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60 startup business model patterns for 2025
Last updated: October 16, 2024
Based on: Business Model Navigator
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Think about business models. What do those 12 startup models you must know articles usually feature? Freemium, razor blade, subscription, white label, drop-shipping… But here’s the catch: these aren’t actually business models.
In this article, we’re taking a different approach. Below, you’ll find a list of 60 business model patterns you can pick and combine like LEGO building blocks to create your own business model.
Jump right to the list 👇 or scroll on to read a short theoretical introduction.
Revenue and pricing
Market positioning and customer relationship
Distribution and access
Collaborative and platform
Resource and process optimization
Your understanding of a business model is wrong.
What comes to your mind when you think about business models? What gets featured in all the 12, 5, 31 or 7 startup business models you must know-like articles?
Probably, it’s a mix of freemium, razor blade, subscription, white label with drop-shipping on top of it.
The problem is these are not business models.
These are business model patterns.
The actual definition of a business model
A business model is a framework that describes how a company creates, delivers, and captures value (according to the most popular definition).
In practice, this means how a company
Develops products, services, or experiences that customers want;
Gets these offerings to customers effectively;
Monetizes this process.
While how a company is going to make money is an important thing to consider, it’s just one part of a business model. Apart from that, you need to define what problem your business solves and how, who your customers are, how you’re different from your competitors, and so on. (For that, Lean Business Canvas and our article on creating a business model for startups can be useful.)
As you can see, a business model is a framework that’s not only much more complex, but also unique to each business.
What you’ll find on this list
Instead of compiling another confusing list of “business models”, we’ve given you a shorter and more handy version of the Business Model Navigator’s pattern list–an amazing tool created by BMI Lab.
This is a list of patterns you can use to create your own business model–either but taking one of compiling some concepts from the list below.
(Business Model Navigator’ list of 60 comes from their analysis of 350 business model innovators. They found out that about 90% of their innovations are recombinations of previously existing concepts, ideas, or business models–which means you’re almost certainly going to make use of these patterns when designing your own.)
Add-on
The base price is low, but pricey extras drive up the total cost. Customers often pay more than expected. On the plus side, buyers can customize their purchase. They pick only the extras they need, tailoring the product to their specific requirements.
Top industry: Software
Often comes with: Lock-in
Example: Salesforce’s basic Sales Cloud plan starts at $25 per user per month. This price looks competitive compared to other CRM solutions. However, costs can quickly add up if a customer wants advanced features, extra storage, or premium support.
| Aspect | Details |
|---|---|
| Implementation Strategies | • Start with a strong core product |
| Key Metrics | • Average Revenue Per User (ARPU) • Upsell conversion rate • Customer Lifetime Value (CLV) • Churn rate • Add-on adoption rate |
| Potential Partnerships | • Complementary service providers • Add-on developers or suppliers • Integration with popular platforms • Affiliate marketers for core product |
| Common Pitfalls | • Overpricing add-ons • Neglecting core product quality • Overwhelming customers with too many options • Lack of transparency in pricing • Insufficient value in add-ons |
| Customer Acquisition Strategies | • Lead with attractive core product pricing • Content marketing focusing on base + add-on benefits • Referral programs with add-on incentives • Free trials of premium add-ons • Targeted ads for specific add-on features |
| Competitive Advantage | • Flexibility and customization for users • Lower initial price point • Ability to capture more value from power users • Continuous revenue stream from add-ons • Data-driven insight into customer preferences |
| Adaptation Potential | • Easy to add or remove features based on demand • Can shift to subscription model if needed • Possibility to bundle popular add-ons • Potential to create spin-off products from successful add-ons |
| Funding Considerations | • Attractive to investors due to upsell potential • May require funding for continuous add-on development • Predictable revenue streams from recurring add-ons • Potential for high growth through cross-selling |
Affiliation
Affiliate marketing benefits both sellers and promoters. Affiliates earn money by selling others’ products, usually through commissions or ad views. Companies gain access to new customers without extra marketing efforts. This system allows businesses to expand their reach while affiliates profit from successful sales. It’s a win-win strategy that’s especially effective in online markets.
Top industry: Hospitality
Often comes with: Leverage Customer Data
Example: Airbnb. Hosts act as affiliates by listing their properties. They earn money when guests book their space. Airbnb takes a cut of each transaction.
