What is a Business Model Canvas-Revenue Streams

BLOCK N°5: Revenue Streams 

 

The main target of a company is to generate money, to maximise its profit through a Revenue streams of each customer segments. Everyone build a Business Model has to ask himself the following ultimate question:

What value each segment willing to pay?

 

Finding the exact answer to this ultimate question you assure the longevity of your company and the success of your Business Model.

Keep in mind:

Finding the exact Customer Segments,

Defining the perfect Value Propositions,

Discovering the Revenue Streams 

mains to a successful company.

Returning to our ultimate question “What value each segment willing to pay?”. To answer this question, you have to set firstly the ways of generating Revenue Streams. Depending in your Value Propositions and Customer Segments you can choose one or more from the following ways:

• Asset sale: The conventional way of selling;
• Usage fee: Use of particular service;
• Subscription fees;
• Lending/Renting/Leasing: Use of a particular asset for a fixed period;
• Licensing;
• Brokerage fees: Intermediation services performed on behalf of two or more parties;
• Advertising.

Secondly, each Revenue Streams might have different pricing mechanisms. There are two types:

1- Fixed Pricing: Depends on static variables such as:

• Price list: static prices;
• Product feature: In function of the features of the Value Propositions;
• Customer Segment: Types of the Customer Segment;
• Volume: Quantities purchased.

2- Dynamic Pricing: Market conditions such as:

• Negotiation;
• Yield management: Inventory and time of purchase (Exp: Airline seats);
• Real-time-market: In function of the supply and demand;
• Auctions: Established by the outcome of competitive bidding.

Finally, the price strategy is important for the success of your Business Model, we suggest you "The Strategy and Tactics of Pricing: A Guide to Growing More Profitably" book to read.

Example: iPod Revenue Streams

 

The way used by Apple for defining the iPod Revenue streams is Asset Sales provided by the selling of the hardware, in addition to the selling of music on the iTunes store;

BLOCK N°6: Key Resources