Kim Mattson

ITS 380

CH 2

 

Case Study

1.       Compare Pandora’s original business model with its current business model. What’s the difference between “free” and “freemium” revenue models?

The original free model gave customers ten hours for free and then after that, they could pay $36 monthly to subscribe. The freemium model gave customers forty hours free, but then they would have to choose from three options. The first option was paying 99 cents for the rest of the month. Second option was unlimited access by signing up for the premium service. And the third option was doing nothing and wait for the next month to roll around and sign up again.

 

2.       What is the customer value proposition that Pandora offers?

Pandora gave customers a personal radio station tailored to your tastes in music.

 

3.       Why did MailChimp ultimately succeed with a freemium model but Baremetrics did not?

MailChimp’s basic free features were satisfying enough to attract customers and enable growth.  Once a customer’s email needs increased, they could subscribe to the special features. The special features offered, like analytics and performance tracking, are beneficial from a marketing standpoint to help the customer’s business. Baremetrics did experience a surge in subscribers initially, but due to the inability to keep up with the increased demands in data processing requirements and customer support staff, lost more customers in the end. Baremetrics failed to foresee their need to increase their capabilities as their customers increased.

 

4.       What’s the most important consideration when considering a freemium revenue model?

The most important factor would be if the product or service is going to provide value initially and on into the future for the customer. The customer will stay if they feel they are benefitting as well.

 

Projects

2. Examine the experience of shopping online versus shopping in a traditional environment. Imagine that you have decided to purchase a digital camera (or any other item of your choosing). First, shop for the camera in a tradition al manner. Describe how you would do so (for example, how you would gather the necessary information you would need to choose a particular item, what stores you would visit, how log it would take, prices, etc.). Next shop for the item on the Web or via a mobile app. Compare and contrast your experiences. What were the advantages and disadvantages of each? Which did you prefer?

To start shopping for a digital camera in the traditional sense, I would start by talking with people I know who own one to get their insight on any features, brands, and overall satisfaction. Depending on the number people I spoke with, I might also go to the library or purchase an electronics magazine to read further on the topic. Once I know what features are important to me, I would venture out to the stores. I’d visit at least one camera only store, like Duluth Camera, and then to more mass retail like Best Buy and Target. I would consult with salespeople at each store, get their opinion on brands, most popular, etc. Hopefully I have enough input to make a decision and can wait for a sale. The whole process of speaking with people could take a week or two, depending on schedules (my own, friends, store hours, etc.) and length of each discussion. You must be in the mood for a lot of interaction. All together, this process would probably take about 3 weeks for me, maybe longer if I was waiting for the camera to go on sale. Now, shopping online would still be a little time consuming but can be done on your own time and no one else’s. All the research, opinions, features, prices, etc. can be searched on the Web. And you can access more reviews than you may want to read, it will be much quicker than the traditional way. The whole process and purchase could be completed in a day, all depends on how long the research is done before you’re satisfied. The main drawback with purchasing online is you don’t get to physically hold and try the camera unless you go to the store to do so.