A business model is a company’s strategy for generating revenue and profits by delivering value to its customers. It serves as the foundation of any business, helping define how a company operates, attracts customers, and sustains its activities over time. Over the years, businesses have developed various models to meet the evolving needs of consumers, technology, and market dynamics. In this article, we will explore the different types of business models commonly used today.

1. Bricks and Clicks

The Bricks and Clicks model combines offline (brick-and-mortar) and online (clicks) operations. Companies that adopt this model have physical stores for in-person shopping as well as an online presence for e-commerce. This hybrid model provides customers with the flexibility to shop in-store or online, and businesses can reach a wider audience while maintaining traditional retail operations.

2. Subscription-Based

In a subscription-based model, customers pay recurring fees—typically monthly or annually—for continuous access to a product or service. This model is prevalent in industries like software (e.g., SaaS), media (e.g., streaming services), and health & wellness (e.g., gym memberships). Subscription-based businesses benefit from predictable, steady revenue streams and customer loyalty.

3. Freemium

The freemium model offers basic services or features for free but charges for premium services or advanced features. This model is widely used by tech companies, particularly in mobile apps and software. The goal is to attract a large user base, and then convert a percentage of free users into paying customers for added value or functionality.

4. Direct Sales

In a direct sales model, businesses sell products directly to consumers without using intermediaries like retailers or wholesalers. This model is commonly seen in industries such as direct-selling companies (e.g., Avon, Mary Kay) and companies that sell through their own e-commerce sites or physical storefronts.

5. Franchise

Franchise businesses allow others to operate businesses using an established brand’s model, trademarks, and systems in exchange for fees and ongoing royalties. The franchisor provides training, marketing, and support, while franchisees operate the business locally. This model is popular in the food industry (e.g., McDonald's) and retail sectors.

6. Advertising

The advertising business model generates revenue by selling advertising space alongside free content or services. This model is common in media companies, including television, newspapers, websites, and social platforms like Facebook and Google, where users access content for free, but the business profits through ads.

7. Commission-Based

A commission-based model involves earning a percentage of each transaction or sale facilitated between buyers and sellers. This model is common in real estate, affiliate marketing, travel agencies, and marketplaces like eBay and Uber, where the platform earns a commission from transactions.

8. Licensing

Licensing allows a business to earn revenue by allowing others to use its intellectual property (e.g., patents, trademarks, copyrights) in exchange for a fee. Companies that use this model may license their products, technology, or content to other businesses, which can then commercialize it under the terms of the licensing agreement.

9. Razor and Blades

This model involves selling a primary product (the razor) at a low price, often below cost, while charging higher prices for complementary products (the blades). This approach is commonly used in industries such as razors, printers (selling printers at a low price and ink cartridges at a premium), and gaming consoles.

10. Aggregator

An aggregator business model brings together multiple providers or sources under a single platform to offer a standardized product or service. This model works by offering consumers a variety of choices from different suppliers, and the platform typically earns revenue through commissions or fees. Examples include food delivery apps like Uber Eats or travel comparison sites like Expedia.

11. Marketplace

A marketplace business model provides a platform where buyers and sellers can transact, and the platform typically earns revenue through listing fees, commissions, or advertising. Examples include eBay, Amazon, and Airbnb, where the platform facilitates transactions but doesn’t directly sell the products or services.

12. Crowdsourcing

Crowdsourcing is a model where businesses obtain input, services, or content by soliciting contributions from a large group of people, usually online. This model is widely used for funding projects (crowdfunding platforms like Kickstarter) or gathering information (crowd-sourced data and research).

13. Peer-to-Peer (P2P)

The Peer-to-Peer model enables direct transactions between individuals, often through an online platform that facilitates the exchange of goods or services. Examples include platforms like Airbnb or Uber, where users can rent out their properties or offer rides, and the platform takes a percentage of the transaction.

14. Pay-What-You-Can

A pay-what-you-can model allows customers to pay an amount of their choosing for a product or service. This model is often used as a promotional tactic, for charitable purposes, or by businesses that want to increase accessibility to their offerings. Pay-what-you-can pricing is commonly seen in nonprofit sectors or donation-based platforms.

15. Reverse Auction

In a reverse auction, buyers state their needs or requirements, and sellers bid to offer the lowest price. The platform typically earns revenue through listing fees or commissions on the transaction. Platforms like Priceline use this model for travel bookings, allowing customers to choose the best deal from sellers’ bids.

16. Data Licensing/Selling

Data licensing or selling involves collecting user data and selling it to third parties. This business model is common with free services like social media platforms, search engines, and mobile apps, which generate revenue by selling user-generated data to advertisers or marketers.

