Deck 10: Creating Revenue Models

Question 1

How does the business Chicago Food Planet Food Tours generate revenue?

A)food tasting tours and business courses for entrepreneurs
B)business courses and entrepreneur courses
C)travel and food tasting
D)food tasting tours and cooking lessons

Answer 1

A

Question 2

This revenue model measures the amount of revenue generated by the number of items sold by the company.

A)razor and razor blade
B)unit sales
C)data revenue
D)intermediation

Answer 2

B

Question 3

What can be sold as unit sales?

A)physical goods
B)intangibles
C)support offered by the hour
D)all of these

Answer 3

D

Question 4

The razor-and-razor-blade revenue model:

A)includes and tangible and intangible sales
B)includes the sale of a low-cost physical product to encourage the sale of more expensive products
C)includes a high-cost product with easy-to-replace parts
D)includes additional products as an add-on to the sale

Question 5

Which of the following would be considered an intangible?

A)clothing
B)food
C)hardware
D)iTunes download

Question 6

A revenue stream is best defined by which of the following?

A)the particular method that a business uses to gain revenue
B)the amount of money that comes to a business, such as a "large stream"
C)the market segments a business sells to
D)a steady flow of income

Question 7

Different revenue streams may affect which of the following:

A)the industry your company operates in
B)the geography your company will operate in
C)who your customers will be
D)all of these

Question 8

Intermediation revenue is associated with:

A)direct buyer-seller relationships
B)the use of intermediary brokers
C)repeat sales
D)dispute management

Question 9

Which of the following is true about a revenue model?

A)It is the same as a business model.
B)It is a separate planning model from the business model.
C)It is minor component of the business model.
D)It is a key component of the business model.

Question 10

Knowing how many customers will be needed is important because:

A)a business needs as many customers as possible
B)a company can resell product to the same customer
C)it will determine the level of effort required to earn enough revenue for business success
D)it will determine how much profit the company can make

Question 11

Brent has designed a barbeque smoker that will sell for $29.99 and appeal to campers.The unit includes a disposable unit that will protect the food during smoking and make cleanup easier.What revenue model is Brent planning on?

A)unit sales
B)razor and razor blade
C)intangible sales
D)repeat sales

Question 12

In spite of the type of business, all businesses need to generate:

A)revenue
B)customers
C)product
D)service

Question 13

If a company has two revenue streams, what must the entrepreneur ask in relation to revenue?

A)How many customers will I need for each stream?
B)How much will each revenue stream contribute to total revenue?
C)How many more revenue streams will I need?
D)Will my revenue streams compete with each other?

Question 14

A business model:

A)means the same thing as a revenue model
B)focuses on how the product or service will serve a market need
C)determines how profits will be made
D)determines how revenue will be earned

Question 15

Which of these questions will not provide information for the revenue model?

A)How will my service add value to my customer?
B)How much will my customers be willing to pay?
C)How many customers do I need?
D)How much cash can be generated from sales?

Question 16

Cylle installs a unique home entertainment center.He charges a flat fee of $1,200 for the system and the installation.What revenue model does Cylle employ?

A)razor and razor blade
B)unit sales
C)data revenue
D)Intermediation

Question 17

Why is the razor-and-razor-blade model also known as the printer-and-ink model?

A)the technique is only used by printing companies
B)the razor blade is not used that much
C)the printer is sold at a low cost, but ink or toner is priced much higher
D)printers are expensive, but ink is readily available

Question 18

Revenue can be described as which of the following?

A)all the money that a company has to work with
B)the money from loans, sales, and contributions
C)money gained from the sale of goods or services
D)money gained from sales minus the cost of creating the goods

Question 19

Tony owns a bicycle shop where he sells bicycles, repairs them, and sells accessories.How many revenue streams does Tony's business have?

A)one
B)three
C)two
D)it cannot be determined

Question 20

Carol sells a downloadable product that uses bar codes to conduct comparison shopping.Carol's product is an example of:

A)a tangible revenue model
B)an intangible sale
C)a data revenue model
D)a licensing revenue model

Question 21

A popular sports company grants a license to people who use their logo on T-shirts and caps.They charge the company for the rights to use the logo.This is an example of which of the following revenue models?

