Louis Gouge

ITS 380

Chapter 2

Case Study Questions

1. (a) The free strategy was to give away 10 hours of free music per month, and after the 10 hours the subscribers would have to pay $36.00 per month to listen until the next month. Subscribers took advantage of the free music but did not want to pay for it. At the beginning of the next month subscribers could sign up again and listen for the free 10 hours. Now all that has to be done is subscribe and listen albeit with some commercials every now and then but it is a pretty great service.

            (b) Free is free. There are no fees to pay to use the service but the catch is not all features are available to use. If a user wants to take advantage of all the features available, then the user has to pay a “freemium”. In the case of Pandora, the freemium includes, no commercials, higher quality streaming, a desktop app, and little to none user limits for accessing the music.

2. The customer value proposition offered by Pandora is; the music can be custom tailored to what the user wants to listen to. A virtual radio station can be designed by the user to listen to a certain type of music and a computer algorithm picks and plays music that is similar to what the users suggested. If the user pays the subscription fee the music will be totally commercial free and without any interruptions.

3. Mailchimp succeeded because it supplied the options the users wanted and needed. It offered the customer value proposition and the users wanted to take advantage of it. Ning suffered from many things to make it go under one of the biggest was users wanted to take advantage of the free program but only some users were paying for the service. Ning was growing and it started to make the company suffer from all the users taking advantage of the free services. While Ning almost went under it finally started to bring paying subscribers back and now users are paying for the services keeping Ning above water.

4. A freemium revenue model will only work for a firm that will have a very small marginal cost and that can provide support for users. If the main idea catches on fast and grows exponentially then the business can lure advertisers to come aboard to offset all the costs and overhead for the free from fees type of business. As long as the users do not have to pay a high premium to use the service the users will stay, but when they have to pay that will force them away.



1. A business model is a set of plans designed for a business to use to be profitable and generate revenue. A business plan is a document that expresses how that company will implement the business model.

5. A community provider knows what type of customers will exist in the target market and can meet those type of customers’ needs. The smaller target market will also help to keep costs down by not having to keep a large inventory of items that could remain on shelves for long periods of time. The marketing of items the provider supplies can help in reducing the costs to reach the smaller group of customers in that area. Once the business starts to be more successful then maybe the provider can grow and offer more items.

10. The largest companies have many business models, and there is no suitable way to classify those types of businesses. Most E-commerce business can create confusion when they are classified into a single type of business model, because they can be categorized into a Business to Customer(B2C), Business to Business(B2B), Customer to Customer(C2C) etc.  It is because of this wide range these large providers can fit into multiple sectors.

15. An exchange is a digital marketplace where suppliers and purchasers conduct transactions. Some key factors that contribute to their success are; there is a large need, it is easy to access, it’s cheaper, quick, and most goods are more specific for the inquiring industry. Portals offers users powerful search tools, packages, and services all in one place. A portal does not sell anything but their business model is to be a destination site to keep users there to read news, find entertainment, and meet other users.

20. Crowdfunding is using the internet to ask a large number of people for money to raise capital to fund a project or to help other people in need. An example would be “Kickstarter”, “Indiegogo”, and “Go fund me”.



I chose number 2 for my project question.

I live in a very rural area and if I wanted to go look for a camera my only choice would be our local Walmart. If I wanted to search other stores for my new camera my best bet would be to travel to Duluth or Eau Claire. Whichever way I decide to go it is about a ninety mile drive one way to get to each city. This process would easily take all day to visit all the stores offering digital cameras within those two cities, and it would also take at least 3 hours of driving just to get to and from those cities. I predict it could take 10 hours’ total including taking time to stop and eat somewhere.

Now if I was going to look online it would probably take an hour or 2 just to make sure I got the best price and to ensure I had the least amount of shipping costs. I could also read other buyers critique of the item and I could do a lot of research on the items I might even change my mind about what camera to purchase.

I would use the online shopping experience hands down! The only downfalls to the online side would be not being able to physically handle and try out the camera. I like to be able to feel the product before I purchase an item and sometimes the only way to do that is visiting a physical store. The wait time for my product to arrive at my home would also be a bummer. Sometimes the shipping can take a long time so a buyer has to make sure the product is not coming from the other side of the world. If the product is in store, I can take it home that very same day and enjoy using my new camera.