Case Study Questions

 

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

 

In the original business model, they gave 10 hours to listen Pandora for free and the ask the customers to pay $36 a month for a year. In contrast, they now give 40 hours to listen Pandora for free in a calendar month. When the customers use up their free 40 hours, the asked to choose from multiple options such as paying $36 a year, paying 99 cent for rest of the month, cancelling or coming back next month to use another free 40 hours for free.

      With “free” service, every services are free for customers to use. In “freemium” service model, a company offers some basic service for free and then asks to pay premium price for more advanced, greater service.

 

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

 

They give customers 40 hours to listen Pandora for free in one calendar month. When the customer uses up the 40 free hours, then they have to make one of few options Pandora gives.

a. Pay 99 cent to continue to listen for the rest of the month

b. Pay $36 to use for a whole year

c. Cancel the service

d. Come back next month for another 40 free hours on Pandora

 

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

 

The main reason of decline of Baremetrics was their capacity. Baremetrics released new service option without calculating new customer volume. They didn’t match their capacity with newly gained customer base so their service became hard or uneasy to use.

Also MailChimp offers emailing service and analytical service when Baremetrics only offered analytical service. From my point of view, Baremetrics service offering might have been not enough to start freemium business model. However, the main reason still remain their uncalculated and unmatched service capacity with the new customer flow.

 

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

 

It is important to consider:

·         Variable cost of providing products or services to additional customers

·         Cost of supporting free customers

·         Product type

·         Potential large customer base

·         If the company has long- term customer retention rate

·         Forecasting number of customers who are willing to pay

·         If it can earn advertising revenue

 

PROJECTS

 

1.                  Select an e-commerce company. Visit its website or mobile app and describe its business model based on the information you find there. Identify its customer value proposition, its revenue model, the marketspace it operates in, who its main competitors are, any comparative advantages you believe the company possesses, and what its market strategy appears to be. Also try to locate information about the company’s management team and organizational structure. (Check for a page labeled “the Company,” “About Us,” or something similar.)

 

I chose Spotify and visited their mobile app. The business model is freemium just like Pandora. They offer free music streaming with limited control and advertisements. For example, every 30 minute, you will have to listen to full commercial. You can’t change music for more than 5 times. You can’t stream offline and you can’t download music to you library on Spotify. However, they also offer premium service which gives you full freedom, listening without commercial and offline streaming. Spotify is accessible from wherever there is an internet. The main competitors are Apple music, Pandora and YouTube.

I think Spotify is very successful company that has full potential to grow more in the future. Their interface is appealing and user friendly. They have pre- made music playlists but also they let you create one that fits more to your own taste. You can share you playlist with you friends. So many artists have joined Spotify, so you can follow their Spotify’s page to get their newly released music right away. You can share your playlist through your other social network platforms too. Overall, Spotify is a great example company that is using “freemium” business model.

·         Subscribers: Over 70 million (as of January 2018)

·         Active users: Over 140 million (as of June 2017)

·         Revenue paid to rights holders: $5bn (as of September 2016)

·         Number of songs: Over 30 million

·         Number of playlists: Over 2 billion

·         Available in 61 markets

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 traditional 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 long 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 and why?

 

I don’t have good knowledge about digital camera. So if I need to shop for one, I would educate myself first about it. I could learn from internet or friends and family who has knowledge.

In traditional shopping, I think I would be very constrained by the choices I would have by the availability at the store I’m visiting. I can visit another store or two, but it would be very time consuming if I count the traveling time in between. My choice is limited in this way but I can have my product right away on hand.

On the other hand, online shopping can be much easier. I don’t have to travel anywhere else. I can compare a lots of products and read customer review to even better the idea on certain product. I will have to wait for few days until my product come to my hand. In this way, it can be cheaper too because I’m not wasting gas money and my time searching in stores.

I would much rather choose online option where the return and refund policy is great and has good customer service. It will be cheaper and faster.