Business Model: "ROBIN HOOD"

?? PRICING MODEL pattern ??

Prologue

The Robin Hood business model is an innovative approach that combines profitability with social responsibility. This model involves selling products or services to affluent customers at higher prices, using the profits to subsidize or provide free offerings to economically disadvantaged consumers. This strategy not only creates social impact but also helps companies build brand reputation, achieve economies of scale, and potentially develop future markets.

?? Key Takeaways

1. Cross-Subsidization: The model uses profits from higher-priced sales to wealthier customers to subsidize or provide free products/services to less affluent consumers. Profit from wealthy customers subsidizes offerings for the poor Enables access to products/services for disadvantaged groups
2. Social Impact and Brand Image: Implementing this model can significantly enhance a company's reputation and social impact. Improves corporate social responsibility (CSR) profile Builds positive brand image and customer loyalty
3. Market Expansion: The Robin Hood model can help companies enter and develop future markets in emerging economies. Creates relationships with potential future customers Establishes presence in developing markets
4. Economies of Scale: By serving a broader customer base, companies can achieve greater operational efficiencies. Increased production volume lowers per-unit costs Enables competitive advantage through scale
5. Innovative Pricing Strategy: This model requires a sophisticated approach to pricing and market segmentation. Differential pricing based on customer segments Balances profitability with social impact

?? Implementation

To successfully implement the Robin Hood business model:

1. Identify products or services that can be adapted for different market segments
2. Develop a clear segmentation strategy to differentiate between "rich" and "poor" customers
3. Create a pricing structure that allows for cross-subsidization
4. Establish partnerships or distribution channels to reach disadvantaged communities
5. Communicate the social impact to enhance brand value

?? Questions to guide you

1. Could we offer our products and services to lower-income customers?
2. What strategies might we employ to effectively and sustainably segment our customer base? How can we reliably and sustainably segment the market?
3. Can we cross-subsidise these offerings or adjust our products such that they cost less?
4. How do we measure and track the impact of its giving?
5. How do we ensure that our giving is truly beneficial and not harmful to the communities we aim to serve?

?? Real-world examples of successful implementation include:

• Aravind Eye Care Hospital: Provides free or low-cost eye surgeries to poor patients, subsidized by full-price procedures for wealthier patients.
• TOMS Shoes: For every pair of shoes sold, donates a pair to a child in need through their "One for One" progra.
• One Laptop per Child (OLPC): Sells laptops to consumers in developed countries to fund the distribution of low-cost laptops to children in developing countries.
• Lemonaid: A German beverage company that donates a portion of each sale to charitable projects.
• Ivy League Universities: Offer substantial financial aid to low-income students, subsidized by full tuition payments from wealthy students.

?? Challenges to Implementation

• Accurately segmenting the market to identify "rich" and "poor" customers
• Maintaining product quality across different price points
• Balancing profitability with social impact goals
• Managing potential backlash from full-price paying customers
• Ensuring the sustainability of the cross-subsidization model

?? Bottom Line

The Robin Hood business model offers a unique opportunity for companies to create social impact while building a sustainable and profitable business. By leveraging the purchasing power of affluent customers to subsidize products or services for disadvantaged groups, companies can expand their market reach, enhance their brand reputation, and potentially develop future growth markets.

While challenging to implement, this model can lead to significant competitive advantages and long-term success, particularly in industries where social responsibility is highly valued. For entrepreneurs and startups, the Robin Hood model presents an innovative way to differentiate themselves in the market while making a positive contribution to society.

PROFESSIONAL: I conduct academic research by interviewing CEOs of small and medium-sized businesses (SMEs) in Japan, known as Japanese Global Niche Top (aka "Hidden Champion").

• I am also conducting a holistic four-year study that examines the growing entrepreneurial ecosystem in Japan, which includes interviews with startups, incubators, accelerators, studios, living labs, venture capitalists, and government officials (to date, individuals have been interviewed in Tokyo, Osaka, Kyoto, and Hiroshima).

PERSONAL: I am a polymath and love all types of topics typically reading 2-3 books each week. Now, I have a chance to share my insights with readers!

References

Gassmann, Oliver, Frankenberger, Karolin, & Csik, Michaela. (2020). The business model navigator?: the strategies behind the most successful companies (2nd ed.). Pearson Education, Limited.

Hiteva, Ralitsa, & Sovacool, Benjamin. (2017). Harnessing social innovation for energy justice: A business model perspective. Energy Policy, 107, 631–639.

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