Revenue models

Today

• Revenue models

– Categories

– Key characteristics

– Yours?

• About IP – Siri Mårtensson Delphi

4 weeks….

Pivot or not?

What is a revenue stream?

The strategy a company uses to generate

cash from each customer segment

What is a pricing model?

The tactics you use to set the price in each

customer segment

Common mistakes

• A revenue stream is the price I charge the

customer

• I set the price of the product based on how

much it cost to produce/make

• The price must be lower than the

competitors

Defining the revenue model

• What value are your customers willing to

pay for?

• How do your customers pay for products

today?

• How is the value delivered?

Some revenue model categories

• Advertising

• Freemium

• Pay once

• Pay per use

• Subscription

• Licensing

• Affiliate

• Donations

Advertising (unique or large)

• Display Ads – e.g. Yahoo!

• Search Ads – e.g. Google

• Text Ads – e.g. Google, Facebook

• Video Ads – e.g. YouTube

• Audio Ads – e.g. Saavn

• Promoted Content – e.g. Twitter, Facebook

• Recruitment Ads – e.g. LinkedIn

• Classifieds – e.g. Blocket, Craigslist

• Featured listings – e.g. Zomato, CommonFloor

• Email Ads – e.g. Yahoo!, Google

• Location-based offers – e.g. Foursquare

Freemium (up- & crossell)

• (not the same as free trial)

• Most often a subscription extension

• More of the core offering” – DropBox, KissMetrics

• Extended functionality – LinkedIN

• Extended support (time or quality) – MySQL

• Virtual goods – Candy Crush

• In app purchases -

• Combination of above

Pay once

• Retailing – e.g. Myntra

• Marketplace – e.g. Snapdeal

• Sharing Economy – AirBnB

• Aggregators – e.g Taxi for Sure

• Group buying – e.g. Groupon

• Digital goods / downloads – e.g. iTunes

• Training – e.g. Coursera, SimpliLearn

• Pay what you want – e.g. Instamojo (optional)

• Auction commerce – e.g. eBay

• Crowdsourced Services – e.g. Elance, oDesk

Pay per use

• Linear – e.g. pay per GB user, Telia

• Incremental – e.g. 1000 SMS, Halebop

• Linear with cap – e.g. Internet abroad,

Telenor

• Mixed/performance – Amazon EC2/S3,

Rackspace

Subscription

• Software as a Service (SaaS) – e.g.

Freshdesk

• Service as a Service – e.g. PayU

• Content as a Service

• Infrastructure/Platform as a service – e.g.

AWS, Azure

• Membership Services – e.g. Amazon Prime

• Support and Maintenance – e.g. Red Hat

• Paywall – e.g. ft.com, NYtimes

Licensing

• Less used today, except for patents, rights to use

• Per Device/Server License – e.g. Microsoft products

• Per Application instance – e.g. Adobe Photoshop

• Per Site License – e.g. Private cloud on internal infrastructure

• Patent Licensing (upfront + milestones/usage) – e.g. Qualcomm

Affiliate

• Referral revenue

• Affiliate revenue

Sponsorship/donations

• Not suitable for a startup

“open source”

• Not a revenue stream, but a strategy with

a revenue stream

So, pro’s and con’s

Pricing – two types

• Fixed

– Cost + margin

– Value based

– Volume based

• Dynamic

– Negotation

– Auctions

– Real-time market

Avoid price based on cost!

Some last words

• Two/multi-sided business models – focus

on users first

• Sketch a hypothesis, try to get facts

• Packaging (perception) is important

What is a revenue stream?

• Very simply: how will your startup make money? And how does your revenue model integrate itself into your business model canvas and customer value proposition? This isn't limited to the pricing of your product or service - but rather the overall strategy and tactics related to collecting the revenue from the value your customers are getting from your product/service.

• A revenue stream is the strategy to generate cash from each customer segment

• A pricing model is the tactics you'll use to set the price in each of your customer segments.

• To determine the pricing, you need to understand the value they are willing to pay for. When you're first making your assumptions, you can guess what the pricing could be, but you'll quickly validate how much they are currently paying (and for what value), and how they are currently paying.

• Common startup mistakes at this stage include thinking that your price is determined by the cost of manufacturing or producing the product or service or that your price should be lower than any other competitor's pricing.

• Tack …välkomna tillbaka!• - Teamet på Chalmers Innovation