Aikido
Aikido in business means offering something completely opposite to competitors. Like the martial art, it uses their strength against them. Companies create a new value proposition that’s different from the mainstream. This attracts customers who want something unique. It’s a way to stand out by going against common industry approaches.
Top industry: Entertainment
Often comes with: E-commerce
Example: Nintendo. While competitors focused on cutting-edge graphics and hardcore gamers, Nintendo targeted families and casual players. They emphasized fun, simple gameplay over technical specs.
Auction
Auctions sell items to the highest bidder. The price keeps rising until time runs out or no one bids higher. Companies get the best price customers will pay. Buyers can influence the final cost through their bids. This creates a dynamic pricing system that balances seller profits and buyer willingness to pay.
Top industry: Transportation
Often comes with: Two-sided market
Example: Lufthansa. Passengers bid on better seats after booking. They offer what they’re willing to pay for an upgrade. Lufthansa accepts the highest bids that fit available seats.
Barter
Barter involves exchanging goods without money. The exchange doesn’t need to be directly related. Each side values the trade differently.
Top industry: Airlines
Often comes with: Auction
Example: Pepsi. In 1972, Pepsi became the first foreign product sold in the Soviet Union.They offered its drink in exchange for exclusive rights to sell Stolichnaya vodka in America.USSR, on the other hand, gained exclusive sales rights on the American market.
Cash Machine
Customers pay for products before the company covers its costs. This creates extra cash flow for the business. The company can use this money to pay off debts or invest in growth. It’s a way to improve liquidity without taking on more debt or finding new investors.
Top industry: E-commerce
Often comes with: Leverage Customer Data
Example: Amazon Web Services (AWS). Customers pay upfront for a year of cloud computing. This prepayment gives them big discounts, up to 75% off regular prices. AWS gets cash in advance, which they can use for investments or operations. Customers save money by committing early.
Cross-selling
Businesses offer additional products or services to existing customers.
Top industry: E-commerce
Often comes with: Direct selling
Example: Lufthansa sells products in-flight and online, both aviation-related and not. This boosts revenue by targeting a customer group which typically has significant purchasing power beyond just flight tickets.
Crwodfunding
Crowdfunding is a method of raising money for projects or ventures by collecting small amounts from many people, typically via the internet.
Top industry: Media
Often comes with: Digitization, Hidden Revenue, Open Source
Example: Oculus Rift, a virtual reality headset, raised $2.4 million on Kickstarter in 2012, far exceeding its $250,000 goal. This success led to its $2 billion acquisition by Facebook in 2014.
Crowdsourcing
Crowdsourcing gets online crowds to solve problems. People submit ideas for rewards. This builds customer relationships and can boost sales. Companies tap into diverse thinking while engaging their audience.
Top industry: Consumer Goods
Often comes with: Reverse Innovation
Example: LEGO Ideas. Fans submit new LEGO set designs online. Other users vote on their favorites. LEGO reviews top ideas and may produce them as official sets. Winning designers get a share of sales.
Customer Loyalty
Customer loyalty programs reward repeat buyers. They offer perks beyond the main product or service. This creates emotional ties or gives tangible benefits. The goal is to keep customers coming back.
Top industry: Retail
Often comes with: Affiliation, Cross Selling, Direct Selling, Leverage Customer Data
Example: MyMcDonald’s Rewards. Customers earn points on purchases through the app. These points can be exchanged for free menu items. The app also offers exclusive deals and personalized offers.
Digitization
Digitization transforms physical products into digital versions. This brings benefits like faster distribution. The key is to keep the core value while adding digital perks. Companies aim to make things more efficient without losing what customers love.
Top industry: Entertainment
Often comes with: Subscription, Leverage Customer Data
Example: Spotify turned physical albums into a streaming service. Users get instant access to millions of songs without buying CDs. Spotify kept music’s core value (listening to favorite artists) while adding benefits like playlists and offline mode.
Direct selling
Direct selling means companies sell straight to customers, skipping stores or middlemen. This cuts out extra costs, which can mean lower prices for buyers. It also lets the company control the sales experience. By dealing directly with customers, businesses can build stronger relationships.
