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:
Under the Buy a Pair, Give a Pair program, Warby Parker distributes glasses around the world to help people with impaired vision.
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 efforts
The one-for-one-business model is an entire marketingstrategy in itself. The next generation of consumers is increasingly choosing to do business with companies that give back to the world.
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.
An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run.
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
Digital and tech business models can be classified according to four levels of transformation into digitally-enabled, digitally-enhanced, tech or platform business models, and business platforms/ecosystems.
A digital business model might be defined as a model that leverages digital technologies to improve several aspects of an organization. From how the company acquires customers, to what product/service it provides. A digital business model is such when digital technology helps enhance its value proposition.
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
In an asymmetric businessmodel, 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.
In an asymmetric businessmodel, 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.
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.
Cloud business models are all built on top of cloud computing, a concept that took over around 2006 when former Google’s CEO Eric Schmit mentioned it. Most cloud-based business models can be classified as IaaS (Infrastructure as a Service), PaaS (Platform as a Service), or SaaS (Software as a Service). While those models are primarily monetized via subscriptions, they are monetized via pay-as-you-go revenue models and hybrid models (subscriptions + pay-as-you-go).
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.
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.
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.
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.
B2B, which stands for business-to-business, is a process for selling products or services to other businesses. On the other hand, a B2C sells directly to its consumers.
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.
Direct-to-consumer (D2C) is a business model where companies sell their products directly to the consumer without the assistance of a third-party wholesaler or retailer. In this way, the company can cut through intermediaries and increase its margins. However, to be successful the direct-to-consumers company needs to build its own distribution, which in the short term can be more expensive. Yet in the long-term creates a competitive advantage.
The C2C business model describes a market environment where one customer purchases from another on a third-party platform that may also handle the transaction. Under the C2C model, both the seller and the buyer are considered consumers. Customer to customer (C2C) is, therefore, a business model where consumers buy and sell directly between themselves. Consumer-to-consumer has become a prevalent business model especially as the web helped disintermediate various industries.
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.
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.
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.
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.
Businesses employing the brokerage business model make money via brokerage services. This means they are involved with the facilitation, negotiation, or arbitration of a transaction between a buyer and a seller. The brokerage business model involves a business connecting buyers with sellers to collect a commission on the resultant transaction. Therefore, acting as a middleman within a transaction.
Dropshipping is a retail business model where the dropshipper externalizes the manufacturing and logistics and focuses only on distribution and customer acquisition. Therefore, the dropshipper collects final customers’ sales orders, sending them over to third-party suppliers, who ship directly to those customers. In this way, through dropshipping, it is possible to run a business without operational costs and logistics management.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
