Have you ever wondered where the term "business model" came from?
The oldest, most basic business model is the shopkeeper. Originally there was no such thing as a shop front or visual merchandising for that matter. When customers wanted to buy items such as food, clothing, linen etc. they would approach the shopkeeper and explain what they wanted. The shopkeeper would head out the back and select items before returning to the front to show customers.
Until one day a smart owner of rugs, who was low on sales, decided to display his rugs outside to draw in buyers. To his surprise, people were intrigued by this move and he sold more rugs than ever. This was when the true shop front like we know today was born. Fast forward to today and the look and feel of the shop keeper has changed, but the true essence is that the traditional business model has not. Owners set up a store at a site where customers are and display products or services for passers-by to see.
Whilst the traditional "brick and mortar" business still exists business models have evolved and become more advanced especially around advertising. Visual merchandising helps draw in potential customers to a storefront, but business owners still have to focus on advertising. In the early 20th century a new advertising method began called "bait and hook". This model involved offering a basic service for a low-cost, often at a loss. This part is the bait. Owners used these services or products as loss leaders to get potential customers in the door. The owner would then "cross-sell" or "up sell" to other product lines, this is the hook. It's also been called the tiered business model.
The original version was from Gillette with the razor (bait) followed by refills (hook). But other examples are printers (the bait) and inkjet cartridges / refills (the hook) or gaming consoles (bait) and the games (hook).
Today's business models are dependent more on technology with the rise in digital marketing and online business models. These days, many Entrepreneurs are turning to the fastest growing business model "online". However, traditional brick and mortar businesses are having to diversify and move to a hybrid model using both a traditional store front as well as an online version. With the help of computer technology, new businesses have the advantage of reaching a large amount of customers with a minimal capital injection.
