The drop box Freemium pricing strategy

Its container

In a freemium pricing plan, a basic service is provided for free alongside a premium service; in this scenario, free synchronization and space are provided up to a specific level without charge, but beyond that, they are charged for. For online file sharing, use Dropbox, a cloud-based storage platform. The corporation wanted to draw a large number of clients who would be intrigued by the news they hear from the few clients who were already taking advantage of the free services. As a result, the likelihood of paying customers for the business would rise. To put this in perspective, when one user refers a friend, he/she gets free space and the person referred also benefits by enjoying the free services available. This has enticed lots of people to use this strategy leading to an increased number of users over a short period of time.

The positive aspect of this strategy

The positive aspect of this strategy largely lies in its ability to mobilize the customers as marketing agents. The company does not have to employ sales agents and use of online advertisements which tend to be intrusive. Rather, the consumers are enticed to invite their friend and family by being offered more space when they do so. As a matter of fact, Dropbox has seen a significant improvement in income and customer base due to incentives of free storage and free bonus to the consumers.

The Dropbox single biggest disadvantage

The Dropbox single biggest disadvantage of the drop box and failure of this model of operation is the low number of paying customers. Out of the millions of users, a paltry 1.4% are in the paying category. This makes it quite tricky to maintain the service. The model used is enshrouded in uncertainty which means that the company has no real way of ensuring that it got paying customers. As much as the paying customers were few, the company still had to run and maintain the website; making the unpredictability unfavorable.

The strategy that drop box employed for the corporate customers

The strategy that drop box employed for the corporate customers was the trialware approach in which the business can enjoy the services free of charge for 30 days beyond which they shall have to pay for them. During the trial, the business can enjoy every feature and test every module of the services. After the trial, the business has to pay for the services after being hooked. However, the offered space is priced cheaply, similar to that of pro-consumers. The pricing for the pro customer was $10 while that of the business was $15. To add to this, the $15 comes with a multitude of features that the business can enjoy for ’free’. Note that the word free here implies that the business gets more than it ever bargained for. This type of apparent underpricing model encouraged business to grab the services.

Dropbox could employ the following strategies apart from freemium pricing strategy:

Perpetual license model. This type of service, payment is usually done once and renewed either monthly or annually on the basis of subscription.

Persistent advertising within the suite and on related sites. This would have earned the company revenue based on the pay per click model. It can exercise its control over the advertisements on its own sites to avoid clutter.

Last but not least, the company can employ the tiered model where it ties up the user with pricing based on the value and usage which can be data volume seats, servers, and modules (HBS, 2014).

B. Circuit City

Circuit City Company got to be so successful that it featured in the book ’Good to Great’ by employing the below strategies. It embraced the concept of electronic superstores that was getting momentum in America (Hart A., Matulich E., Rubinsak K., Sheffer K., Vann N., Vidalon M., 2012). In 1959 it had opened a total of four stores with total sales worth $1 million (Hart A., et al, 2012). In 1970, it changed management staff. The new management closed all the unprofitable stores and opened an electronic superstore worth $2 million (Hart A., et al, 2012). The company enjoyed economies of scale to defeat smaller electronic retail stores (Hart A., et al, 2012). The superstore model adopted in 1965 proved successful. Consequently, the company changed many of its small stores to electronic specialty stores. The strategy helped the company make sales worth $120 million by the closure of 1979 (Hart A., et al, 2012). The success of the Circuit City Electronic company is attributed to competent management, good marketing strategies, and focus on customer satisfaction (Romero, 2013).

The Circuit City company lost its competitive advantage

The Circuit City company lost its competitive advantage and had to file for bankruptcy because of the following reasons. The Sharp’s (the company president) decision to start the projects of CarMax and DIVX shifted the concentration from the main activities of the company (Romero, 2013). This gave their rising competitors such as Best Buy an opportunity to overtake the Circuit City company. In 2001, Circuit City Company under the presidency of Alan McCullough decided to stop selling home appliances (Romero, 2013). This move was described by Tom wolf, a former manager of the company (Romero, 2013) as a way of chasing customers to go to other shops. In 2003, the company laid off 3900 highly commissioned salespeople. The move affected the remaining employees’ productivity and morale.

