On-Demand Business Model: How is it different from the traditional one?
The on-demand business model is now getting widely popular among millennial entrepreneurs while more established traditional businesses too are looking for an avenue to expand their business using the On-Demand Business Model. However, the current literature does not talk a lot about how the traditional business model is different from the On-Demand Business. People started doing business as simple transactions dating back to the stone age. The man would exchange something he owned to something he required from another party. This is a simple exchange. Evolving from this, businesses have now traveled a greater distance.
Traditional business
The simplest way to explain the traditional business model is to take as an example your neighborhood grocery store. The owner of this business, purchases goods from a supplier required to run the business, based on the demand and sells these goods directly to its customers. The main features of the traditional business model is that it mostly restricted by a geographical limit, the customers mostly have to come physically to the store and purchase the goods or the service, the customers have limited choice when purchasing, the opportunity to expand is limited comparatively, the organization has a more intimate relationship with the customer, etc.
On-Demand Business Model
The On-Demand Business Model, on the other hand, is a lot different than the traditional business model. In On-Demand Business Model, the business is mostly working on a digital platform. Based on the products or services offered, the customer is able to select a product of its liking based on the requirement.
The best example to explain the On-Demand Business is Airbnb. Customer searches for the destination he wants to travel and could apply filters for the results such as the price and required amenities. The customer is presented with a list of properties that matches its search criteria. He is able to go to each property and look for its images and customer reviews and based on his preference, book the most desirable property. The main features of the On-Demand Business are, the customer is able to make an informed selection of the product/service. It is mostly operated over an online platform. However, it is able to reach to a wider customer base, mostly no geographical limitation, the customers are able to leave feedback for the service, etc.
Features of On-Demand Business Model
It is understandable that the On-Demand Business Model inherited a few features from the traditional business model. However, it has mainly taken the drawback of the traditional business model and transformed them to be positive features. A few of the positive features of the On-Demand Business in contrast to the traditional one is that it is able to reach more customers due to the usage of online services as its platform and the customers being able to make an informed decision from the choices it’s presented based on its requirement and customer reviews.
With the popularization of the smartphone, the On-Demand Business tends to use mobile apps as their platform mainly. It is the driving factor for more people to reach its business. However, like the traditional business model, the On-Demand Business too has to conduct marketing campaigns, mostly in a grander scale, maintain all the other back-office operations such as financial management, IT, etc.
However, it is inevitable that the On-Demand Business Model is the more suited type of doing business in the present era with the technologies available and customer behaviors. Although, in the future, it is highly predictable that a better model for doing business will emerge with the technologies and customer behavior changes of that era which is more suitable.
Want to know how does this model work? Read this: On-Demand Business