Top industry: Fashion
Often comes with: E-commerce
Example: IKEA designs, manufactures, and sells their own furniture directly to customers. IKEA stores combine showrooms and warehouses. Customers see products in person, then pick up flat-packed items themselves.
E-commerce
E-commerce replaces physical stores with online-only sales. This cuts costs tied to running actual shops. For customers, it means 24/7 access and easy shopping from home. Companies can link sales directly with other parts of their business, like inventory and shipping.
Top industry: E-commerce
Often comes with: Direct Selling
Example: Amazon is the quintessential example of e-commerce replacing physical stores. They built a massive online retail business without traditional shops, offering customers 24/7 access to a vast range of products while tightly integrating sales with inventory and shipping systems.
Experience selling
Experience selling boosts product value through great customer experiences. This strategy increases demand and allows higher prices, but requires tailored experiences. Companies adapt their approach, from marketing to store design. The goal is to make buying feel special.
Top industry: Automotive
Often comes with: Direct Selling
Example: Porsche offers personalized consultations and custom car configurations. Customers can use high-tech simulators to “test drive” different models. Some showrooms have race track access for real test drives.
Flat rate
Flat rate pricing charges one set fee, no matter how much you use. Customers like it because costs are simple and predictable. Companies benefit from steady income. It’s common for services like unlimited data plans or gym memberships. This model works well when usage costs are low, and it encourages customers to use the service more.
Top industry: Entertainment
Often comes with: Subscription
Example: Amazon Prime uses the flat rate pattern by charging a single annual or monthly fee for unlimited access to various services. Customers pay a predictable cost, gaining benefits like free two-day shipping, video and music streaming, and exclusive deals. This model encourages frequent use of services, driving customer loyalty while providing Amazon with steady and predictable revenue.
Fractional ownership
Fractional ownership allows a group of people to share ownership of an expensive asset that they only need occasionally. This way, each person enjoys the benefits of being an owner without having to cover the full cost on their own.
Top industry: Financial services
Often comes with: Target The Poor, Pay Per Use, Rent Instead of Buy, Self-service, Subscription
Example: Pacaso offers fractional ownership of luxury vacation homes. Buyers co-own a share of the home (like 1/8), get usage rights based on their share, and can schedule stays through an app. Pacaso handles all management, and owners can sell their share anytime, making it a flexible and affordable way to enjoy a vacation home.
Franchising
A company (the franchisor) allows an individual or group (the franchisee) to operate a business under its brand, using its products, services, and operational methods. In exchange, the franchisee typically pays an initial fee and ongoing royalties to the franchisor.
Top industry: Retail
Often comes with: Target The Poor
Example: 7-Eleven. Franchisees pay an initial fee and share profits with 7-Eleven, while benefiting from its established brand, supply chain, and support systems.
Freemium
A company offers a basic version of its product or service for free, while charging for premium features or additional functionality. The goal is to attract a large user base with the free offering and then convert some of those users into paying customers who want advanced features, better service, or more resources.
Top industry: Services
Often comes with: Leverage Customer Data
Example: Grammarly offers basic grammar and spelling checks for free to attract users. It encourages upgrades to its premium version by showcasing advanced features like style suggestions, tone adjustments, and plagiarism checks.
From push to pull
This pattern involves decentralizing a company’s operations to increase flexibility and become more customer-focused. By doing so, the company can quickly adapt to changing customer needs, impacting various parts of the value chain, including production and research and development.
Top industry: Hardware, Transportation, IT, Automotive, Retail, Fashion
Often comes with: Cash Machine, Direct Selling, E-commerce, Mass Customization, License, Integrator
Example: Toyota decentralizes production processes to allow each plant to adapt to local market demands and improve efficiency.
Guaranteed availability
This model guarantees near-zero downtime, allowing customers to use the product or service whenever needed. The company reduces operational costs and ensures high availability by utilizing its expertise and economies of scale.
Top industry: Software
Often comes with: Digitization, Subscription
Example: Microsoft Azure uses a global network of data centers to provide geographic redundancy, ensuring services can failover to another location if one experiences issues.
Ingredient branding
Ingredient branding involves choosing a specific ingredient or component from a supplier to include in another product. This ingredient is branded and promoted alongside the final product, enhancing its value and projecting positive associations from the ingredient brand.