I think the company could have embraced the following strategies to adapt and survive

I think the company could have embraced the following strategies to adapt and survive. Expansion and specialization in the management team could have ensured every department is appropriately monitored. Adequate monitoring and evaluation could have sensed the rising competition then take necessary actions such as looking for appropriate product differentiation strategies. The management could have employed a participation approach in laying the experienced salespeople. The management could have used SWOT analysis to identify the weaknesses and imminent threats. It was a weakness on the side of the management to carelessly lay off the most experienced workers. Also, the management could not realize increasing threat from the rising Best Buy stores (Romero, 2013).

C. Samsung

Mr. Lee turned Samsung form a sleeping bureaucrat to a successful business by establishing the company’s subsidiary, Samsung electronics. When Lee inherited the company, Samsung, from his father, it was a large conglomerate that had eighty-three subsidiaries. In addition to the establishment of the electronics section, Mr. Lee heavily invested in research and development as well as marketing with the aim of making the company to be efficient, fast, and reliable in the market. He also put emphasis on the design of the products. To this end, he hired experts in these fields to run his company; these were in the form of western designers and managers.

However, as far as expertise was concerned, he took an additionally step of sending local talent to different well-established countries so that they could learn best practices in the business. This ensured that he had prompt access to a developing pool of experts that were ready to meet the company’s labor requirements. As a matter of fact, Mr. Lee established a global strategic group that was in charge of smoothing the transition and transactions between the westerners and the Koreans. From this perspective, Mr. Lee managed to come up with a company that had new faces that had an understanding of both global and local affairs. In matters that relate to employees, Mr. Lee a merit-based pay system of remuneration. This saw that the company paid for services received thus avoiding unnecessary expenditure. In the same vein, he hired Yun Jong-Yong, a new CEO, who aggressively reduced costs in the organization. He, Yun Jong-Yong, did this by selling off unproductive and redundant assets during the Asian financial crisis, among other methods. These changes allowed the company to quickly adapt to the market and be able to stay abreast with the trends in the industry (Case Centre, 2017).

D. General Electric

The three lines of business that General Electric quit between 2004 and 2015 are; NBC universa, Insurance, and Commercial finance. This was done in order for the company to focus on its core activities. The assets from these lines of business can be assimilated into the ongoing businesses or sold off. As a matter of fact, General Electric has put up for sale assets worth over 100 billion dollars.

The narrow focus and deep focus strategy

The narrow focus and deep focus strategy has seen the company focus on its core services amidst the digital information overload that exists. It has managed to avoid becoming a commodities enterprise and instead transformed itself into a digital enterprise within the industry. In this manner, General Electric is not really led by the internet of things but rather the quality of the products in sales (quality and quantity of its sales). This strategy shall help the business stay focused and be able to deliver consistently amid the Information Technology era. It is important to note that the mandate of the company is not Information technology and as such, it balances between its core activities and the necessary technology advancements that are characteristic of its lines of business. This has been achieved effectively through the narrow and deep focus approach.

General Electric’s three biggest business segments in 20015 measured by dollar revenue are

General Electric’s three biggest business segments in 20015 measured by dollar revenue are; aviation ($24.2 billion revenues), power business ($20.7 billion revenues), and healthcare business ($17.6 billion revenues) (Vij, 2016).

References

Case Centre. (2017, February 17). The Rise of Samsung Electronics. Retrieved from thecasecentre.org: http://www.thecasecentre.org/educators/ordering/selecting/featuredcases/samsung

Hart A., Matulich E., Rubinsak K., Sheffer K., Vann N., Vidalon M. (2012). The rise and fall of Circuit City. Journal of Business Cases and Applications.

HBS. (2014, November). Freemium Pricing at Dropbox. Retrieved from hbs.edu: http://www.hbs.edu/faculty/Pages/item.aspx?num=45910

Romero, J. (2013). The Rise and Fall of Circuit City. Retrieved from https://www.richmondfed.org/~/media/richmondfedorg/.../economic_history.pdf

Vij, R. (2016, June 14). How GE Makes Money? Understanding GE Business Model. Retrieved from revenuesandprofits.com: http://revenuesandprofits.com/ge-makes-money-understanding-ge-business-model/