one-for-one-business-model

What Is The One-For-One Business Model? One-For-One Business Model In A Nutshell

The strategy was popularized by TOMS Shoes in 2006, with the shoe company donating a new pair of shoes to a child in a developing country for every pair of shoes sold to a consumer.  The one-for-one business model is based on the idea that for every consumer purchase, an equivalent or similar product is given away to someone in need.

Understanding the one-for-one business model

The one-for-one model, otherwise known as “buy-one give-one”, is a social entrepreneurship business model in which one item is donated for each item purchased.

Opinions on the one-for-one business model are divided. Proponents suggest it is one way to create more social and commercial value in society, while the most fervent critics claim it is a marketing tactic that exploits the poorest individuals.

Other examples of the one-for-one business model

After witnessing the success of TOMS shoes, the model was implemented by many other businesses. These include:

Warby Parker

Under the Buy a Pair, Give a Pair program, Warby Parker distributes glasses around the world to help people with impaired vision.

warby-parker-business-model
Warby Parker is a prescription and sunglasses retail company, which focuses on vertical integration to enhance the customer experience by owning the optical laboratories where lenses are developed, and by owning both physical and online stores to enable customers to choose from a variety of products. Warby Parker leverages programs like the Home-Try-On program and the “Buy a Pair, Give a Pair” to lower up long-term customer acquisition costs, incentivize recurring purchases and referrals from existing customers.

This Bar Saves Lives

This company aims to fight global hunger by donating a packet of life-saving food with every purchase of a healthy gourmet bar.

The Little Bee Co.

With every diaper purchase, the Little Bee Co. donates a cloth diaper to an orphan in need.

Better World Books

This company is on a mission to improve literacy rates in developing countries. With every book sold under the Book for Book initiative, a book is donated to one of the company’s two partners: Books for Africa and Feed the Children.

FIGS

The one-for-one business model also works in the medical field. FIGS is a provider of comfortable and practical medical wear and donates a clean set of scrubs to healthcare providers who lack the proper attire to do their jobs safely.

Key considerations of one-for-one business model

Entrepreneurs considering the one-for-one business model should note the following key considerations of the approach:

1 – It can boost marketing effort

The one-for-one-business model is an entire marketing strategy in itself. The next generation of consumers is increasingly choosing to do business with companies that give back to the world. 

With 75% of consumers likely to purchase from a company that supports an issue they agree with, it is imperative marketing and product development teams enable the consumer to get what they want and make a positive impact on society at the same time.

2 – It must leverage economies of scale 

In some respects, the one-for-one business model is a balancing act between social good and profitability. In other words, the business must not devote too many resources to producing the donated item. 

TOMS made the model work for a time because it utilized cheaper materials and economies of scale through high production volume. But after donating 95 million pairs of shoes in 2019, the company almost went bankrupt and was forced to distance itself from the strategy

Premium products with lower demand may not be a suitable fit for the one-for-one approach, with some companies choosing to donate a percentage of their total sales to a particular cause. TOMS now donates 33% of its profits to grassroots efforts building local communities from the ground up.

3 – It must consider the recipients 

Critics argue that when a company donates items to citizens en masse, they can become dependent on donations instead of contributing to a stronger local business culture or improving their living standards. 

While there is nothing inherently wrong with good intentions, one-for-one initiatives should be designed to help people lift themselves out of poverty. Socially responsible companies must also be careful not to undercut the local sellers or producers of the goods they intend to donate.

Key takeaways:

  • The one-for-one business model is based on the idea that for every consumer purchase, an equivalent or similar product is given away to someone in need.
  • The one-for-one business model has been used successfully by companies such as Warby Parker, This Bar Saves Lives, Better World Books, FIGS, and The Little Bee Co. Donated items include books, diapers, medical scrubs, and essential food packets.
  • There are a few key considerations of the one-for-one model. For one, it can enable the business to profit from the next generation of socially responsible consumers. However, the strategy will only work if the business utilizes economies of scale and considers the impact donated items have on the recipient and local producers.

Read Next: TOMS Shoes Business Model

Connected Business Model Types

Asymmetric Business Models

asymmetric-business-models
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Attention Merchant Business Model

attention-business-models-compared
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Marketplace Business Models

marketplace-business-models
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

Wholesale Business Model

wholesale-business-model
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.

Retail Business Model

retail-business-model
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.

B2B2C

b2b2c
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.

Crowdsourcing Business Model

crowdsourcing
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.

Open-Core Business Model

open-core
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.

Open Source vs. Freemium

open-source-business-model
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.

Freemium Business Model

freemium-business-model
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.

Freeterprise Business Model

freeterprise-business-model
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

Franchising Business Model

franchained-business-model
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.

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