OVER

Suppose New

Competitor enter your

market, But

How do I React???

Ignore it!!Introduce

free product

of my own!!

Based on

Article,

“Competin

g Against

Free”

June 2011 Edition

David J Bryce Nile W HatchJeffry H Dyer

About the Research

5 Year Study

34 incumbents

26 Markets

About 2/3rd of incumbents failed,

1. Ignore

2. Launch Free to early

3. Launch Free too Late

Accessing the threat

Accessing the threat

Seriousness hinges on three factorsEntrant Ability to

Cover its costs quickly

Growth rate of Entrants Users

Defecting rate of your paying customers

Choosin

g whether

& when

to respond

Business Model

Threat

Change business model

quickly

Delayed Threat

Can Co-exist for few

years

Trick is to figure out

when to respond

Why Microsoft should take its competition more seriously?

Immediate Threat

Your problem, so quickly figure out to launch free offering

Minor Threat

Continue to Monitor

Situation

Established Free offering as Threat.

Considered Timing

Offer a better FREE

How to Respond???

Four Tried & True Strategies

i. Up Sell

ii. Cross sell

iii. Charge 3rd Parties

iv. Bundle

1. Up SellIntroduce free basic offering for

widespread use, charge for premium.

Very large user

base.

High % users

want Premium

2. Cross SellSell other products that are

not directly tied to free products

Broad Product

Line

Strong

Partnerships

3. Charge 3rd PartiesProvides a free product to users

and charge 3rd Parties for access of them

Large user base segmented

for third parties(Advertisers &

Target Group)

4. BundleOffer a free product or service

with paid offerings.

Products that can be bundled

with

free offerings.

Product that needs regular maintenance & complimentary offering.

Challenges of

Launching Free

• Must separate revenue from cost

• Different manages over each

• Take profit responsibility to top

P & L Structur

e

• Must think of marginal not average costs

• Must understand long term cost of losing market share

• Beat back while you can

Cost Accounti

ng System

Challenges of Launching FreeChoosing whether & when to

respond

Offer a better FREEAccessing the threat

Introduction

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

Prof. Sameer Mathur

Marketing Professor 2013 –-----------------------------------------------------------

Marketing Professor 2009-2013-----------------------------------------------------------

M.S(Marketing) and PhD 2003-2009

Shashank Motepalli

Summer Intern 2015(May-June)--------------------------------------------------------------iMtech(IT) First Year

www.IIMInternship.com