A)advertising revenue model
B)intermediation revenue model
C)licensing revenue model
D)razor-and-razor-blades model

Question 22

Myhours.com offers a free individual time reporting system.However, it charges for additional users and services.This is an example of which of the following revenue models:

A)utility and usage revenue model
B)professional revenue model
C)freemium revenue model
D)premium revenue model

Question 23

Clinton owns a popular coffee shop in downtown Seattle.Rather than open up a second shop, he allows another business owner to use his company name and follow the same operations.The second business owner, in turn, pays him an initial monthly fee for operational support and the use of the company name.What revenue model does this represent?

A)intermediation model
B)franchising model
C)licensing model
D)professional revenue model

Question 24

This revenue model involves charging customers to gain continuous access to a product or service:

A)licensing revenue model
B)franchising revenue model
C)revolving revenue model
D)subscription revenue model

Question 25

This revenue model mixes free basic services with premium or upgraded services:

A)utility and usage revenue model
B)professional revenue model
C)freemium revenue model
D)premium revenue model

Question 26

What is the primary source of revenue for Skype, a company that offers free online video and phone service?

A)the money they charge for a connection
B)the money they charge for Skypeout, the service that calls land lines and cell phones
C)the long-distance fees
D)the monthly subscription fee

Question 27

This revenue model provides professional services on time and materials contract:

A)contractor revenue model
B)utility and usage revenue model
C)professional revenue model
D)franchising revenue model

Question 28

What are the two revenue sources of Airbnb?

A)air travel and gambling
B)commission from the homeowner and a booking fee from visitors
C)commission on the booking fee
D)advertisement of the rooms

Question 29

The revenue model associated with giving permission to other parties to use protected intellectual property in exchange for fees is called:

A)fee revenue model
B)licensing revenue model
C)intellectual property model
D)intermediation model

Question 30

Airbnb is considered an intermediation revenue model because:

A)they help people in a real-estate-related industry
B)they advertise on behalf of the homeowner/renter
C)they charge commission for connecting home renters and home owners
D)they are a new business model

Question 31

What is a likely reason why someone would pay money for a franchise?

A)they are not aware of basic business practices
B)they will not have to spend the same amount of time marketing and building the brand
C)they do not have knowledge in the industry or business model
D)they will not have to work as hard in running the business

Question 32

Massage Envy, a franchised spa offering massages and facials, offers discounts for people who automatically purchase a monthly service or services.What revenue model does this represent?

A)licensing revenue model
B)franchising revenue model
C)revolving revenue model
D)subscription revenue model

Question 33

Which of the following might be used with permission in a licensing revenue model?

A)copyrights
B)patents
C)trademarks
D)all of these

Question 34

A mobile telephone company charges a base fee plus additional minutes for data usage.What revenue model is demonstrated in this example?

A)contractor revenue model
B)utility and usage revenue model
C)professional revenue model
D)franchising revenue model

Question 35

Pam developed an application for the iPhone that Apple sells to their customers.Through what revenue model does Pam get revenue?

A)licensing revenue model
B)intermediation
C)copyright
D)advertising revenue model

Question 36

Which of the following is the role of the broker in an intermediation revenue model?

A)sell to the ultimate buyer
B)organize transactions between buyer and seller
C)represent the buyer in legal cases
D)represent the seller in legal cases

Question 37

In which revenue model does an existing business allow another party to trade under the name of that business?

A)a licensing revenue model
B)a franchising revenue model
C)a brokerage model
D)an advertising model

Question 38

This revenue model charges customers fees based on how often goods or services are used:

A)contractor revenue model
B)utility and usage revenue model
C)professional revenue model
D)franchising revenue model

Question 39

What is a likely reason why someone would license a product to someone else to sell?

