offering that product cheaply well the founders of aldi a german supermarket have been very open about this according to dw.com who interviewed the brothers who
took the supermarket over from their late mother they offer low prices through a limited range which means they can buy in bulk to save but not need to buy different items by the thousands they also relate this thought process to say an airline that doesn't serve drinks i also observe that with a grocery store there isn't a great deal of pressure to constantly revise a product i mean when was the last time you saw an update to golden grahams yes most of it will expire but by focusing on the core needs of consumers there's less time invested in figuring out the next thing to sell a few other key insights to this model according to oliver wyman.com include high-performing private labels that meet the needs of customers are gmo free additive free and organic then there's store efficiency where our product is well marked so it's easy to scan and shopping carts are the same height as conveyors so they're easy to load and lastly store location where by taking up residence near a large supermarket or hypermarket customers can maximize their shopping trip by figuring out which of the stores around would be better to serve the needs on their list all right next up distribution based business model as stated on the website a lot of businesses fall under this model distribution is a key asset to nearly every company's success so naturally google gets brought up but a few key takeaways from the site that indicate whether or not this is made out to succeed as if a the distribution channel is sustainable meaning the money spent to maintain it can't forever outpace the money it generates b to have a main channel but also secondary and tertiary channels in case there's an issue with the main one and c if it can handle scaling to give you a small sense of how google pulls this off consider when a web browser or site uses the google search engine as a default all right this next one would relate to us pretty highly direct to consumer in this the brand or company is directly involved in having a dialogue with the customer through marketing the example cited is unilever who controls nearly 400 brands in over 190 countries having such a broad scope on the operation the company can adjust their portfolio based on the economic situation of its customers the company also has full control over how the products are perceived the downside is that it heavily relies on marketing to make sure competing products aren't taking over the customer's mindset as e-commerce platforms we can do this on a smaller scale at least at first don't want you to think you'll never move on to a bigger pond but you as a single seller are one company and you have the ability to control multiple sites and brands that you can adjust on the fly next up is direct sales business model this is one of the oldest models out there it's good old-fashioned person-to-person selling not an easy task to scale with so it depends on whether or not you'll be drop shipping your way to glory however i sincerely hope you've had a chance to experience being a seller you learn some key skills like understanding how to take questions you've been asked before and answering them in a way that's fresh and unique to the person you're speaking to four week mba however points out that in our era ai machine learning and automation may make this seem irrelevant but instead it's actually giving it a whole new appreciation sure at one point customers would get annoyed having person after person try to sell them something but the more ai takes the job over the more people appreciate having someone to talk to when i was doing remote sales and service this was a pretty common thread among customers who appreciated that i was a person and not an ai to which i would say oh no i'm i'm an ai we have advanced technology substantially in the last five years you're welcome to use that one one of the other characteristics i appreciated over time was that i had a chance to practice my technique and although the first wave of phone calls weren't spectacular i would learn what not to say and be able to definitely handle conversations with ease i'll give you another skill in case you're in this position say you're talking to someone from france and they are trying their best to speak in english if they apologize about it just say it's all right your english is a lot better than my french puzzlement ease works every time anyways one key takeaway in regards to direct sales is that you have to curate potential customers and leads the more broad you go the more it comes across as more spam so you need to find a balance between specificity but also reaching a large enough audience next up we have the ecommerce marketplace which i'm going to skip since that's literally our whole show it doesn't count for the uh for the 20 and you'll still get 20. let's move on to educational niche and i quote the site built by one of the smartest persons on earth stephen wolfram wolfram alpha is a computational engine end quote i'll also say the man has one of the coolest last names on earth his business is targeted towards teachers and students with three levels apps a pro version and an enterprise option with pricing from 99 cents to 5.99
475 to 799 and 25 to 100 respectively although search engines have rapidly caught up in terms of computational power the wolfram search model differs from a search engine and that a search engine looks through an index of web pages whereas the wolfram uses its algorithm to answer the question itself this leads to information that prioritizes answering the question while search engines are chock full of information as well in an educational setting i can see why teachers would value an unbiased information source moving on we have family owned technically my business enterprise is family owned since i'm in a family but the example found here is prada where the owners the original founders control 80 of the company this is a highly hands-on approach but the extra time it takes being the boss means the company will always reflect your vision even as you bring in over three billion euros i've worked for a number of family owned businesses as well and one takeaway from my experience is that meeting someone who owns a business even a small business makes me see them in a unique way there's an aura about them feeding is next up on the list this is a business model that supports other businesses by providing an asset other industries and markets need it improves both supply and demand thus creating more opportunities to continue feeding for instance hire car which is h y r e c a r lets owners of cars rent them out to drivers of uber and lyft for drivers if it's more economical to rent and do uber shifts for blocks of time rather than own a car and have to use it constantly this is an option i'm a non-driver myself so interestingly this would be a way to incentivize purchasing a vehicle that i don't need to use myself i could just let uber and lyft drivers use it while i earn passive income coming around the bend we get into the free section there's freemium which is considered more of a growth and branding strategy rather than a business model whereas i see it as more of a funnel this is where a company provides a service for free which helps boost the user base and the company's popularity some news websites as i've learned in trying to read certain articles from my work somewhat fall under this category where they limit a certain number of articles for free and i can pay if i want more access google drive might be another good example as the 15 gigs of data are free and i can open as many gmail accounts as i like i think i'm under like eight now but for three bucks a month i can get access to 100 gigs of data instead which i have done because if i'm trying to organize a large project 15 gigs can be brought through pretty quick free to play is next on the list but i'm going to talk about it as a bonus because it doesn't have very much to do with us this is the video game version of freemium the example cited is fortnite which needs to be free to play because it needs a high population of players to keep the 100 player lobby filled without taking too long i think we could in the future stand to study gaming business models the reason being players want to have fun but also want to win and the conditions for winning are in the hands of the designers some games sell access to something can't get for free such as additional playable characters in a fighting game putting players playing for free or who bought the base game at a disadvantage other games give you everything for free but if you want something sooner you have to pay me i draw the line at paying to access something other players can never get unless they pay as well and then i disregard that line because i have no spine when it comes to certain game companies last on this episode's list belongs to freederprise the b2b version of freemium where customers become professionals in the eyes of the business and thus sales agents are tasked with channeling free users into paying ones we add the beautify fall under this model we offer four services one of which is free just remember when it's freemium that means you're essentially using the same service the paying customers are another example of this would be slack which we can use for free and evaluate if it's worth upgrading from there freemium and free to price have a lot in common so from my perspective i draw a distinction between a free service someone could use as a business like a blog as freemium versus something clearly made for business like slack although friends could get together and use slack for socializing i just don't see why you would anyways that is the first part of this list you can expect a second and possibly third on its way down the pipe any one of these models stick out to you anything you might integrate into your own business empire drop us a line we want to know podcast at debutify.com thanks for listening you might have found this show on many number of platforms apple podcasts spotify google play stitcher or right here on debutify whatever the case if you enjoy this content and want to help us thrive please take a few moments to leave a review on apple podcasts or wherever you think is best we also want to hear from you so whether you think you'd be a good guest or want to weigh in on anything related to our show you can email podcast debutify.com or connect with us on facebook twitter instagram and tick tock finally this podcast is created by the passionate team at debutify if you're ready to take the plunge into e-commerce or are looking to up your game head over to debutify.com and see how it can change your life and the lives of many through what you do next [Music] you
2021-08-23 02:05
