CASE STUDY: AMERICA ONLINE, INC.
1) There were a few factors that contributed to AOL’s success prior to 1995. Firstly, AOL had a wide range of products and services that catered to different needs of consumers. The variety of services offered was a key factor in attracting and retaining new customers. Secondly, AOL was very aggressive in their marketing efforts which included both independent marketing, such as television and print ads for AOL software, and co-marketing such as working with hardware and software producers to bundle AOL software with their products. AOL also developed specialized retention programs, for example online promotions of upcoming events and regular addition of new content and services. This enabled them to maximize their customer’s subscription life. Thirdly, AOL had an easy to understand fee structure compared to its competitors – It charged a monthly fee for access to all its services whereas CompuServe, Prodigy and MSN charged additional fees on top of a monthly fee for premium services and downloading. This helped customers anticipate their monthly expenditure and was another important factor in customer retention. Lastly, AOL had strategic partnerships with many content providers which allowed them to create unique content to attract users. These factors differentiated AOL from its competitors: CompuServe and Prodigy and helped AOL establish itself as a market leader in the commercial online industry. 2) There were two main changes which took place in the commercial online industry as of 1995 that would affect AOL’s future prospects. First was the entrance of Microsoft into the online services industry. Microsoft’s commission structure was much more appealing to content providers. Content providers were allowed to charge users what they wanted for the content they provide and Microsoft would keep a 30 percent commission of their fees. AOL in comparison was charging 80 percent of the provider’s revenue. MSN also gave...
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