COMPETING

AGAINST

Free offering from NEW COMPETITOR

INCUMBENTS made the wrong choice by introducing their own free offering too quickly, responded too slowly or did nothing at all

HOW TO ASSESS FREE ENTRANT THREAT

When both rates mentioned above are high, the entrant

represents a business model threat

When the entrant’s users are multiplying rapidly but the

established firm’s customers are defecting slowly, the

entrant represents a delayed threat

When the defection rate among your paying customers is high

and the growth rate of the entrant’s users is low, the

threat is immediate

When both rates are low, the threat is minor

SOME STRATEGIES TO OFFER BETTER FREE

PRODUCT

Sell other products that are not directly tied to the free product

Introduce a free basic offering to gain widespread use and then charge for a premium version

CHARGE THIRD PARTY

Provide a free product to users and then charge a third party for access to them

BUNDLE

Offer a free product or service with a paid offering

Belief that products must generate a respectable level of revenues

and profits on their own

Profit-center structure and Accounting system

OBSTACLES

RECAP How to assess the threats posed by new

entrant

How to respond

Some strategies to better free offer

Obstacles

DISCLAIMER

These slides were created by Pratyush Das, as part of an internship done under the guidance of Prof. Sameer Mathur (www.IIMInternship.com)"