Case Study 2
Q1. Compare Pandora's original business model with its current business model. What's the difference between "free" and "freemium" revenue models? Pandora’s original business model was to provide users with 10 free hours of access to their website contents. Once the 10 hours has been used up, they will then be asked to subscribe to Pandora at a rate of $36 per month for continual access. Whereas, their current business model is designed where users can access their online radio for free as long as they sign up for an account, but are exposed to ads while streaming. The Freemium model is designed to give away some services to 99% of the customer base and rely on the other 1% of customers to pay for premium versions of the same service. In a business model, “freemium” basically means the basic version of a product or service is offered free to use, but is only limited to the basics provided, whereas “free” is the product/service is completely free access to the range of contents it provides. The revenue is then generated from targeted advertisings and displayed to users while they are on Pandora.
Q2. What is the customer value proposition that Pandora offers? Actual subscribers of Pandora will not be displayed advertisements and higher quality of music while streaming. The people who pays for Pandora has pretty much unlimited usage for $36 per year, while the people who are listening to music with Pandora for free are limited to only 40 hours of music per month, while subjected to advertisements between songs.
Q3. Why did MailChimp ultimately succeed with a freemium model, but Ning did not? MailChimp was successful because it started with offering free basic tools and provided an option to upgrade the account for a subscription fee in order to access special features. As customer’s email list grew, people became more likely to subscribed to the special features of MailChimp, which was part of their...