Glossary: M07 — Business Models

Term	Definition
Business model	How a company generates revenue and profits
Value proposition	What the company offers to customers and why they choose it
Value chain	Internal activities that create value for customers
Supply chain	All steps in creating a product, both within and external to the firm
Unit economics	Revenue and costs expressed on a per-unit basis
Contribution margin	Revenue per unit minus variable cost per unit
Break-even point	Output level where total revenue equals total costs
Bundling	Selling multiple products/services together
Razors-and-blades	Low initial price, high consumable price
Freemium	Free basic service, paid premium features
Penetration pricing	Low price to build scale and market share
Dynamic pricing	Prices vary by time or demand
Subscription model	Recurring payment for ongoing access to product/service
Franchising	Licensing business model to operate in a territory
Omnichannel	Integrating both physical and digital distribution channels