How to Plan the Revenue Model for Online Businesses?
A website or mobile app with a good design and a lousy revenue model is just another average business.
Your customers may fancy the user experience. However, your business might lack a constant stream of revenue. All in all, it is just a hollow space for users to penetrate through and leave without adding any value to your bank balance.
We don’t want that. You don’t want that.
Your target audience should come as new visitors, turn into customers, and stay as retained customers.
Does this sound euphoric to you?
With a suitable revenue model, it is possible. Let’s address some FAQs before getting to know the working revenue model.
Top Questions about Revenue Models Answered
If you already have an online business but are unsure about it, we have answered the top questions.
Can I have Multiple Revenue Models for an App?
It is recommended to launch your online startup business with one primary revenue stream. As your business advances, you can identify the key nodes that capture the most attention of your users. You can monetize on these nodes to classify your second revenue model, and so on.
For instance, you are launching an on-demand video platform. Now, the content that is most viewed can be put as limited-access content. So, the first revenue layer is a subscription, and the second one is limited access.
How to Determine the Right Time to Introduce a Revenue Model in an App?
Every business has a specific ecosystem. Hence, generalizing might not work in this case. However, if you are providing promotional time to users to access your app at a discount, you should measure the retention rate of customers. If the retention rate and the number of new visitors is high, you can gradually decrease the promotional validity to move towards your actual revenue model full-fledged.
If the Revenue Model Doesn’t Pick Up, Should I Switch to Another One?
When you have just launched a business, the pick-up rate would be turtle-slow. In this situation, rather than switching to another model, you can increase the value of your app. Gauge your market and have better offerings than your competitors. If it still doesn’t work, you can consult with the IT professionals and make the right decision.
Which are the Types of Revenue Models for Online Businesses?
The revenue model basically is a thread that connects all your business purposes, and yet it is an outcome of well-aligned goals between a business and a customer. If you want to develop a mobile app and are confused about the revenue model, we’ve got you covered. There are numerous types of revenue models:
When you launch your app, you can offer a free trial based on time or features. Once the free trial duration is completed, users can subscribe to the plan to access the app. The plans can be created for a week, month, or year.
In the freemium revenue model, you can make some areas of your app free to access for users. However, in order to access more features, users will need to pay a premium fee.
Revenue through Ads:
The ad-based revenue model is one of the highly used tactics for online businesses. You can connect with the sponsors or brands and enter into an agreement to showcase their apps to your users. In addition, an ad-based revenue model is often assisted with a subscription plan for users to view ad-free content--e.g. YouTube Premium.
An in-app purchase revenue model is similar to the freemium model. Users get to access the app for free. However, the app charges a fee every time a user demands a premium content/feature. The difference between the premium and in-app purchase models is that a user can make multiple in-app purchases to access numerous content. In contradiction to this, the premium model unlocks all the features under a single purchase.
In case the demand for a specific product/service/feature is higher than the rest, you can incorporate a dynamic pricing model, also known as surge pricing.
When you don’t directly deal with the services or products but only provide a channel to connect the users and service providers, you can charge a commission for every service availed.
How to Determine the Right Revenue Model for Online Businesses?
The success of an online business depends on its ability to generate revenue. The revenue model should be such that users do not feel the weight to make the payment. To put this into perspective, users need something viable for every penny they spend. Hence, the key to the seamless passage of revenue begins with the quality of your offerings.
Below are some other tips for you to identify the right revenue model for your business:
Type of Industry:
Your competitors can be your best mentors. If you are an emerging online business, you can list down the top contenders in the space. Next, you should study their business model and revenue model to seek inspiration. Get to know the annual numbers. If the numbers are working in their favor, you can opt for the same revenue model but with value addition.
If you are a social media company, ad-based revenue works the best. For entertainment businesses, ad-based, subscription, or freemium revenue models can serve the purpose. For the fitness apps like Headspace, commission-based models, in-app purchases, surge pricing, freemium, or subscription can help build a sustainable business.
Type of Offerings:
If you are a product-based online company, your primary source of revenue would be product sales. You can optimize the revenue channel by adding the ad-based revenue model. However, if you are a service-based business, you have to identify the demand quotient of your services and plan your revenue model accordingly.
For service-based businesses, commission-model and subscription plans work the best. Besides this, you can also offer in-app purchases as additional offerings.
Frequency of Usage:
The selection of revenue model also hinges on the frequency of app usage. If your offerings include something that users use on a regular basis, you can opt for a subscription plan, surge pricing, or ad-based model.
On the contrary, if you offer something that can be used only on special occasions or events, you can opt for the freemium revenue model.
Bonus Section - What’s the Best Revenue Model for Online Businesses?
Revenue models can be multiple and varied in nature. A successful business monetizes every opportunity that may interest its target audience while providing equal value. You can begin with one revenue model. As your business advances, you can add features and functionalities to your business to help it stay relevant.
With more value-added to your online business, you can charge for better accessibility. Hence, a combination of revenue models is always the ultimate way to win the digital space.