17. Affiliate Marketing

Affiliate marketing involves earning commissions by promoting other companies' products or services and driving sales through referrals. Affiliates typically use websites, blogs, or social media channels to promote products, earning a percentage of the sale for every successful referral.

18. Drop Shipping

Drop shipping allows businesses to sell products without holding inventory. When a customer places an order, the business forwards the order to a third-party supplier who directly ships the product to the customer. This model eliminates the need for warehousing and inventory management.

19. High-Touch

A high-touch business model focuses on providing personalized services to customers, often justifying premium pricing. Companies in industries like luxury goods, high-end hospitality, and bespoke services (e.g., custom tailoring) use this model to offer tailored experiences that exceed basic expectations.

20. Low-Touch

In contrast, the low-touch model focuses on offering standardized services with minimal direct customer interaction. These businesses prioritize efficiency and scalability, providing services that require little human involvement, such as automated software, fast-food chains, or SaaS platforms.

There are various other business models that companies use to generate revenue and deliver value to customers, each suited to different industries, products, and consumer needs. In today’s fast-evolving market, businesses often combine or adapt these models to suit their goals, market conditions, and customer preferences. Some of the most common models are centered on how companies sell products, interact with customers, and structure their revenue streams.

A bricks and clicks model combines offline and online presences, allowing businesses to reach customers both in physical stores and through online platforms. This hybrid approach has gained popularity with the rise of omnichannel shopping, where customers can seamlessly transition between in-store and digital experiences.

The subscription-based model involves charging customers recurring fees for continuous access to products or services. This model has become widely popular in industries like entertainment, software, and consumer goods, as it offers businesses predictable revenue streams and customers convenience with access to goods or services on a regular basis.

In the freemium model, companies offer basic services for free while charging for premium features or enhanced services. This model is often used by software companies and online platforms, providing a low barrier to entry while incentivizing users to upgrade to paid versions for additional features.

A direct sales model involves selling products directly to consumers without intermediaries. This model eliminates the need for wholesalers or retailers and is frequently seen in companies that sell through their own storefronts, both physical and online, as well as in industries like cosmetics and direct marketing.

The franchise model allows other entrepreneurs to operate businesses under an established brand’s proven model. This allows rapid expansion and leverage of an established brand’s reputation and processes, as seen with fast-food chains, fitness centers, and hospitality businesses.

The advertising model focuses on generating revenue by selling advertising space alongside free content or services. Platforms like Google, Facebook, and television networks have successfully adopted this model, offering their services for free while profiting from the ads displayed to their users.

With the commission-based model, businesses earn revenue by facilitating transactions between buyers and sellers and taking a percentage of each sale. This model is often seen in platforms such as eBay, real estate, and financial services, where businesses act as intermediaries.

The licensing model involves earning revenue by allowing other businesses to use your intellectual property in exchange for a fee. Licensing can apply to patents, trademarks, and copyrights and is commonly seen in the technology and entertainment industries.

The razor and blades model works by selling a primary product at a low price and charging higher prices for complementary goods or consumables, which are often necessary for the product’s use. Classic examples include companies that sell printers at low costs but make significant profits from ink cartridges.

The aggregator model gathers offerings from various providers under one roof, often streamlining a specific service or product for consumers. Websites like Expedia or Uber use this model to bring together travel options or ride services from various sources into one easy-to-use platform.

A marketplace model provides a platform where buyers and sellers can transact, with the platform typically earning through commissions, listing fees, or transaction charges. Examples include eBay, Etsy, and Amazon, which bring together various sellers to offer a variety of products and services.

Crowdsourcing involves obtaining input, services, or content by soliciting contributions from a large group of people, typically online. This business model allows companies to gather diverse insights or fund their projects by harnessing the collective power of their audience. Crowdfunding platforms like Kickstarter or GoFundMe are prominent examples of this model.

The peer-to-peer (P2P) model enables direct transactions between individuals, often facilitated by an online platform that earns money through fees or commissions. Platforms like Airbnb and eBay offer P2P exchanges, connecting people with specific needs and offering secure, transparent transaction environments.

In the pay-what-you-can model, customers are allowed to pay any amount they choose for a product or service. This is often seen in charitable or promotional contexts, where companies or organizations seek to raise awareness or create goodwill.

A reverse auction is a pricing model where buyers state a need, and sellers bid to offer the lowest price, with the platform earning revenue through fees or commissions. It is commonly used in procurement and sourcing industries, enabling buyers to find competitive offers quickly.

