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Business Models

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Understanding a business model is a fundamental. Put simply, a business model is a definition of how your business expects to generate revenue. The Wikipedia definition is:

“A business model describes the rationale of how an organization creates, delivers, and captures value.”

The concept of value features heavily in any business model. We’ll look at this side of creating a value exchange with users and customers later in this section.


To illustrate business models, let’s look at three prevalent models that we encounter on the web every day.

These are:

  • The subscription model, where a user makes a regular or single payment in return for a service
  • The free model, where a service is offered for free in return for access to users by advertisers or access to users’ data
  • The freemium model, where a part of the service is free with additional or premium services requiring a payment.

The significance of understanding the business model is that it tells us what a user’s expectations may be or it will inform what content we need to include on a website. In short, it affects what a website’s proposition is and will lead to research questions around how that information should be presented to users.

Subscription examples

Here are three examples of companies which operate under a subscription model. You’ll be familiar with at least one of them.

  • Netflix charges a fee for access to its vast library of TV shows and movies.
  • Dollar Shave Club charges a monthly fee in return for a regular delivery of razor blades.
  • Salesforce has a stepped level of subscription for access to its cloud-based CRM software. There is a straightforward exchange taking place here, fee in return for a service.

Free examples

Here are three examples of companies which operate under a free model and, again, these will be familiar names. Facebook, Twitter, and YouTube are all social media channels of one sort or another. Billions of people around the world use these services without having to pay anything to the companies that provide them.

  • Facebook is free only in the sense that we don’t pay any monetary value for the service. However, for advertisers and marketers, access to Facebook users comes at a premium.
  • YouTube offers advertisers the opportunity to place ads in front of millions of users each day. The users’ understanding of the business model here is debatable, but there is no doubt that these are terrifically popular and successful services.
  • Twitter has had its problems defining precisely where its value is generated, but that doesn’t stop hundreds of millions of people using its services.

Freemium examples

Finally, here are three examples of companies which operate under the freemium model. The name freemium, of course, comes from a combination of the words free and premium.

Dropbox, Evernote, and LinkedIn provide various types of services, but each offers a free version of their product, while asking users to pay for enhanced features.

  • Dropbox offers an increase in storage capacity for a paid account.
  • Evernote, similarly, offers greater storage and unlimited document transfer.
  • LinkedIn provides greater insights to its data and heightened contact options for a premium product.

In these cases, the business hopes that users will develop a dependency on their product over time and build it into their work routines or lifestyle, such that they will eventually want to pay for the premium service.

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Rick Monro

Rick Monro is UX Director at Fathom. He has extensive experience in user research, interaction design, user-centered design, and design strategy with private and public sector organisations throughout the UK and Ireland.

By the end of this topic, you should be able to:

  • Appraise practices for planning UX research
  • Critically evaluate the roles of innovation and users in User Experience (UX) research
  • Evaluate cognitive biases that can affect research data

    Data protection regulations affect almost all aspects of digital marketing. Therefore, DMI has produced a short course on GDPR for all of our students. If you wish to learn more about GDPR, you can do so here:

    DMI Short Course: GDPR

    If you are interested in learning about the principles of UX and the tools or techniques that you can use to develop and refine your user's experience, DMI has produced a short course on the subject for all of our students. You can access this content here:

    DMI Short Course: UX Essentials

    The following pieces of content from the Digital Marketing Institute's Membership Library have been chosen to offer additional material that you might find interesting or insightful.

    You can find more information and content like this on the Digital Marketing Institute's Membership Library

    You will not be assessed on this content in your final exam.


      UX Research
      Rick Monro
      Skills Expert

      With the help of Rick Monro, you will develop the knowledge and skills to build highly effective user experiences. You will learn how to think like a user in order to understand their priorities and needs, and you will recognize the role of various research and analytics techniques such as tree-testing, card-sorting, user-testing, user-surveys, Google Analytics and specialized tools such as Click-tale.