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Sample Case Study Paper on Freemium Business Model

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Sample Case Study Paper on Freemium Business Model
Question 1

Pandora initially used the free business model but realized it was not sustainable. It adopted Freemium business model which has resulted to growth in paid subscribers resulting to the company making profits. The difference between free and Freemium business model is that in Freemium there are paid subscribers and free accounts that are ad supported.  The free service attracts a huge audience which creates a platform for marketers to advertise. This results in a sustainable income stream because the number of free subscribers continues to increase. Premium accounts record at least 1% of the total subscribers. This is still a substantial number of subscribers due to the high number of subscribers registered in the company which implies that 1% may be as high as one million subscribers. Income from adverts and paid subscriptions results in a high income especially in a business such as Pandora’s because of the low marginal cost of production.

Question 2

Pandora offers customers the ability to select the genre of music they want to listen to. This is a unique model that is different from other existing internet radios. Customers are able to select the music they want to listen to and the radio provides similar music in the same genre. This is available through ad supported music with many restrictions and ad free music streaming with few restrictions. Customers are at liberty to choose what fits them well. There are those who prefer free ad supported music because they are not disturbed by the adverts and do not mind the restrictions. Others prefer their music to be free of any restrictions and adverts. This way, the company has been able to serve both categories of listeners while also making profits.

Question 3

MailChimp succeeded with the Freemium business model when it decided to make some features available for free while other special features were only available to paid subscribers. This attracted many customers to the company and increased its traffic. Customers were willing to pay for the special features that could enable them track their traffic. This has resulted in growth in the income of the company and an increase in the number of paid accounts as the number of free accounts increases. Ning on the other hand was unable to convert free users to paid users which greatly affected its income stream. The cost of running the free accounts was higher for Ning than MailChimp which made it hard for the company to support millions of free accounts. This eventually led to Ning terminating the Freemium model adopting a paid model which has resulted in a growth in income.

Question 4

Freemium business model thrives if the type of product that is being offered has a strong customer proposition. It is also important that the cost of production is low so that the cost of maintaining the free accounts does not drain the income derived from paid accounts. The value of the product offered should also be high in the long-term to retain customers. Customer retention is important because of converting them to paid customers.

 

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Sample Case Study Paper on Freemium Business Model

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