The Revenue Streams building block represents the cash a company generates from each customer segment. If customers are the heart of a business model, revenue streams are its arteries. A business model can involve two different types of revenue streams:
- Transaction revenues resulting from one-time customer payments
- Recurring revenues resulting from ongoing payments to either
deliver a value proposition to customers or provide post-purchase
customer support
There are several ways to create revenue streams. Here are some questions that help guide the type of revenue stream a company leverages:
- What value are customers willing to pay?
- What are they currently paying?
- How are they currently paying?
- How would they prefer to pay?
- How much does each revenue stream contribute to overall revenue?
So now let’s think about the types of revenue streams companies use:
- Asset Sale: selling ownership rights to a physical product (most widely understood revenue model)
- Subscription Fee: selling continuous access to a service (often times seen in software)
- Licensing: giving customers permission to use protected intellectual property in exchange for a fee
- Advertising: collecting payment for advertising a particular product, service, or brand. The media industry relies heavily on revenues from advertising.
Each revenue stream can be priced differently. There are two main types of pricing mechanisms: fixed and dynamic pricing. Fixed pricing is where prices are predefined based on a static variable such as product features, customer segment, or volume. Dynamic pricing is where prices change based on market conditions such as negotiations, inventory, season, and auctions.