The data licensing/selling model involves collecting and selling user data to third parties. Businesses that offer free services or content often use this model, generating revenue by selling anonymized data to marketers, advertisers, or other entities.

Affiliate marketing is a performance-based model where businesses earn commissions by promoting products or services from other companies and driving sales through referrals. This model has become popular with bloggers, influencers, and online content creators.

With drop shipping, businesses sell products without holding any inventory. Instead, they fulfill orders by purchasing goods from a third-party supplier who ships them directly to the customer. This low-risk model is frequently used by e-commerce stores.

High-touch businesses focus on providing personalized services, with a strong emphasis on customer relationships. These models justify premium pricing due to the tailored experiences offered. Examples include luxury goods, consulting services, and exclusive memberships.

In contrast, low-touch models focus on offering standardized services with minimal direct customer interaction. This approach is more cost-effective and scalable, as seen in businesses like budget airlines and fast food chains.

User-generated content platforms, such as YouTube, rely on content created by users, with revenue generated through advertising or premium features. These models empower individuals to contribute content, while businesses capitalize on the user base and advertising opportunities.

Experience selling focuses on providing unique experiences as the primary value proposition rather than physical products. Examples include theme parks, travel agencies, and concert organizers, where the value lies in offering memorable, once-in-a-lifetime experiences.

The leasing/renting model allows customers to use a product for a specific period in exchange for a fee. This model is seen in real estate, car rental, and equipment leasing industries.

E-commerce refers to businesses selling products or services online directly to consumers. This model has transformed retail by enabling companies to reach global markets through digital storefronts.

The open-source model offers software for free, with revenue earned through complementary services like support, hosting, or customization. Businesses such as Red Hat and WordPress operate under this model, leveraging the community to build and improve open-source software.

Freelance/contracting allows individuals to provide specialized services on a per-project basis, without the need for long-term commitments. This model is often used in creative industries, IT, and consulting.

Barter is an ancient model that involves exchanging goods or services directly for other goods or services without the use of money. In some communities or specialized industries, bartering still plays a role in trade.

The productization of services involves turning custom services into standardized products that can be sold to a wider audience. This approach helps businesses scale their offerings, often by converting consultancy or bespoke services into software or online courses.

Decoy pricing is a pricing strategy that introduces a third, higher-priced option to make other options appear more attractive. This method is often used in subscription-based services or digital products, influencing consumer behavior toward higher-value purchases.

Hidden revenue is a model where businesses offer free products to users while generating revenue through third parties, such as through partnerships or selling user data. Many free-to-use apps or platforms operate under this model, such as social media networks.

Fractional ownership allows customers to own a portion of a high-value asset, like real estate or luxury items, sharing both the costs and benefits. This model provides access to expensive assets without the full financial burden.

The on-demand model allows customers to access goods or services immediately, typically through a digital platform. Companies like Uber or Netflix use this model, generating revenue each time a service is used.

Frugal innovation focuses on creating affordable products by minimizing complexity and cost. This model targets budget-conscious consumers and can be seen in businesses that prioritize efficiency and affordability.

Microtransactions involve small, often digital, purchases within an application or platform, common in online games or mobile apps. This model allows businesses to profit from frequent small purchases.

Companies that adopt corporate social responsibility (CSR) build their business models around ethical practices and sustainability. These businesses attract customers who value social impact, contributing to a positive public image and attracting a loyal customer base.

An ecosystem model involves creating a suite of interconnected products or services that enhance each other's value, encouraging customer loyalty. This model is common in companies like Apple, where the hardware, software, and services work together.

The long tail model focuses on offering a large variety of niche products that may not sell in high volumes individually, but collectively contribute to significant revenue. This model is seen in platforms like Amazon or Etsy.

In reverse engineering, companies analyze the products of successful competitors and create similar offerings, often at a lower price point. This strategy allows companies to enter markets quickly with cost-effective solutions.

The pay-per-use model charges customers based on their actual usage rather than a flat fee. This model is often seen in services like utilities or cloud computing, where customers pay according to their consumption.

Finally, the user community model builds platforms where users interact, share content, and engage, generating revenue through memberships, advertising, or merchandise. Examples include platforms like Reddit or Discord, where the community contributes to both content and engagement.

Crowdfunding allows businesses or individuals to raise capital by soliciting small contributions from a large group of people, often through online platforms. This model democratizes funding and gives people an opportunity to invest in or support projects they believe in.

Each of these business models has its unique advantages, and businesses often combine elements of multiple models to maximize their revenue streams and reach. By understanding the different approaches available, companies can make strategic decisions that best align with their objectives, resources, and target customers.