Top industry: IT
Often comes with: Layer Player
Example: Intel’s logo is prominently featured on computers, signaling quality and performance. This branding enhances the appeal of PCs that use Intel processors.
Integrator
An integrator is a company that manages many parts of the process that adds value to its products or services. By controlling most of the resources and capabilities, the integrator can work more efficiently and reduce costs.
Top industry: IT, Industrials, Transportation
Often comes with: Cash Machine
Example: Tesla manages the entire production process of its electric vehicles, from battery manufacturing to vehicle assembly and software development.
Layer player
A layer player is a company that focuses on providing a specific step in the value-adding process across different markets and industries. Instead of handling everything from start to finish, they specialize in one part, which allows them to do it really well.
Top industry: IT
Often comes with: Solution Provider
Example: Nvidia specializes in designing and manufacturing graphics processing units (GPUs) and AI hardware, which serve as critical components in various industries, including gaming, automotive, data centers, and artificial intelligence.
Leverage customer data
Companies collect and organize customer data on preferences and behaviors to create new value. They can monetize this data by selling it to other businesses or, more commonly, by using it to enhance their own marketing efforts.
Top industry: IT
Often comes with: Two-sided Market
Example: Netflix analyzes viewing habits to recommend shows and movies, improving user engagement and retention.
License
Creating valuable intellectual property that can be licensed to other manufacturers. Instead of turning their knowledge into products themselves, companies use this model to make money from their ideas.
Top industry: Automotive, Transportation
Often comes with:
Example: Qualcomm licenses its semiconductor technology and patents to smartphone manufacturers, generating revenue without directly producing devices.
Lock-in
Customers become so attached to a company’s products and services that switching to a competitor is difficult and costly.
Top industry: IT
Often comes with: Digitization
Example: Nestlé’s Nespresso uses lock-in by creating a system where customers buy specific Nespresso machines that are designed to work exclusively with Nespresso coffee capsules.
Long tail
Companies focus on selling a wide range of niche products rather than just a few popular ones. While each niche product may not sell in large quantities or at high prices, offering many of them can lead to significant overall profits. By catering to diverse customer interests, businesses can capitalize on the cumulative sales from these less popular items.
Top industry: IT
Often comes with: Two-sided Market, Leverage Customer Data, Digitization
Example: YouTube hosts a vast amount of user-generated content, where niche channels and videos can attract dedicated audiences, contributing to overall platform revenue.
Make more of it
A company uses its expertise and resources not just to make its own products, but also to help other businesses. By offering their knowledge and unused assets, companies can generate extra income alongside their main revenue from their core products or services. It’s a way to maximize the value of what they already have.
Top industry: IT, Services, Chemicals, Industrials
Often comes with: Performance-based contracting
Example: BASF uses the “make more of it” business model by connecting its production plants in a network called Verbund. This setup allows them to use raw materials efficiently and turn by-products from one process into useful inputs for another. By collaborating with its subsidiaries and sometimes external partners, BASF can sell these by-products to them, creating extra revenue while minimizing waste.
Mass customization
Companies create personalized products while still making them in large quantities. By using parts that can be mixed and matched, businesses can easily customize items to fit individual customer needs without raising prices too much
Top industry: IT, Retail, Consumer Goods
Often comes with: E-commerce
Example: In Subway, customers can create their own sandwiches by choosing from a wide variety of bread, meats, vegetables, sauces, and toppings.
No frills
Providing only the essential features of a product or service, keeping it as simple and basic as possible.
Top industry: Retail
Often comes with: Target The Poor
Example: Recently, Nokia offers budget-friendly smartphones that prioritize durability and core functionalities.
Open business model
Companies using this model look for new ways to collaborate with suppliers, customers, and others to grow and improve their offerings, leveraging shared ideas and resources for better results.
Top industry: Retail, Fashion, IT, Entertainment
Often comes with: E-commerce, Long Tail
Example: Abril was created by a group of 29 small textile companies in Costa Rica that joined forces to market their products under one brand. By using the social media platform hi5 and getting support from their partner Barrabes, these companies shared marketing resources, allowing them to effectively split the costs of a successful branding campaign.
Open source
Making software source code freely available for anyone to use, modify, and distribute. Companies leveraging this model often provide basic software for free while offering premium features, support, or services for a fee.
