Chapter 10 Flashcards
(29 cards)
What is a Revenue Model ?
Ability to generate revenue
Identifying how company will generate profits
Unit Sales Revenue Model
Measures the amount of revenue generated by the number of items (units) sold by a company.
Ex: The razor-and-razor-blade model
Advertising Revenue Model
Revenue gains through sales of advertising
Ex: Google Ads
Data Revenue Model
Generate revenue by selling high-quality, exclusive, valuable information called data assets.
Ex: Data can be sold in raw form or in the form of insights derived from data analysis
Intermediation Revenue Model
Methods by which third parties, such as brokers (or “intermediaries”) can generate money.
Ex: AirBNB
Licensing Revenue Model
Selling permission to use intellectual property
(copyrights, patents, and trademarks) in exchange for royalties or fees.
Ex: Microsoft, Disney
Franchising Revenue Model
The owner of an existing business (the franchisor) sells the rights to another party (a franchisee) to trade under the name of that business.
Ex: Franchisor helps franchisee with marketing, operation and financing, and franchisee pays franchisor royalties in exchange.
Subscription Revenue Model
Involves charging customers to gain continuous access to a product or service.
Ex: Magazines, newspapers
Professional Revenue Model
Provides professional services on a time and materials contract.
Ex: Lawyers charge by the hour for their services.
Utility and Usage Revenue Model
Charges customers fees on the basis of how often goods/services are used.
Ex: Prepaid mobile plans
Freemium Revenue Model
Involves mixing free (mainly web-based) basic services with premium or upgraded services.
Ex: apps
Revenue Drivers
- Customers
- Purchase frequency
- Selling process
- Price
Direct cross-subsidies
Pricing a product or service above its
market value to pay for the loss of giving away a product or service for free or below its market value.
Cost Drivers
- Cost of goods sold (COGS)
- Operating expenses
- Depreciation and amortization
- Interest expense and taxes
The goal with pricing startegies
- Create consistent revenue streams
- Opportunities for repeat business
Types of Pricing Strategies
- Competition-led pricing
- Customer-led pricing
- Loss leader
- Introductory offer
- Skimming
- Psychological pricing
- Fair pricing
- Bundled pricing
Pricing Strategies
- Prices adjust based on demand
- Understanding your brand
- Carry theme through packaging and marketing
Competition-led pricing
A pricing strategy that matches prices to other businesses selling the same or very similar products and services
Customer-led pricing
A pricing strategy that asks customers how much they are willing to pay and then
offers the product at that price.
Loss Leader
A pricing strategy whereby a business offers a product or service at a lower price in an attempt to attract more customers.
Introductory offer
A pricing strategy to encourage people to try a new product by offering it for free or at a heavily discounted price.
Skimming
A high pricing strategy, generally used for new products or services that face very little or even no competition
Psychological pricing
A pricing strategy intended to encourage customers to buy on the basis of their belief that the product or service is cheaper than it really is.
Fair pricing
The degree to which both businesses and
customers believe that the pricing is reasonable.
