With so many choices, deciding on the best business model for your business comes down to what’s best for your customer.
The best way to evaluate your choices is to consider where you add value to your customer?
Here are the crucial aspects you need to take into consideration while making your decision:
1. Customer needs
The model you choose should align with your customer’s needs and expectations.
Once you have a prototype, expose it to real customers to see if you get the same excitement and delight that you expected.
Look for feedback on how to make it a better fit. If it doesn’t relieve the pain or doesn’t work, no business model will save you.
2. Your Target Market
Before you move any further, you first need to test whether your idea is actually viable.
Research your target market to get a scope of your possible customers, and make sure that there’s a need which your product/service can satisfy.
If too few people are interested in what you have to offer, or people don’t want what you’re offering, it’s best to go back to the drawing board.
Related: Define your target audience.
3. Potential Customers / Customer avatar
Although you won’t be able to rely on data until you’ve been in business for a while, it helps to create a mental image of your ideal customer.
Think about WHO exactly is it that you want to serve. What are their demographics, interests, major problems they’re facing, their life-long goals?
Once you have a clearer image of who your potential customers are, it’s much easier to figure out how best to approach your target market.
Creating a customer avatar will also help you choose the right marketing channels and strategies, as well as the tone of voice you’ll use when getting your marketing message in front of them.
Consider How Customers Buy
Another thing to consider is how your customers buy things?
You might have customers who prefer to purchase a product, like a software, by one single payment and keep it for multiple years to come. They pay for an item or service in full, upfront and depreciate it as a capital purchase.
On the other hand, another group might say they have difficulty getting the total lump sum needed to pay for the item in full. Instead, they can, for instance, fund up a monthly or annual subscription pretty easily.
Some markets will be challenging to monetise. If you have a content-driven website that gets a high traffic volume but doesn’t convert well to product sales, then the advertising model is probably your best bet.
Do your customers often make high-end purchases? Or, will they be more receptive to a recurring subscription or a low-end product?
4. Know the Competition
When entering a specific market, you must understand who you’ll have to face off against. Check to see how many people are already doing what you want to do and how successful they are.
Then think about what is it you can do better? How can you add more value? What will make your business stand out?
Having some competition is actually a good thing. It proves that your idea has merit and that there is indeed a demand for the type of product you’re planning on creating.
However, it’s best to steer clear of oversaturated markets. The competition is both tough and plentiful, as it can be challenging and quite costly to fight for every customer.
However, there’s always space to innovate and disrupt in a given market. So, don’t feel like you’re stuck doing only what’s been done before.
Related: Conduct online market research
5. Consider your value proposition to the market
What makes you stand out in the marketplace?
This is a vital question you need to answer when choosing your business model: How much value makes a potential customer gain from your solution?
Think in terms of how big of an impact it will have on their lives. Does it help them finally solve a burning problem they’ve been struggling with for years? Will it enable them to get a step closer to achieving one of the goals?
If you’re only focused on what business model will be most lucrative for you, and neglect the customer, you’re bound to fail — spectacularly.
Customers are the lifeblood of every business, and their wants and needs have to be at the very centre of your business. Understanding your customers’ desires will help you determine how best to approach the sale, and what price they’ll be willing to pay.
It’s a simple matter of understanding how much a specific problem costs your audience, and what are the returns they expect to get by investing in your solution.
Always aim to give massive value for the price you’re asking. If the customers feel like they’re getting a ton of value compared to their investment, your business will quickly flourish.
6. Diversify Revenue Streams
The big idea that made you decide to start a business in the first place will be your main revenue source. However, it would help if you also consider other possibilities to add multiple revenue streams.
For instance, you might include other products that you can offer as upsells and cross-sells. Or perhaps you can add affiliate products to your offers and generate additional income through commissions.
Don’t just focus on selling one product or service. Explore all your different options and try to bring in money from multiple streams.
It’s Your Turn
As you can see, there is no best business model, but instead, identify the best business model for your business. Let your market and customers dictate how you’ll generate revenue.