The revenue model defines how a business captures value from its customers. That value is reflected in the Customer Value Model.

For example, Google makes it easy for Internet users to find information and it helps advertisers reach potential customers. The diagram above shows a simplified version of the revenue model for Google.

Let me briefly walk through the pieces here.

Google’s value proposition to Internet Users is to make it easy for them to find information. Their brand strength and their success in delivering that value proposition are the primary means of acquiring and retaining these customers and the customers consume the value proposition through a variety of channels including Google’s website, mobile app, and voice assistant devices. Customers “pay” for the service by implicitly allowing Google to identify them and to build a profile around their identity. That value then contributes directly to the value proposition for advertisers.

Google’s value proposition to Advertisers is to connect them with potential customers. As above, their brand strength and success in delivering that value proposition are the primary means of acquiring and retaining customers. Google primarily delivers that value proposition through the Google Ads tools accessible through the Web and mobile apps and customer make cash payments to Google through automatic and manual electronic payments established online. That cash counts towards Google’s sales revenue and provides the bulk of the company’s cash flow.

I think this one example gives a sense for the components of a revenue model. It reflects the relationship between the value proposition and the customer, how that customer is acquired and retained, the nature of the payments made by the customer, and how much of that is actual cash contributing to the cash flow of the business.

Tools for creating a Revenue Model coming soon!