A)the licensee may have better access to the market
B)the revenue stream will be bigger due to double dipping
C)the customer will not know who the provider is
D)doing so will generate more money

Question 40

Joe owns a construction company and prices his services based on labor hours and the cost of material.Which of the following revenue models is Joe using?

A)contractor revenue model
B)utility and usage revenue model
C)professional revenue model
D)franchising revenue model

Question 41

Profit will depend primarily on which of the following?

A)the amount of revenue that your company can bring in
B)both revenue and cost
C)the value of the company
D)the number of customers generated

Question 42

Which of the following refers to the model that gives the product away to one party but charges another party?

A)dual system
B)multiparty business
C)single-party marketing
D)double-bind pricing

Question 43

The cost of running the business, including rent, utilities, administration, salaries, marketing, etc., is referred to as which of the following?

A)cost of goods sold
B)operating expenses
C)infrastructure costs
D)nonsales costs

Question 44

How do companies gain revenue from free products under the freemium model?

A)they operate as nonprofits
B)they are sponsored by wealthy sponsors
C)they have paid advertisements in their service
D)they get donations from users

Question 45

The costs that include design, material, manufacturing, packaging, and other costs before a sale can be made to the customer is referred to as:

A)customer directed costs
B)presales costs
C)cost of goods sold
D)operating costs

Question 46

Which of the following refers to pricing a product or service above its market value to cover the cost of giving a product away for free or for a marked discount?

A)direct cross-subsidies
B)price plus
C)freemium plus
D)BOGO pricing

Question 47

When Sally placed cookies by the side counter of her coffee shop, which revenue component was she addressing?

A)frequency
B)selling price
C)selling process
D)customers

Question 48

A cell phone company offers a promotional in which they give away a free phone to people who purchase the highest-level data usage plan.This is an example of which of the following?

A)balance subsidies
B)promotional subsidies
C)direct cross-subsidies
D)risk reduction subsidies

Question 49

The component of revenue that is addressed when a company offers a frequent shopper award is:

A)frequency
B)selling price
C)selling process
D)customers

Question 50

The four elements of revenue are:

A)customers, frequency, selling process, price
B)profit, sales, employees, selling process
C)selling process, price, employees, profit
D)customers, revenue streams, frequency, price

Question 51

How do companies gain revenue from free products under the freemium model?

A)They operate as nonprofits.
B)They are sponsored by wealthy sponsors.
C)The cost of the free service is minimal (usually web based) and the upgrade costs enough to cover the cost.
D)They get donations from users.

Question 52

A Las Vegas theater offers a free performance.There is a two-drink minimum.This is an example of what strategy?

A)value-based pricing
B)cross subsidies
C)multiparty
D)utility and usage

Question 53

What is the main reason customers are attracted to direct cross-subsidies?

A)they get two products for the price of one
B)it eliminates the upfront cost of a product or service
C)it is the most cost-effective model
D)they rarely calculate the true costs

Question 54

Kelly charges a premium price for her marketing services.In her sales pitch, she makes sure that she distinguishes key elements of quality not offered by her competitors.What key element of revenue is Kelly addressing by doing this?

A)frequency
B)selling price
C)selling process
D)customers

Question 55

How should a new startup address the issues of revenue before the business makes money?

A)conduct a most likely financial forecast
B)actively test assumptions
C)look at businesses in other areas
D)think things through carefully

Question 56

A popular restaurant offers a free meal.At the restaurant, it turns out that drinks are not included.The drinks sell for above market rates.This is an example of which of the following?

A)direct cross-subsidies
B)dishonest pricing
C)double whammy
D)distributed pricing

Question 57

What is the first key driver of revenue?

A)price
B)selling process
C)customer
D)frequency

Question 58

What are the two types of costs that should be taken into consideration when understanding the cost driver?

