Learning Objectives

10-1: Define a revenue model and distinguish it from the business models.

The revenue model specifies exactly how income and earnings will be generated from the value proposition, whereas the business model is the framework established to create value for the consumer while preserving some of that value for the entrepreneur.

10-2: Illustrate the ten most popular revenue models being used by entrepreneurs.

There are many effective revenue models. Commonly employed models include unit sales revenue model, advertising revenue model, data revenue model, intermediation revenue model, licensing revenue model, franchising revenue model, subscription revenue model, professional revenue model, utility and usage revenue model, and freemium revenue model.

10-3: Explain how companies generate revenue by profiting from “free.”

The freemium concept has exploded in popularity in recent times. Many companies are finding that small, experience-amplifying transactions can be profitable after introducing consumers to a limited version of their product or service for free.

10-4: Identify the drivers that affect revenue as well as cost.

Revenue drivers include the customer, purchase frequency, selling process, and price.

10-5: Identify different strategies entrepreneurs use when pricing their product and service.

Pricing is critical for a product or service. Some common pricing strategies include competition-led pricing, customer-led pricing, loss leader, introductory offer, skimming, psychological pricing, fair pricing, and bundled pricing.

10-6: Explain different methods of calculating price.

There are several methods to help you calculate the best price for your product or service, such as cost-led pricing, target-return pricing, and value-based pricing.