Digital Business Models: Guaranteeing the Existence of Businesses

A digital business model uses tools of technology to enhance several operations of a firm. The goal of digital business models is to create more value for customers in a more convenient and efficient manner. In recent years, the diversity and extent of strategy in which digital business models create more value has been rapidly growing. 

The Need for Digital Business Models 

The utilization of technological tools in the business sector can be applied in every aspect of the business process. From customer acquisition to offering goods and services. From subscribing to services to making transactions. From creating more presence in the digital world to expanding market domains. The list is long.  

Years ago, data didn’t have more significance than just being used as a supplementary resource to assist some of the operations of a business. In recent years, however, data has become the core part of the whole process of business. Hence, the demand for gathering and utilizing data has considerably increased for businesses to stay competitive with their rivals. This is because the more data they gather, the more opportunity to stay in touch with their customers there is. Let’s not forget that happy customers mean a guaranteed inflow of cash. 

Simply expressed, a digital business model is a way for firms to generate revenue online. These models should be strategically set to address the demands of their customers. Regardless of whether it’s an offline business pursuing digital transformation or a strictly online functioning business, a proper digital business model that responds to customers’ needs is essential.

The Common Digital Business Models 

The most common form of a digital business model is the Freemium Model. With this model, customers are given access to digital services for free. Through time, customers will be offered an upgrade to a premium version for additional functionalities. After an adequate demonstration of the reliability of services at the freemium level, premium version notifications usually pop up with compelling reasons to persuade their users for upgrading.  The issue is, however, that most customers prefer to use the freemium version of services. We may have noticed this digital business when we download free software from websites.

Another commonly found digital business model is the Marketplace Model. Simply put, the marketplace model is a digital platform that serves as an intermediary marketplace for goods and services. These are third-party websites that connect supplies with demands. The services for marketplace models usually offer a quick and easy onboarding process for sellers, customizable e-stores, and a convenient checkout process. We are all familiar with such businesses of the giants of this digital business model: Amazon, eBay, Walmart, and Alibaba.

Additionally, another popular digital business model is one that works on the ‘Use instead of buying’ principle. With this kind of model, companies offer their assets to be used or consumed but not to be owned. Payment transactions are charged based on consumption, usage, or quantity of units provided. The ‘Use instead of buying’ model can assist firms to expand their market domains easily, reach out to new target markets, and stay competitive in their line of business.

Even though there are various digital business models, their core target is the same. They are all developed to efficiently tap into the flow of data in order to assist business owners in making profits.

Future Expectations 

The development of digital business models to more diverse alternatives for fulfilling the demands of the market can create several concerns associated with customers’ privacy, third-party security issues, insurance of transactions, the possibility of fraud, lack of global standardization, and so on. Despite these concerns, however, we are all witnessing that digital business models are rapidly conquering the business world. 

Without a doubt, digital business models have the potential to transform the images of markets and the whole business process. Many businesses took this opportunity and are already fully engaged in the digital operation of their businesses. Many more others are still insisting on the slower transition to a digital business model; hence they are partially operating online. Few others are stubborn in the old ways of business operation. This might work for them for now. However, in the long run, businesses that miss out on capturing the opportunity of utilizing digital tools will risk losing consumers and risk going out of business.

Photo: SFIO CRACHO/Shutterstock

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