A)cost of goods sold and operating expenses
B)cost of startup and cost of operations
C)cost of pre-startup and cost of operations
D)employee costs and infrastructure costs

Question 59

The financial report that measures the financial performance of your business on a monthly or an annual basis is:

A)profit and loss statement
B)income tax statement
C)balance sheet
D)credit report

Question 60

Another term for an income statement is:

A)profit and loss statement
B)income tax statement
C)balance sheet
D)credit report

Question 61

In this pricing strategy, prices are guided by the price other businesses set for similar products and services:

A)customer-led pricing
B)loss-leader pricing
C)competition-led pricing
D)skimming

Question 62

A grocery store offers cans of vegetables at 10 for $10.This is most likely which of the following pricing strategies:

A)skimming
B)fair pricing
C)psychological pricing
D)customer-led pricing

Question 63

In target-return pricing, the cost is determined by which of the following:

A)the maximum amount that your customers will pay
B)the cost of creating the product and adding a profit margin
C)pricing is based on how much you have invested in your business
D)the price you need to charge to meet your company goals

Question 64

A hardware store offers highly discounted sale items to attract people into the store.This is an example of which kind of pricing strategy?

A)introductory offer
B)sale pricing
C)customer-led pricing
D)loss leader

Question 65

The income statement:

A)subtracts the cost of goods sold from the total revenue to get net income
B)subtracts the operating expenses from the total revenue to get net income
C)subtracts the cost of goods sold and operating expenses from the total revenue to get net income
D)reports all income with no adjustment for cost of goods sold or operating expenses

Question 66

Depreciation can be thought of as:

A)the cost of wear and tear on physical assets such as equipment
B)a discount placed on aspects of your business
C)the result of business losses
D)the value of used goods

Question 67

In this pricing strategy, a product or service is offered at or below cost in order to attract more customers:

A)skimming
B)loss-leader
C)customer-led
D)competition-led

Question 68

A specialty tour company markets its service as offering "an experience of a lifetime." Which of the following would be the most likely pricing strategy?

A)customer-led pricing
B)psychological pricing
C)value-based pricing
D)bundled pricing

Question 69

A form of pricing high, this strategy is used for new products that have no competition:

A)customer-led
B)competition-led
C)skimming
D)loss-leader

Question 70

This method of pricing involves pricing the product based on how it benefits the customers:

A)target-return pricing
B)customer-led pricing
C)value-based pricing
D)benefit pricing

Question 71

In this type of pricing, customers are encouraged to believe that the product is less expensive than it really is:

A)skimming
B)fair pricing
C)psychological pricing
D)customer led pricing

Question 72

A local hardware store offers flashlights at "3 for a dollar." This action would indicate which of the following strategies?

A)psychological pricing
B)loss-leader pricing
C)value-based pricing
D)fair pricing

Question 73

If free products are not attracting customers, what action would be appropriate?

A)discontinue the free product
B)explain why upgrades would be appropriate
C)add features to the free product
D)lower the features in the free product

Question 74

This pricing strategy packages goods together at a lower price than if they were sold separately:

A)bundled pricing
B)discount pricing
C)fair pricing
D)introductory offer

Question 75

The operating profit represents which of the following:

A)the amount left over from revenue once all costs and operating expenses are subtracted
B)the amount from all sales and business loans
C)the amount from sales once costs are subtracted
D)the amount from sales once operating expenses are subtracted.

Question 76

In this pricing strategy, the product is offered for a heavily discounted price (or free) to attract more customers:

A)introductory offer
B)loss-leader
C)customer-led
D)competition-led

Question 77

Cost-led pricing refers to which of the following pricing calculations:

A)calculating the cost of manufacturing and delivering the product and adding a profit margin
B)calculating the cost based on how much profit you have targeted in your business plan
C)calculating the price based on the maximum price a customer will pay
D)calculating the price based on competitive products

Question 78

______ is the degree to which both businesses and customers believe that the pricing is reasonable.

A)lowest cost pricing
B)loss-leader pricing
C)customer-led pricing
D)fair pricing

Question 79

A company prices a product at market levels but packages the product to read "introductory pricing." This would indicate which of the following pricing strategies?

A)customer-led pricing
B)psychological pricing
C)value-based pricing
D)bundled pricing

Question 80

In this pricing strategy, customers are asked how much they would pay for the product:

A)skimming
B)loss-leader
C)customer-led
D)competition-led