Shaye Trenda

ITS 380 – Global E-Commerce & Systems

Submitted on 1/29/18

CH2 - E-ecommerce Business Models and Concepts: Pandora Radio Case Study

C A S E    S T U D Y    Q U E S T I O N S

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

Pandora’s initial idea was to offer 10 hours of free music and then, if the user wants to keep listening to music they would have to subscribe and pay for the service later on. This strategy did not work because people would listen to their free music, and then stop using Pandora when they were prompted to pay for it. So, they increased the “free” time to 40 hours. The same problem occurred so they decided to introduce ads and remove the limit time in order to face the cost they had.

A free revenue model makes its money adding ads and provides to the customer a “light”, limited, or uncompleted version of the products, hoping that they will subscribe and pay for the service. A freemium revenue model provides a simpler version of the premium service that hopefully the customer will subscribe to it and pay a monthly fee for its use.

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

The customer proposition that Pandora offers when the customer subscribes pays for the services includes: no ads, fewer limits, a desktop app, and higher quality of the service.

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

MailChimp’s strategies succeed because the free version that they provide includes just the right amount of things and encourage the customers to pay for the extra service and subscribe to them. On the other hand, the strategy that Ning used did not convince the customer to pay for the full version, and the cost that the free users were generating was causing them a big economic loss.

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

When considering this type revenue model, it is important to know the cost of the business and make sure that are affordable even when there are not too many subscribers. It is also important to offer a good deal for the full version, letting the customers know that the experience when they are subscribed it’s greater than the free version, and they are really missing a great service.


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 would do so (for example, how would you gather the necessary information you would need to choose a particular item, what stores would you visit, how long it would take, prices, etc.). Next, shop for the item on the Web or via mobile app. Compare and contrast your experiences. What were the advantages and disadvantages of each? Prepare a report or slide presentation to support your analysis and approach.

- Buying a digital camera: Traditional manner:

The first thing I would do would be to gather enough information about what kind of digital cameras are right now in the market and what kind of camera would better fit my necessities. In order to do so, I would try to collect as more brochures as I could. After reviewing some of the cameras available in the market I would start to visit stores with the purpose of look for the models I have found and more information. I would go to Target, BestBuy, and Walmart because probably they have a wide variety of video cameras. It would take me a long time to go to each store, find the camera I want, reach a seller and ask questions to him or her, and remember the prices of each store.

- Buying a digital camera: Shopping online:

I would google digital camera and see what it is the feedback received. It would be relatively easy to find information about brands, cameras, and its description to find which one fits better my necessities. Once I have decided what model I want, typing the name of the camera in Google, would give me back the results with the prices for a bunch of stores, so I will know which one is the cheapest place to buy my camera. It would be really fast, if I have a preconceived idea of what I want, I would probably buy the camera within an hour.

The advantages of the traditional manner is that I can try the cameras before buying it, something that I would not be able to do when buying online, however, I am sure I would be able to find a video of someone analyzing the camera and how it works. The disadvantages of the traditional are that it is time-consuming, stressful, and complicated, while buying online is fast, you do not need to move, and you do not have to deal with long lines to check out and related issues.

3. During the early days of e-commerce, first-mover advantage was touted as one way to success. On the other hand, some suggest that being a market follower can yield rewards as well. Which approach has proven to be more successful- first mover or follower? Choose 2 e-commerce companies that prove your point.

I think that the first company to make the move is still proven to be the best way to succeed. Early arrival to a business and owning your own market is the way to the top. Being a follower is just copying the company who made the first move and they will usually be a step behind the first mover company. Some examples of a first-mover company would be Amazon, PayPal. Although each of these has encountered competition, their early arrival and commitment to becoming the major player in their own marketspace have helped to assure their continuing success. Amazon is the most powerful and successful e-commerce website because of the company’s ability to be a first mover and their early arrival to the online markets.