# Business Model > [!note] Definition > > The **underlying logic** of a company: how it creates and captures value? - [[business-model-canvas|Business Model Canvas]] - [[business-model-generation|Business Model Generation]] - Two fundamental choices - [[value-proposition|Value Proposition]] -- low cost/price vs. product/service differentiation - Target Market (scope) -- board (mass market) vs. narrow/niche (focused) - Fit vs. Trade-offs ## Examples - **Razor and Blades:** low-margin item, high markup replacements - **Hotel California:** a must-have product that traps customers into buying unrelated high-profit items - **Cheap Chic:** Stylish but inexpensive merchandise. Typically allows for high margins with low price points but expensive feel. - **Bricks and Clicks:** Online ordering, in-store pickup - **Franchise:** Sell the right to use business model in exchange for percentage of revenue. - **Loss Leader:** Velocity items offered at low margin in anticipation of additional sales at higher margin. (e.g. Gas stations) - **Subscription:** Recurring revenue. Creating a significant asset and renting a piece of it. - **Freemium:** Product offered for free. Typically 8% of users upgrade to become paying customers. - **Nickel and Dime:** Price the most cost-sensitive item as low as possible and then charge for every little extra. (e.g. Airlines)