Revenue Models

Shaer Hassan
CEO, Nascenia

What?
How a business generates revenue
streams from its products and
services

Why
To sustain the business

Revenue Models: Commerce &

Retail
Selling physical goods: Clothing
Selling digital products: Cell phone

Ideal
Customers

Advantage

Problems

Ideal Products

Revenue Models: Commerce &

Retail
A service sold per unit (hour,
distance, weight, bandwidth): ISP,
Telecom, Theater, Bus
A service with fixed price: ISP,
Telecom
Daily deals / flash sales: ajkerdeal,
akhoni (previously)
Ideal
Customers

Advantage

Problems

Ideal Products

Revenue Models: Subscription &

Usage Fees
Subscription: Newspaper
Usage fees: Electricity
Rental: House, Car

Ideal
Customers

Advantage

Problems

Ideal Products

Revenue Models: Licensing

License of usage: Software

Ideal
Customers

Advantage

Problems

Ideal Products

Revenue Models: Auctions &

Bids
Auctions: ebay

Ideal
Customers

Advantage

Problems

Ideal Products

Revenue Models:
Advertising
Advertisements: TV, Newspaper, Priyo.com
Promoted content: Bikroy.com
Sponsorships: Maya.com.bd

Ideal
Customers

Advantage

Problems

Ideal Products

Revenue Models: Data

Databases: SMS gateways

Ideal
Customers

Advantage

Problems

Ideal Products

Revenue Models: Transaction /

Intermediation
Brokerage
Transaction enablers: epayment gateway
SSL Commerze
Affiliate programs: Amazon
Creating a platform / marketplace: Odesk,
Oployee, kaymu.com.bd, carmudi.com.bd

Ideal
Customers

Advantage

Problems

Ideal Products

Revenue Models: Freemium

Paid version without advertisements
Paid version without restrictions
Paid version with additional features

Ideal
Customers

Advantage

Problems

Ideal Products

Revenue Models: Negative

Operating Cycle
Lower price by receiving payment
before delivering the offering
Amazon, Airbnb, courier service for ccommerce in Bangladesh

Ideal
Customers

Advantage

Problems

Ideal Products

Revenue Models:
Razor/Blades
Offer the high-margin below cost to
increase volume sales of the lowmargin razor blades.
Printers and ink
Glucometer
Free connection with router by ISPs
Free SIM by Telcos

Ideal
Customers

Advantage

Problems

Ideal Products

Revenue Models: Reverse

Razor/Blades
Offer the low-margin item below cost
to encourage sales of the highmargin companion product
Kindle, iPod/iTunes

Ideal
Customers

Advantage

Problems

Ideal Products

Pricing Strategy

Selecting
Pricing
Objective

Determining
Demand

Estimating
Costs

Analyzing
Competitors
Costs, Prices
and Offers

Selecting a
Pricing
Method

Selecting
Final Price

Pricing Objective

Survival
Maximum Current Profit
Maximum Market Share
Maximum Market Skimming
Product-Quality Leadership
Other Objectives

Selecting
Pricing
Objective

Determining
Demand

Estimating
Costs

Analyzing
Competitors
Costs, Prices
and Offers

Selecting a
Pricing
Method

Selecting
Final Price

Determining Demand
Price Sensitivity
Less price sensitive when

Product more distinctive

Buyers are less aware of substitute
Expenditure is smaller part of buyers income
Expenditure is small compared to the total cost of
the product
Product is assumed to have more quality, prestige
or exclusiveness

Estimating Demand Curves

Price Elasticity of Demand
Selecting
Pricing
Objective

Determining
Demand

Estimating
Costs

Analyzing
Competitors
Costs, Prices
and Offers

Selecting a
Pricing
Method

Selecting
Final Price

Estimating Costs
Types of costs and level of
productions
- Variable cost
- Total cost
- Average cost

Accumulated production
Target costing
Selecting
Pricing
Objective

Determining
Demand

Estimating
Costs

Analyzing
Competitors
Costs, Prices
and Offers

Selecting a
Pricing
Method

Selecting
Final Price

Estimating Costs
Accumulated production
Target costing

Selecting
Pricing
Objective

Determining
Demand

Estimating
Costs

Analyzing
Competitors
Costs, Prices
and Offers

Selecting a
Pricing
Method

Selecting
Final Price

Analyzing Competitors Costs, Prices

and Offers

Selecting
Pricing
Objective

Determining
Demand

Estimating
Costs

Analyzing
Competitors
Costs, Prices
and Offers

Selecting a
Pricing
Method

Selecting
Final Price

Selecting a Pricing Method

Markup Pricing
Unit cost = variable cost + fixed cost /
unit sales
Markup price= unit cost / (1 - desired
return on sales) = 16/(1-0.2) = 20

Selecting
Pricing
Objective

Determining
Demand

Estimating
Costs

Analyzing
Competitors
Costs, Prices
and Offers

Selecting a
Pricing
Method

Selecting
Final Price

Selecting a Pricing Method

Target-return Pricing = unit cost +
(desired return*invested capital) /
unit sales
Break-even Volume = fixed cost /
(price-variable cost)

Selecting
Pricing
Objective

Determining
Demand

Estimating
Costs

Analyzing
Competitors
Costs, Prices
and Offers

Selecting a
Pricing
Method

Selecting
Final Price

Selecting a Pricing Method

Perceived Value Pricing

Value Pricing
Going Rate Pricing
Auction-Type Pricing

Selecting
Pricing
Objective

Determining
Demand

Estimating
Costs

Analyzing
Competitors
Costs, Prices
and Offers

Selecting a
Pricing
Method

Selecting
Final Price

Selecting Final Price

Impact of other marketing activities

Company pricing policies
Gain-and-risk-sharing Pricing
Impact of Price on other parties

Selecting
Pricing
Objective

Determining
Demand

Estimating
Costs

Analyzing
Competitors
Costs, Prices
and Offers

Selecting a
Pricing
Method

Selecting
Final Price

Need to Know before Revenue

Model
Your strength
Operation
Selling skills
Existing networks
Market / customer readiness
Potential market

Thank you

shaer@nascenia.com
linkedin.com/in/shaerhass
www.nascenia.com