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Business models

Patterns that describe how companies create and capture value. Click through for detailed profiles and examples.

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#1

The core product is priced competitively, but the real money's in the extras. Customers get flexibility, but often end up paying more than they initially thought. It's a classic bait-and-switch, but with a veneer of customization.

Examples:
MojangLifcoAmerican AirlinesRyanairBest Buy

Affiliate / Referral

#2

You're not selling products; you're selling the ability to sell products. Affiliates get a cut of each sale, while the company expands its reach without the overhead of a larger sales force. It's outsourcing, but for marketing.

Examples:
Booking.comeBayRakutenMastercardCAA (Creative Artists Agency)Pinterest

Contrarian / Opposite positioning

#3

Named after the martial art, this model is about using your competitor's strength against them. You offer something diametrically opposed to the industry norm, attracting customers who are tired of the status quo. It's contrarianism as a business strategy.

Examples:
UberNetflixAirbnb

Auction

#4

Let the market decide the price. The highest bidder wins, creating a natural price discovery mechanism. It's efficient for sellers and gives buyers a chance to snag a deal if demand is low.

Examples:
eBayCopartCME Group

Negative working capital / Cash-first

#6

Get paid before you pay your suppliers. This model is all about optimizing cash flow, giving you capital to reinvest or pay down debt. It's financial engineering at its finest.

Examples:
DellCostCoBlockBerkshire HathawayCoca-ColaGoldman Sachs

Cross-sell / Bundling

#7

Why stop at one industry? Use your existing skills and resources to branch out into related fields. It's about maximizing the value of your assets and customer relationships.

Examples:
IntuitBerkshire HathawayCoca-ColaFerrariGoldman SachsHermes

Crowdsourcing

#9

Why hire experts when you can tap into the collective wisdom of the masses? Offer a prize for the best solution and watch the ideas roll in. It's outsourcing, but with a competitive twist.

Examples:
LEGODuolingoTikTokUberChess.comConvoy

Loyalty program / Rewards

#10

Keep them coming back for more. Offer rewards, create emotional connections, and make it painful to switch. It's about turning customers into fans.

Examples:
StarbucksAmerican ExpressChanelCoca-ColaHermesLEGO

Digitization

#11

Take something physical and make it digital. It's faster, cheaper, and infinitely scalable. The trick is maintaining the value proposition in the transition.

Examples:
SpotifyAdobeNetflixThe New York TimesInteractive BrokersCompass

Direct sales / Network sales

#12

Cut out the middleman. Sell straight to the consumer and pocket the difference. It's about controlling the customer experience and maximizing margins.

Examples:
ChanelFerrariFordHermesLEGOLVMH

E-commerce

#13

The store that never closes. Sell online and say goodbye to retail overhead. It's convenience for the customer and efficiency for you.

Examples:
AlibabaShopifyWayfaireBayAirbnbLEGO

Experience-led / Experiential

#14

Don't just sell a product; sell an experience. Charge a premium for the emotional value. It's about creating memories, not just transactions.

Examples:
The Walt Disney CompanyStarbucksAirbnbChanelFacebook (Meta)Ferrari

All-you-can-use / Flat-rate

#15

One price fits all. Simplify pricing and give customers peace of mind. It's a gamble that average usage will work in your favor.

Examples:
SpotifyPelotonAT&TBasic-FitCharter CommunicationsNetflix

Fractional ownership

#16

Why buy the whole cow when you only need a glass of milk? Share ownership of high-value assets. It's about access over ownership.

Examples:
FerrettiPatek PhilippeBrookfield Asset ManagementMarriott International

Franchising

#17

Clone your business model. Let others take the risk while you collect royalties. It's scaling through delegation.

Examples:
McDonald'sSubwayThe Home DepotKFCCoca-ColaLEGO

Freemium

#18

Give away the basics, charge for the good stuff. It's a numbers game: convert enough free users to paying customers and you're golden.

Examples:
SlackZoomSpotifyFacebook (Meta)Google (Alphabet)Alibaba

Pull-based / Demand-driven

#19

Be reactive to customer needs. Decentralize and add flexibility to your processes. It's about being nimble in a fast-changing market.

