05Oct
By: Paula Borowska October 05, 2016

When you’re starting out with your online business you have a lot of decisions to make. Sooner or later you’ll have to make a decision regarding what products to sell online or how to best utilize affiliate marketing. But that’s getting ahead of ourselves. Right now, let’s talk about online business models.

Every new business needs one. The good news is, there are so many proven online business models out there. The most successful models are pretty much set, so it’s just a matter of learning about them and deciding which one best fits your business. I’ve gathered six different but powerful online business models that we can discuss to see which one would be best for you and your online business.

The freemium model

The term “freemium” comes from the combination of words “free” and “premium”. It’s a very common online business model for start-ups in all sorts of industries. The idea here is that the company will provide both free and paid services to its customers. The business gives out the basic services or features for free while charging for the premium ones – usually through a subscription, but not always.

spotify-online-business-model

Spotify, a music streaming service, provides a free service for its customers. On the free service you can listen to music anywhere online and as much as you want. However, if you pay for the service, at just $9.99 a month, you will receive premium features, including no ads between songs, better quality of music, and offline mode.

Another example is OKCupid which is an online dating service. Again, the app is free for anyone to use. If you pay for the premium subscription, you will receive a bigger inbox, more search filters, a full list of people who have expressed interest in you, and a bunch of other features. Of course, if you’re paying you won’t see ads while using the app either.

The subscription model

The reason this online business model is so popular is because it is convenient for both the customer and the business. A customer doesn’t have to worry about purchasing the same thing each month. They know their purchase will be there as long as they are subscribed to it. Netflix’s subscription model has got to be one of the most popular subscriptions. A customer picks a plan they want to sign up for, like a $10-a-month plan. The customer is charged monthly and has the service available to them at all times. If the service provides a lot of value for the customer, they are sure to stay on the subscription for years and years. That’s why it’s convenient for the business as well. Technically, both Spotify’s and OKCupid’s paid plans are subscriptions because they occur monthly. Netflix is not a freemium service because they don’t have a free plan.

lola-online-business-model

Another example of a subscription is LOLA which delivers natural and cotton tampons to your door, monthly. A subscription model is not only for digital services. If you’re selling physical products, like tampons, and you know your customers will need it regularly, follow in LOLA’s footsteps and create a subscription plan. This will ensure that your customers stay regular customers. It can work for other products like dog food, razors, or even wine.

The on-demand model

The on-demand online business model relies on the immediate needs of their customers, aka instant gratification. This business model relies heavily on technology and its ability to provide goods or services at a moment’s notice. It’s all about providing fast services whenever and wherever a customer needs it. The companies using this model usually work with freelancers who work with a flexible schedule. The company makes a profit by taking a fee off the service, then paying the freelancer as payments are made through the company.

Soothe is a perfect example, and a fun one too. Soothe is an on-demand massage service. The company provides vetted and licensed massage therapists to come to the customer within just an hour. The company relies on freelance massage therapists who are professional and will deliver the most amazing services to the clients.

Washio is an on-demand dry cleaning and laundry services. Depending on the time of your service order, you’re even able to get same-day service, too. A Washio employee comes to you, picks up your laundry order, and brings it back to you at a time convenient for you. They are a beautiful time-saver for chores like doing laundry and dropping off and picking up dry cleaners.

The direct sales model

This online business model relies on people who need to supplement their income. It allows those people to sell your product while they look for a new job, can’t find one, or just need extra cash on the side. As a business, you’d produce and manufacture the good and get people to sell it for you by offering commissions and a flexible schedule.

trumaker-online-business-model

Trumaker is doing exactly that with selling men’s suits. The company manufactures tailor-made suits by sending Outfitters to their customers to take measurements. The Outfitter, as they call it, is a freelancer who will meet the client and be part tailor and part stylist. They work with the client to get them the best wardrobe as needed.

The customized goods model

Another online business model to consider is providing customized or personalized goods. Your business will provide a base product that the customer then can tweak to their liking. This model works great with different tier pricing, as well as custom pricing per edit. The customer pays for what they really want.

A great example of this is Artifact Uprising. They are a company that sells custom-made photo albums, calendars, and a few other printed paper goods. The customer creates their photo album to their liking by uploading as many photos as they want. They design each page of the photo album as well. There is a base price for each album based on size and page count. If a customer wants more pages, the customer pays for them individually. All the company does it print it and ship it.

Another example is Blank Label which sells custom-made men’s wear. They have everything from shirts to polo t-shirts to suits. The customer picks a base product, usually based on the fabric, and enters their measurements like height or how loose they like their fit. The end product is a self-made tailored shirt.

The marketplace model

The last model I wanted to mention is the marketplace model. It’s one of the online business models that relies on bringing the supply and demand of a product, or service, together. Your business won’t hold any inventory, your suppliers will. Uber provides transportation but owns no cars, Airbnb provides lodging but own no properties, and Etsy provides goods but doesn’t manufacture any of them. You’d be doing the same thing, whatever demand you choose to fill. These types of companies are growing and make money off sales made through them.

airbnb-online-business-model

Which one of the online business models is best for you?

So now the question stands, what’s the best one of online business models for you? Hopefully, these six models have given you insight into the possibilities of online business. It will all boil down to how you want to conduct it.

  • Hi Paula,
    Sounds good, i know only few online business models but here you have explained little more. Thanks for sharing.

  • Paula Borowska

    You go it! 😃

  • Great article. Nice information about Business models, thank you.