In the Business Model Canvas, the Revenue Streams component encompasses the money that the company generates with each previously defined Customer Segment. But that does not mean the “profit” earned, but the revenue flow involved.
As you may have guessed, the heart of the Business Model is the Customer. Therefore, the first block of everything is the definition of Customer Segments.
From there, the appropriate Value Propositions are developed for each segment, the Distribution Channels are chosen to reach them, in addition to the strategies that will be used for the Customers Relationships.
Now your organization needs to find out how much your target audience is willing to pay for your product or service. Thus, you can define what the Revenue Streams will be for each customer segment.
Each stream will have its pricing mechanisms and its life cycles. The purpose will be to check whether these streams will be profitable or not. There is no reason, for example, to develop a new product whose design and production will cost more than the amount the public is willing to pay.
Let’s find out, therefore, how to assess whether a product or service deserves the attention of your brand or not.
The best way to understand the flow of revenue streams in your business is to do it through forecasts. But this is an exercise that must be accomplished throughout the life of your enterprise.
That’s because, as the market and industry evolve, your revenue streams may change. Note the most important factors to consider when deciding what revenue streams your organization will follow:
A business model essentially includes two types of revenue streams: single-payment and recurring-income transactions resulting from the constant payment due to repeat service or after-sales support. Some options for generating Revenue Streams involve:
Each Revenue Stream may have different pricing mechanisms. It is a tool with the aim of combining buyers and sellers. The mechanism chosen will have a direct impact on the income generated by the Revenue Stream used. There are two types of pricing mechanisms, fixed and dynamic prices:
In the fixed-price system, the price remains uniform because the raw material value and the processes vary little:
In the system of dynamic price, the price varies according to market conditions:
To build the Revenue Streams block, it is important for the company to ask itself what benefits encourage customers to pay more, at what prices they are acquiring similar benefits these days, what mode of payment they prefer, and also what share of the organization’s total revenue each stream represents.
After defining the Revenue Streams, the company will be able to define what will be the Key Resources for its business, thus continuing the development of its business model canvas.
TAKE ME TO THE NEXT BLOCK -> KEY RESOURCES
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