06.09.2022 11:30

What are The 3 Main Types of Revenue Models?

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A revenue model is a tool that is used for the creation, promotion, and delivery of a product or service to the customer. Furthermore, relationships with clients and investments are the sources of income.

The business model is based on a revenue model. It is extremely important to determine it correctly at the initial stage of business development so that profit will not be long in coming. This question will also be interesting to investors because the return on investment will depend on it. It is worth noting that any business can combine several income models.

Let us discuss revenue models that can be used for OTT monetization and more.

For Manufacturers

When you decide to create some product or service, you have to think about the needs and expectations of the target audience. Then, of course, it is necessary to choose the best ways for delivery.

While thinking about these issues, you can utilize one of the following models:

  • Direct marketing. It means that you sell your product through a land-based or online store. In this case, there will be no intermediaries between you and your client, which may help in building closer relationships. In addition, you will save money on intermediaries. This model requires special knowledge and additional investment.
  • Cooperation with a distributor, wholesaler, or retailer. This model involves a specialized dealer who reaches clients through multiple channels. Of course, you will pay them, but they will save your time on looking for customers.
  • Transfer of your rights to distributors. Here, we talk about cooperation with a unique intermediary and the creation of a monopoly on your product. If it will be in demand, you can wait for great profits. An additional advantage will be the possibility to control the work of the intermediary, as well as to improve the knowledge of its employees in the field of the product.

For Distributors

There is severe competition in this area because manufacturers often select the model that involves distributors. They think about logistics and link the business owner to the client.

The main advantage of the model is the ability to limit the number of outlets that sell the retailer’s products, as well as to control their activities. For example, staff training will improve the quality of services provided, which directly affects the number of sales.

There are different ways to do this, namely:

  • Retail that involves a large number of products. The distributor works with several manufacturers and provides clients with a variety of goods.
  • Orientation for some niche. The distributor can choose only one category of product and work with it exclusively.
  • Personal sales. In this case, customers pay a regular membership fee and get personal access to the discount system for goods or services.
  • One product per day. This scheme involves a particular product that is sold at a great discount but only one day. Users get this information, and the time limit encourages them to purchase the item quickly.
  • Integrated model. This way combines the traditional buying method with an increasingly popular online store tool. The client selects a product and makes a payment on the distributor’s website. Then, they receive the desired good in the land-based store.

Affiliate Marketing

The model is based on the service provided to the client. The latter is then attracted to take part in an affiliate program and get some discounts or other favorable offers.

Another tool of this program is the guidance of the customer to some products through the content of the website. Many stores utilize this revenue model because they can attract the audience additionally and easily increase the profit. However, it is important to expand the base of customers on a daily basis.

Affiliate marketing uses the same tools as direct sellers to attract customers. The most popular techniques are contextual advertising, banners, and email newsletters. The advantage for the advertiser is direct access to tracking and analytics of advertising campaigns, which allows him to evaluate their effectiveness.

This type involves four parties:

  • seller;
  • partner;
  • network;
  • customer.

A popular example of the use of affiliate marketing is product mentions by public persons. It is not difficult to guess that such advertising is beneficial to all participants.

The most important role in affiliate marketing is played by a competent strategy. Its first stage is the development of a quality content plan, which will determine customer loyalty to the product and brand as a whole. SEO optimization is another important tool to attract more audiences through search query ranking. Social media also plays an important role, aimed in increasing reach.

Frequent mention of the brand on such platforms will attract more interested customers. And do not forget about upselling! Only by selling more expensive, you can increase profits. And this does not mean that the goods of the budget segment should be overlooked. It is necessary to focus the customer’s attention on the benefits and usefulness of premium products.

There are the most popular models that are often chosen as a basic strategy in the world of business.

Regardless of the revenue model chosen, attention must be paid to developing a reasonable pricing policy. There is a misconception that discounts and drastic price reductions attract more customers. In fact, the effect is short-lived. 

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