Top industry: IT
Often comes with: Hidden Revenue, Leverage Customer Data
Example: WordPress is an open-source content management system. While the software is free, the company generates revenue through premium themes, plugins, and hosting services via WordPress.com.
Orchestrator
A company acts as a central hub, coordinating and integrating various resources, partners, and services rather than producing products or services directly.
Top industry: Consumer Goods
Often comes with: Various patterns
Example: Uber connects drivers and riders through its platform without owning the cars.
Pay per use
Customers are charged based on their actual usage of a product or service rather than paying a flat fee or subscription.
Top industry: IT, Services
Often comes with: Self-service
Example: Zipcar. This car-sharing service allows users to pay for vehicle use by the hour or day. Customers only pay for the time they actually use the car.
Pay what you want
Customers have the freedom to choose how much they want to pay for a product or service.
Top industry: IT, E-commerce, Retail, Consumer Goods
Often comes with: Subscription, Two-sided market, Franchising
Example: Gumroad utilizes the Pay What You Want (PWYW) model by allowing creators to set flexible pricing for their digital products, such as e-books, music, art, and software.
Peer-to-peer (P2P)
Individuals interact directly with each other without the need for a central authority or intermediary. A company offers a meeting point, for example an online database or communication platforms where participants can share resources, information, or services directly with one another.
Top industry: IT
Often comes with: Leverage Customer Data
Example: WhatsApp allows users to send messages, make voice and video calls, and share media directly.
Performance-based contracting
Performance-based contracting focuses on outcomes. You pay based on how well the product or service performs. Companies work closely with customers and use their know-how to make and maintain products more cheaply.
Top industry: IT, Industrials
Often comes with: License, Rent Instead Of Buy, Make More Of It
Example: Rolls-Royce’s “Power by the Hour” program for aircraft engines. Airlines pay based on how many hours the engines are in flight (outcome), not for the engines themselves.
Razor and blade
A company sells a basic product (the “razor”) at a low price, sometimes even at a loss. This product needs refills or add-ons (the “blades”) to keep working. The company then makes its real money by selling these refills at a higher price.
Top industry: IT
Often comes with: Lock-in
Example: HP sells printers at low prices. The real money comes from ink cartridges – the “blades”. HP prices are much higher, with significant profit margins. They’re designed to work only in HP printers.
Rent instead of buy
Instead of selling products outright, companies offer them for rent or subscription. This applies to all sorts of things – from cars and furniture to clothing and tech gadgets. Customers pay a regular fee to use the item for a set period. They don’t own it, but they get the benefits of using it.
Top industry: IT
Often comes with: Subscription
Example: Hilti Fleet Management. Instead of selling tools outright, Hilti offers them on a subscription basis. Construction companies pay a monthly fee to use Hilti’s tools. The program covers a wide range of tools, from basic drills to specialized equipment. Customers can choose what they need for their projects.
Revenue sharing
Partners split the money earned from a product or service. It’s based on each party’s contribution or the agreement they make. You’ll see this model in app stores, affiliate marketing, and joint ventures.
Top industry: IT
Often comes with: Leverage Customer Data
Example: Apple’s App Store and Google Play take a cut (usually 15-30%) of app sales and in-app purchases. The rest goes to app developers.
Reverse engineering
Reverse engineering is copying a competitor’s product by taking it apart and studying it. Companies do this to make similar or compatible items without spending much on research. They can then sell these products more cheaply than the original.
Top industry: Various
Often comes with: License
Example: Xiaomi has been known for reverse engineering the hardware and software of premium smartphones from brands like Apple and Samsung to offer similar phones at a much lower price.
Reverse innovation
Reverse innovation is a business strategy where a product or service is initially developed for a developing market and then later introduced to developed markets. This is often driven by the constraints and unique needs of developing countries, which can lead to innovative solutions that are later adapted for more affluent markets.
Top industry: Consumer Goods
Often comes with: Target The Poor
Example: Red Bull
Krating Daeng (it literally means red bull in Thai) was originally a Thai energy drink. It was created in 1975 to help keep truck drivers awake on long hauls.
In 1984, Austrian businessman Dietrich Mateschitz tried Krating Daeng while in Thailand. He saw its potential for the Western market.
