CH2

p. 101 case study questions

1.       Freemium is allowing the giveaway of products and services to customers while relying on a certain percentage to pay for premium versions of the same services. This is the business model for most apps.

2.       The customer value proposition that Pandora offers is why their customers should buy into paying for premium service; for Pandora’s customers this means getting upgraded service and eliminating required advertising viewing and eliminating access time limitations.

3.       MailChimp had relatively little overhead cost for providing their free services and a large customer base, while Baremetrics had too small of a customer base, and more importantly, did not have the server and technical services capacity to support the positive response they received; they couldn’t support their customers and therefore couldn’t keep them.

4.       The most important consideration in considering a freemium service model is too attract a large customer base and know that you are only going to get a small percentage to upgrade to premium service, and that you really need to consider advertising as a must-have add-on to subsidize memberships in your revenue model. Marginal costs must be a part of the equation considerations in the revenue model. Freemium is a better model than free trials.

p. 103-104

1.       A business model is a set of planned activities designed to achieve a profit. A business plan is the document that describes a business model. They aren’t really that different, but the key difference is that a model has a mathematical formula for generating profit, while the plan is the documentation of such modeling.

2.       The eight key components of a business model are:  value proposition, revenue model, market opportunity, competitive environment, competitive advantage, market strategy, organizational development, and management team.