Examples:
ToyotaDellNetflixInditex (Zara)ZaraAmazon

Uptime / Availability SLA

#20

Promise zero downtime and charge a premium for it. It's peace of mind as a service.

Examples:
SalesforceUPSFedExCoupangGE AerospaceQantas

Vertical integration / Full-stack

#21

Control the entire value chain. It's about maximizing efficiency and minimizing dependencies.

Examples:
The Walt Disney CompanyBerkshire HathawayNVIDIABoeingDellOracle

Ingredient brand

#22

Make your component so desirable that other products want to advertise your inclusion. It's about becoming the Intel Inside of your industry.

Examples:
IntelDolbyQualcommARMChanelCoca-Cola

Single-layer / Best-of-breed

#23

Specialize in one part of the value chain and do it better than anyone else. It's about being the best at one thing instead of mediocre at many.

Examples:
PayPalARMMastercardStripeIntelTSMC

Data monetization / Data-driven

#24

Turn user information into a product. Sell it or use it to boost your own operations. It's about extracting value from every interaction.

Examples:
Google (Alphabet)Facebook (Meta)NetflixSpotifyDuolingoSalesforce

Licensing

#25

Focus on creating intellectual property and let others handle the manufacturing. It's R&D as a business model.

Examples:
QualcommThe Walt Disney CompanyAdobeARMBerkshire HathawayFerrari

Switching costs / Ecosystem lock-in

#26

Make it costly or inconvenient for customers to switch. It's about creating dependencies that ensure long-term relationships.

Examples:
AdobeNetflixAT&TSalesforceStandard OilIntuitive Surgical

Long tail / Niche catalog

#27

Forget blockbusters. Sell a large variety of niche items. It's about aggregating marginal gains.

Examples:
NetflixSpotifyeBayWayfairAmazonYouTube

Asset monetization / Asset reuse

#28

Don't let your assets sit idle. If you're not using them, someone else might pay to. It's about maximizing resource utilization.

Examples:
Google (Alphabet)AmazonIBMMicrosoft

Mass customization

#29

Offer personalized products at mass-production prices. It's about giving customers what they want without breaking your production line.

Examples:
NikeDellInvisalign (Align Technology)FordToyotaIKEA

Access over ownership / Rental

#30

Why sell once when you can rent repeatedly? Lower the barrier to entry and create recurring revenue. It's about turning products into services.

Examples:
AirbnbSpotifyWeWorkAmerican TowerCintasDigitalBridge

Open innovation / Co-creation

#31

Collaborate with partners to create value. It's about recognizing that good ideas can come from anywhere.

Examples:
GitHubWikipediaMozilla

Open source

#32

Give away the product, sell the service. It's about building a community that becomes your marketing team and development force.

Examples:
GitHubBasecampDatabricksMongoDBMozilla

Platform orchestrator / Aggregator

#33

Focus on your core competencies and coordinate the rest. It's about being the conductor, not the entire orchestra.

Examples:
UberAirbnbAlibabaDoorDashExorEQT

Usage-based / Pay-as-you-go

#34

Charge only for what's consumed. It's about aligning cost with value for the customer.

Examples:
UberGoogle (Alphabet)StripeFedExUPSAxon

P2P / Peer marketplace

#36

Be the middleman connecting similar individuals. It's about facilitating transactions in a trusted environment.

Examples:
AirbnbUbereBayPayPalWise

Outcome-based / Pay-for-performance

#37

Don't sell the product; sell the outcome it provides. It's about aligning your incentives with your customers'.

Examples:
Rolls-RoyceJohn DeereGoldman SachsAndurilBlackstoneBoeing

Razor-and-blade / Bait-and-hook

#38

Give away the platform, profit from the consumables. It's about creating a captive market for repeat purchases.

Examples:
GilletteGoProNespressoBICColgatePeloton

Revenue share

#39

Split the profits with partners or even competitors. It's about growing the pie instead of fighting over slices.

Examples:
SpotifyBerkshire HathawayBlackstoneFormula OneMastercardNBA

Frugal innovation / Bottom-up innovation

#41

Develop for emerging markets, then adapt for developed ones. It's about finding simplicity in constraint.

