6 – Revenue Streams
A look at the business model from the product manager's point of view
CANVAS 13 - Great guide on the business model, from the product manager's point of view
1 – Customer Problem
2 – Customer Segments
3 – Value Propositions
Value Proposition Formulation Map
4 – Customer Relationships
5 – Channels
You are here ➔ 6 – Revenue Streams
7 – Key Activities
8 – Key Resources
9 – Key Partners
10 – Cost Structure
11 – Eco-Social Costs
12 – Eco-Social Benefits
13 – KPI (Key Performance Indicators)
Revenue streams define all sources of profit that arise from the sale of products or services. In the context of the IT business, the main revenue sources are usually associated with the sale of software usage licenses, subscription fees, or advertising revenues. For example, a mobile application can generate income from the sale of in-game items or services. In other industries, such as film production, the main revenue sources may include ticket sales for movie screenings and the distribution of films through digital platforms. Despite the high costs of film production, revenues from ticket sales and film distribution can be quite substantial.
For the sustainability of the business model, it is important that costs are significantly lower than revenues.
"Revenue" represents the income we receive from users. This income can include various components, including the sale of accessories, the installation of mobile applications, and the sale of devices such as Android and iPhone.
App installation is one source of income, but not the main one. Revenue sources include all types of company activities, including the sale of devices and accessories, as well as the installation of applications on users' devices.
A remarkable feature of some companies is that their main source of profit is the sale of accessories. This is due to the high demand for this category of goods and the enormous margins.
It is important to consider all sources of a company's profit, and there should be several of them. Finally, key activities represent the actions that the company undertakes to achieve its business goals.
What is the actual value of our product or service that our customers are willing to pay for? What aspects of our offer do customers consider valuable enough to invest their money?
What currently constitutes the basis of our customers' expenses? For which products or services do they currently pay, and how do these expenses compare with what we offer?
How do our customers prefer to make payments? Do they prefer one-time purchases or regular subscriptions? Do they pay immediately, or do they prefer installment payments?
Finally, what share of our total revenue does each revenue stream constitute? Which revenue streams are the most profitable, and how do they relate to the overall structure of our revenues?
Types of revenue streams
One-time revenue: This is a form of income that represents one-time payments from customers. This can include money received from the sale of a single product or service, or income from a one-time transaction. An example might be individual work or conducting courses.
Recurring revenue: This type of income involves regular payments from customers. This can result from a site subscription where customers pay a fixed amount each month or year for access to content or services. An example might be a blog with a subscription system or an information platform.
Sale of property
This is a situation where ownership rights to an asset are transferred. This can be either physical property (such as a car or building) or intangible property (such as a patent or license). In this case, revenues are obtained from a one-time transaction that changes the asset owner.
Renting
Renting represents the temporary provision of exclusive rights to use a specific asset to a user. In this case, the asset remains the property of the organization but generates regular income in the form of rental payments. For example, when you rent a car or an apartment.
Usage fee
In this case, income is generated by the use of a specific service. The more the client uses the service, the more they pay. This method can be applied in cases where the service remains the property of the organization and generates constant income. For example, when you pay for internet traffic or electricity.
Licensing
Licensing means granting users the right to use protected intellectual property rights in exchange for a licensing fee. In this case, the asset (intellectual property) remains the property of the organization and generates constant income. For example, when a car manufacturer buys a license to produce a car component developed by another company.
Advertising fee
An advertising fee is charged for attracting attention to a product, service, brand, or any other specific item. In this case, revenues depend on the size and quality of the audience of the advertising medium. For example, advertising on radio or television.
Joint projects and joint materials with other companies
This is cooperation with other companies to create joint projects or materials that generate income for both parties.
Subscription fee
A subscription fee generates income by selling continuous access to a service or product. This creates a constant, predictable, and very stable income stream. For example, a subscription to a streaming service such as Netflix or Spotify, where customers pay monthly for access to content.
Pricing
Fixed
- Price by list: The price of the product is set and does not change, regardless of the customer.
- Depends on product features: The price varies depending on the features or versions of the product.
- Depends on customer segment: The price varies depending on which segment the customer belongs to.
- Depends on volume: The price varies depending on the quantity of goods purchased.
Dynamic
- Negotiations (bargaining): The price is determined through negotiations between the seller and the buyer.
- Revenue management: The price is optimized to maximize revenue based on understanding demand and demand levels.
- Real-time market: The price constantly changes according to market conditions.