Mateschitz partnered with Krating Daeng’s creator to adapt the drink for European tastes. They carbonated it and slightly changed the formula.This adapted version became Red Bull, launched in Austria in 1987. It was marketed as a premium energy drink for young urban professionals.
Red Bull then expanded globally, becoming hugely successful in Western markets. It essentially created the modern energy drink category.
Robin Hood
A company offers the same product or service at different prices. Most of the profit comes from wealthy clients who can afford higher prices. Selling to poorer customers isn’t very profitable on its own. But it helps the company produce more, lowering overall costs.
Top industry: Various
Often comes with: Various
Example: The Economist magazine offers steep discounts to students, while charging full price to professionals and businesses.
Self-service
Companies let customers handle tasks that are costly but don’t add much value. This saves the company money, which they pass on as lower prices.
Top industry: Services
Often comes with: Pay Per Use
Example: KFC uses self-service in several ways. Many locations have self-order kiosks for browsing, ordering, and paying. They offer a mobile app for ordering pickup or delivery. Many locations have self-serve drink stations.
Shop-in-shop
A smaller brand or retailer rents space inside a larger store. They create a distinct area that looks and feels like their own mini-store.
Top industry: Retail
Often comes with: License
Example: MediaMarkt often features branded areas within its stores where companies like Apple, Samsung, Sony, and Microsoft have their own mini-stores. These areas are clearly branded and designed to mirror the look and feel of the brands’ standalone stores.
Solution provider
A full service provider offers a complete range of products and services in a specific field, all through one main contact. They share expert knowledge to help customers work better. This approach helps companies keep and grow their income by adding services to their products. It also lets them learn a lot about what customers want, which helps improve their offerings. By handling everything for the customer, full service providers aim to be the go-to solution in their industry.
Top industry: IT
Often comes with: Guaranteed Availability, Layer Player, Leverage Customer Data, Subscription
Example: Google exemplifies a full service provider in the digital realm. Their offerings include:
- Web search
- Advertising (Google Ads)
- Productivity tools (Google Workspace)
- Mobile OS (Android)
- Cloud services (Google Cloud)
- Hardware (Pixel phones, Chromebooks)
- Maps and navigation
- Video platform (YouTube)
- Web browser (Chrome)
Subscription
Subscription is a recurring payment model where customers pay a fixed fee to access a product or service over a specified period. It’s one of the most popular business model patterns.
Top industry: IT
Often comes with: Digitization
Example: Disney+ uses a subscription model by providing access to its vast library of movies, TV shows, and original content for a monthly or annual fee. Of course, this is just one from the many, many examples out there. See streaming services, gym memberships, box subscriptions, SaaS, etc.
| Aspect | Details |
|---|---|
| Pros | • Predictable recurring revenue • Higher customer lifetime value • Improved cash flow management • Stronger customer relationships • Valuable customer data collection |
| Cons | • Higher customer acquisition costs • Pressure to continually provide value • Potential for high churn rates • Need for constant product/service updates • Billing and payment processing complexities |
| Revenue Streams | • Recurring subscription fees • Tiered pricing models • Upselling and cross-selling opportunities • Setup or onboarding fees • Premium add-ons or features |
| Market Fit | • Software and SaaS products • Content streaming services • Membership-based services • Regular delivery of physical goods • Professional services with ongoing needs |
| Scalability | • Highly scalable, especially for digital products • Automation can support growth • Challenges in scaling customer support • Potential for rapid expansion with viral growth |
| Target Customer Segments | • Consumers seeking convenience and regular access • Businesses looking for predictable expenses • Users valuing up-to-date content or services • Customers preferring smaller, regular payments |
| Key Success Factors | • Strong value proposition and continuous value delivery • Effective customer retention strategies • Robust and flexible billing systems • Clear and transparent pricing structure • Excellent customer support and engagement |
| Challenges | • Reducing churn rates • Managing subscriber expectations • Balancing acquisition costs with lifetime value • Adapting to changing market demands • Dealing with subscription fatigue |
Supermarket
Offering a wide range of readily-available products at competitive prices, typically under one roof, and operating on high volume and low margins.
Top industry: Retail
Often comes with: E-commerce
Example: Walmart is one of the largest supermarket chains in the world, offering everything from groceries to electronics at competitive prices.
