FREEMIUM BUSINESS MODEL, STRATEGIES AND TACTICS FOR ONLINE DIGITAL FIRMS

Transcription

1 FREEMIUM BUSINESS MODEL, STRATEGIES AND TACTICS FOR ONLINE DIGITAL FIRMS Anna B. Holm, Associate Professor, PhD Department of Management Aarhs University, Denmark 24. SEPTEMBER 2017

2 WHAT MAKES A FREEMIUM BUSINESS MODEL SUCCESSFUL FROM A STRATEGIC POINT OF VIEW?

3 BUSINESS MODEL CONCEPT AND DEFINITION THE 4V FRAMEWORK A bsiness model describes the vale which a company offers to one or several (segments of) cstomers, the architectre of the internal processes and the network of partners it has bilt p for creating, marketing and delivering this vale in order to generate revene streams and profit. Vale proposition Vale offering - firm s bndle of prodcts and their characteristics (e.g., prodct or service, brand, novelty, etc.) Vale creation Arrangements of resorces, competencies, activities, processes and partnerships with other firms to create and deliver the vale offering Vale delivery Segments of cstomers to whom the firm offers the vale offering, the varios means and channels to reach the segments, and the firm establishes relationships with the segments. Vale captre Monetisation the way the company makes money from the vale offering throgh a variety of revene flows and their overall profitability (i.e., revene model and cost strctre) Sorce: Adapted from Holm, Gnzel and Ulhøj (2013)

4 A GENERIC FREEMIUM BUSINESS MODEL OF AN ONLINE DIGITAL FIRM Vale proposition FREE prodct basic version of the market offering Premim prodct enhanced vale of the market offering Vale creation Research and new prodct development Infrastrctre development and maintenance Vale delivery Internet own and third-party websites and applications Atomated services and cstomer relationships with free sers Cstomized services and cstomer relationship management with paying cstomers Vale captre Revenes from premim sers Costs from free and premim sers

5 BUSINESS STRATEGIES OF SUCCESSFUL FREEMIUM COMPANIES Sccessfl freemim online digital bsinesses execte the so-called prospector strategy, typically characterized by high degree of exploration with focs on innovation, identification of new markets, growth, and acceptance of high risks (Miles and Snow, 1987). Critical factors for execting the prospector strategy are free prodct excellence and ser growth imperative. Vast nmber of prodct sers is necessary 1) for conversion to paying cstomers which is app. 2-5%; 2) to achieve high company valation and attract ventre capital. Companies chose growth-before-profitability strategy and operated revene-deficient bsiness model for many years. Sorce: Adapted from Holm & Günzel-Jensen 2016 Scceeding with freemim: strategies for implementation, Jornal of Bsiness Strategy, Vol. 38 Isse: 2, pp.16-24

6 FREEMIUM TACTICS EXPLORATION STAGE Continos leveraging the vale of free sers; Continos enhancement of free and premim offerings; Aiming at the right balance between free and premim; Continos learning from ser and consmer behavior; Broad targeting of potential sers throgh prodct bndling and prodct integration; Leveraging social network effects; Sorce: Adapted from Holm & Günzel-Jensen 2016 Scceeding with freemim: strategies for implementation, Jornal of Bsiness Strategy, Vol. 38 Isse: 2, pp.16-24,

7 FREEMIUM BUSINESS MODEL AND TACTICS OF ONLINE DIGITAL COMPANIES Anna B. Holm

8 LATER AT THE EXPLOITATION STAGE The same tactics as at exploration stage pls additional strategic moves, sch as: Rapid access to new technologies and sers throgh mergers and acqisitions; Aggressive internationalization.

9 CONCLUSIONS Choosing a freemim bsiness model implies choosing a particlar bsiness model means choosing a particlar way to compete (Casadess-Masanel and Ricart 2010). Bsiness model elements and bsiness tactics of sccessfl freemim companies constitte a logical vale creation, delivery and captre system. Freemim companies shold maintaining and constantly reapply this bsiness model logic to regenerate it in a virtos circle.

10 Thank yo! FORNAVN EFTERNAVN 24. SEPTEMBER 2017 TITEL