Week 1 Case Study

Topics: Business model, Customer service, Business models Pages: 2 (542 words) Published: September 18, 2013
Compare Pandora’s original business model with its current business model. What’s the difference between “free” and “freemium” revenue models? Pandora struggled to figure out a way to gain business for their newly launched internet radio website. They finally came up with an idea to provide their services following the freemium model. The members were offered 10 hours, at no cost, of Pandora radio. After the 10 hours expired, a fee of thirty-six dollars per month was requested from members. The members look advantage of the free 10 hour service. They refused to pay a fee every year to listen to online music; this lead to a financial collapse. Pandora then decided to come up with another offer hoping to persuade more subscribers. Now, forty, instead of ten hours of free music was offered. When the forty hours was over, subscribers had a choice to select and pay for premium service or pay 99 cents per month. Three to four year later, Pandora enhanced to services by adding various features such as, “free” application support, buy button, ability to skip up to 6 songs per hour, and an IPhone application. The freemium revenue model provides 99% of its services for free, hoping to attract a big pool of buying subscribers based off of the 1% paying premium subscribers. Therefore, major of a company service is free, but eventually some will actually pay for the once “free” service. “Free” revenue model basically operates without “free” application support. So, freemium company subscribers have to option to subscribe to premium upgraded services for a cost and “free” does not. What is the customer value proposition that Pandora offers?

Pandora offers to make its services more satisfying to its premium customers. They are finally able to enjoy Pandora without any pop up advertisements. They will also experience a higher quality of songs. The only that cost they paid is the $36 annual fee. In comparison with $40 per month for unsubscribed customers, premium customers...
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