Target the poor
Creating affordable and accessible products or services for low-income consumers. It relies on low prices, high sales volumes, and innovative cost structures to meet basic needs for a large demographic.
Top industry: Retail, Consumer Goods
Often comes with: No Frills
Example: Dollar Tree is a retail chain where nearly every item is sold for $1 or less. It focuses on offering basic goods such as household products, food, personal care items, and cleaning supplies at the lowest possible price.
Trash-to-cash
Turning waste materials or discarded products into something valuable. Businesses using this model recycle, upcycle, or repurpose items that would typically be considered trash and transform them into marketable goods or raw materials.
Top industry: Retail, Fashion
Often comes with: Various
Example: TerraCycle. Known for recycling difficult-to-recycle materials like coffee capsules, cigarette butts, and plastic packaging. They partner with brands to collect and repurpose these items into new products.
Two-sided market (marketplace)
A platform or marketplace that connects two distinct user groups (buyers and sellers, service providers and consumers) who benefit from each other’s presence.
Top industry: IT
Often comes with: Leverage Customer Data
Example: LinkedIn connects professionals looking for job opportunities with recruiters and companies looking for talent.
| Aspect | Details |
|---|---|
| Pros | • Strong network effects • Potential for rapid growth • Multiple revenue streams • Valuable data and insights from both sides of the market |
| Cons | • Initial chicken-and-egg* 🥚🐔 problem in attracting users • Complexity in managing two distinct user groups • Potential regulatory challenges |
| Revenue Streams | • Transaction fees • Subscription fees (from one or both sides) • Premium features or enhanced visibility options |
| Market Fit | Industries where connecting two distinct user groups adds significant value, such as online marketplaces, dating apps, job boards, and payment platforms. |
| Scalability | • Highly scalable once critical mass is achieved • Potential for exponential growth through network effects • Scalability can be limited by the need to maintain balance between the two sides of the market |
| Target Customer Segments | Two distinct user groups that can benefit from each other’s presence, such as: • Buyers and sellers • Service providers and service seekers • Content creators and content consumers |
| Key Success Factors | • Building trust and credibility • Ensuring a balanced growth of both sides • Providing a seamless user experience • Implementing fair policies and effective conflict resolution • Continuous innovation to add value and stay competitive |
| Challenges | • Overcoming the initial growth hurdle • Preventing disintermediation • Managing platform abuse and maintaining quality • Adapting to evolving user needs and market conditions |
*The chicken-and-egg problem in two-sided markets refers to the challenge of attracting one group of users without already having the other group in place, as each side’s participation depends on the presence of the other.
Ultimate luxury
Offering highly exclusive, premium products or services to individuals willing to pay a premium for exceptional quality, status, and rarity.
Top industry: Transportation
Often comes with: Customer Loyalty, Experience Selling
Example: Lamborghini produces limited-edition, high-performance supercars with superior craftsmanship, exclusivity, and a high price point, offering affluent customers a personalized, prestigious ownership experience.
User-designed
Customers act as both the designers and consumers of a product, using a company’s platform that offers design tools, manufacturing support, or an online shop to create and sell their own products.
Top industry: IT
Often comes with: E-commerce, Two-sided market, Leverage Customer Data
Example: Teachable allows users to design and create their own online courses, while Teachable provides the platform and tools needed for content creation, hosting, payment processing, and marketing.
Whitelabel
A company produces products or services under another company’s brand, allowing the latter to offer products without the investment in development or manufacturing.
Top industry: IT, Services
Often comes with: Solution Provider, Digitization, Self-service, Layer Player
Example: Shopify offers a white-label solution that allows businesses to set up their own branded online stores. Companies can resell Shopify’s technology as their own e-commerce platform with customized branding and features.
Sensor-as-a-Service
Offering sensor data or sensor-based insights on a subscription or pay-per-use basis. Instead of selling the hardware, companies install and maintain sensors for customers, who then access the real-time data generated by these sensors for monitoring, analysis, or decision-making.
Top industry: IT, Services
Often comes with: Various
Example: PurpleAir operates on a Sensor-as-a-Service (SaaS) model, offering a platform that provides real-time air quality data collected from a vast network of sensors.
