Target market

Business Models

Business Models

A business model is a representation of the way a business delivers its products and services to its customers. The business model that I am going to discuss include freemium model, subscription model, and on-demand model.

In Freemium model, a business gives something for free in return for customer’s personal details which are used to market to the customers with the aim of building a relationship so that the customers can buy from the business in future (Kumar, 2014). Typically, it is used by service based businesses particularly in internet services such as Skype or Flickr where lifetime value of the customer is high. In many cases, the offerings have the same cost structures where the marginal cost of serving customers tends towards zero. The free offering becomes a gateway to premium services, i.e. free version has adverts, and premium version does not.

With the subscription model, the objective is to secure a customer on a long-term contract, so they buy a service or product in the future (Weinhardt, 2009). Many businesses aim at retaining customers since the cost of customer acquisition is high. With the growth of mobile payments, consumers are trending towards simple shopping experience which has led to growth of subscription-based services that consumers can easily pay for and know they will receive the product or service every month.

On-demand model focuses on serving consumers with a preference for speed, simplicity, and convenience (Osterwalder, 2010). Due to growth of smartphone usage, on-demand model has become popular as people are shifting towards consuming goods and service on-the-go. On-demand startups such as Uber have seen explosive growth due to their convenience.

I have a small business operating as a bakery that sells cupcakes and cake pops. Sam bakers, the name of my business, is an online store as well as a retail store that supplies cakes. It mainly focuses on offering convenient services to its customers. The on- demand model would be the best for my business since most customers make orders online through our website or by use of a mobile application. This model would be ideal because customers request for services from the company and pay once the services are rendered. This model would to low operation costs and fast delivery of services which would increase customer loyalty.

References

Kumar, V. (2014). Making'Freemium'Work.

Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challengers. John Wiley & Sons.

Weinhardt, C., Anandasivam, A., Blau, B., & Stosser, J. (2009). Business models in the service world. IT Professional Magazine, 11(2), 28.