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Definition

revenue model

A revenue model is a component of a company’s business planning that describes the way it intends to make money. The revenue model is an important element of an organization’s business model and business plan

Basically, the revenue model details on what the business will offer and how it will charge customers: What product or service it will offer, what it will charge for the product or service and the method it will use to generate revenue. 

Examples of revenue models include:  

Advertising (ad-based): A website or app owner can contract with marketers to place advertisements on their content.  

Manufacturing: Manufacturers create products and sell the finished goods.  

Markup: Resellers purchase goods, typically at a discounted bulk purchase price, and sell at a higher price.  

Licensing: Producers of software often charge a per-user licensing fee for use of their product over a specified time period. 

IT services provider: Less formally known as a body shop, an IT service provider or consultancy hires employees and subcontracts them out to other companies.  

Freemium: A basic but functional product is offered without charge and an upgraded version of the product made available for a price.  

 

 

This was last updated in July 2018

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