Virtualization
Creating virtual equivalents of traditionally physical processes, allowing customers to interact with them remotely through digital interfaces.
- While digitization converts analog information into digital formats, virtualization replicates entire physical processes or environments in a virtual space.
Top industry: IT, Services
Often comes with: Digitization, Freemium, Guaranteed Availability, Lock-in, Subscription
Example: Microsoft Teams virtualizes the traditional office environment, offering tools for communication, collaboration, and meetings that would otherwise occur physically.
Object self-service
Using sensors and IT integration to enable objects to autonomously generate orders or trigger processes, such as automated replenishment.
Top industry: IT, Hardware
Often comes with: –
Example:
The Würth iBin system is equipped with sensors that automatically track stock levels in bins and send real-time data to a central IT system. When stock levels reach a predefined threshold, the iBin automatically triggers a replenishment order without human intervention.
Object as point-of-sale
Physical objects or products themselves serve as the interface for transactions.
Top industry: IT, Services
Often comes with: –
Example: Alexa is aAmazon’s voice-activated virtual assistant integrated into smart speakers and other devices, which allows users to make purchases directly through voice commands.
Prosumer
A prosumer is a person who is both a consumer and a producer. They not only use products or services but also actively participate in their creation, design, or improvement.
Top industry: IT, Services
Often comes with: Hidden Revenue, Leverage Customer Data, Long Tail, Two-sided Market, User Designed
Example: On Instagram, users actively participate as producers, sharing their own media, and as consumers, engaging with others’ content through likes, comments, and shares, driving both sides of the platform.
Contents
Business model patterns FAQ
Frequently asked questions about business model patterns.
How do business model patterns support executive leadership in driving scalability and managing crises?
Business model patterns provide a strategic framework that helps executive leaders and founders scale their companies while maintaining resilience during crises. By using repeatable and flexible business model configurations, leaders can adapt to market disruptions and pivot when necessary. This approach ensures that core business functions remain scalable, allowing for long-term growth even in challenging environments. Visionary leadership is key in recognizing when to adjust or evolve the business model to keep up with changing markets, creating resilient, adaptable organizations that are equipped to navigate uncertainty and capitalize on new opportunities.
How do innovation and design contribute to creating resilient business model patterns?
Innovation and design are critical in developing adaptable and resilient business model patterns, allowing teams to craft business strategies that can withstand change and drive long-term success. By leveraging business model innovation and proven patterns, companies can explore new channels, invent fresh approaches, and refine their strategies to remain competitive. Tools like business model blocks and cards help corporate innovation teams visualize and implement these strategies effectively. Leading companies often use repeatable configurations that have been tested and proven to scale, enabling them to innovate continuously while maintaining resilience and adaptability in evolving markets.
How can business model patterns help with marketing and customer segmentation?
Business model patterns are invaluable for validating market assumptions and identifying new customer segments. By using these patterns, companies can test and refine their understanding of the market, ensuring that their offerings resonate with the right audiences. These patterns also allow businesses to tailor their messaging and marketing strategies to better meet the specific needs of different customer segments, increasing engagement and conversion rates. Through structured experimentation and validation, organizations can uncover untapped markets and adapt their business models to serve a broader, more diverse customer base effectively.
How do business model patterns support product management in predicting market fit and streamlining go-to-market strategies?
Business model patterns play a crucial role in product management by helping teams predict market fit and streamline go-to-market strategies. By leveraging these patterns, product managers can align their products with the overall business strategy, ensuring that offerings resonate with customer needs and market demands. These building blocks allow for better forecasting of product success in different segments, helping teams set the right pricing, positioning, and messaging. Additionally, business model patterns provide a framework to simplify and optimize go-to-market strategies, making it easier to launch products and services that are well-integrated into the company’s long-term goals.
How can business model patterns transform business strategies and help with competition and exit strategies?
Business model patterns are powerful tools for transforming business strategies by providing a structured approach to understanding competition and developing effective go-to-market and exit strategies. By using these patterns, companies can identify key shifts in the market, adapt their business models accordingly, and stay ahead of competitors. Business model thinking helps executives refine their pricing, products, and services to better align with market demands and opportunities. Additionally, a well-defined library of business model patterns aids in formulating exit strategies, ensuring that businesses can navigate transitions smoothly while maximizing value for stakeholders.
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