Examples:
GE AerospaceUnileverNokia

Cross-subsidy / Buy-one-give-one

#42

Charge the rich more to subsidize the poor. It's about expanding your market while maintaining premium pricing.

Examples:
RobinhoodWarby ParkerAravind Eye Care System

Self-serve

#43

Let customers do the work and pass on the savings. It's about empowering users and reducing costs.

Examples:
IKEACostCoTrader Joe'sAtlassianCraigslistCharles Schwab

Store-within-store / Concession

#44

Put your store inside someone else's. It's about leveraging existing foot traffic and infrastructure.

Examples:
StarbucksSubwayAppleThe Walt Disney Company

Full-service / Integrated solution

#45

Offer comprehensive coverage in your domain. It's about becoming indispensable to your customers.

Examples:
SalesforceFordGoldman SachsNVIDIASpaceXToyota

Subscription

#46

Trade ownership for access. It's about creating predictable revenue streams and ongoing relationships.

Examples:
TwilioNetflixAdobePelotonGoogle (Alphabet)SpaceX

One-stop shop / Generalist retailer

#47

Sell everything under one roof. It's about becoming a one-stop shop and benefiting from economies of scope.

Examples:
WalmartCostCoTrader Joe'sHersheyKellogg'sMars Inc.

Base of pyramid / BOP

#48

Focus on the base of the pyramid. It's about finding profit in volume rather than margins.

Examples:
UnileverAravind Eye Care System

Waste-to-value / Circular value

#49

Turn waste into revenue. It's about finding value where others see none.

Examples:
Archaea EnergyH&M

Two-sided platform / Marketplace

#50

Connect distinct groups that need each other. It's about becoming the essential intermediary.

Examples:
Facebook (Meta)Goldman SachsGoogle (Alphabet)SpaceXAirbnbeBay

Ultra-premium / Luxury

#51

Cater to the top of the market. It's about turning exclusivity into a business model.

Examples:
ChanelLVMHRolexRolls-RoyceHermesPatek Philippe

User-generated / Co-created product

#52

Let customers create what you sell. It's about tapping into collective creativity and offloading risk.

Examples:
LEGORobloxRec Room

White-label / Private label

#53

Let others put their brand on your product. It's about maximizing production capacity and letting others handle marketing.

Examples:
CostCoFoxconnAldi

Data-as-a-service / IoT data

#54

Don't sell the sensor, sell the data it produces. It's about creating value through information, not hardware.

Examples:
John DeereIntuitive SurgicalRolls-RoyceDexcomMotorola SolutionsIBM

Virtual / Digital replica

#55

Replicate physical processes in digital space. It's about removing physical constraints from your business model.

Examples:
Google (Alphabet)Microsoft

In-device commerce / Embedded commerce

#57

Move the purchase decision to the point of use. It's about capturing customers at the moment of need.

Examples:
RokuAmazon

Prosumer / Creator-seller

#58

Turn customers into producers. It's about leveraging your user base as a resource.

Examples:
AirbnbYouTubeAmazon

Decentralized / Web3 infrastructure

#59

Provide a blockchain infrastructure for others to build on. It's about offering the benefits of blockchain without the complexity of maintaining it.

Examples:
Anchorage DigitalIBM

AI as a Service

#60

Offer AI capabilities through cloud-based platforms. It's about democratizing access to advanced AI tools and models without the need for in-house expertise.

Examples:
NVIDIAGoogle (Alphabet)AMDAndurilPalantirAppLovin

Direct-to-consumer

#61

Sell directly to end customers online, bypassing retailers; brand owns the relationship and margin.

Examples:
Warby Parker

Creator platform

#62

Monetize creator content via ads, subscriptions, tips, and revenue share; platform aggregates audience and takes a cut.

Examples:
Google (Alphabet)Spotify

Product-as-a-Service

#63

Customer pays for use or outcome; provider retains ownership and handles lifecycle (maintenance, reuse, recycling).

Examples:
Rolls-RoyceIBMJohn Deere

Two-Sided Market

#50b

Connect distinct groups that need each other. It's about becoming the essential intermediary.

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