Freemium Pricing at Dropbox Harvard Case Solution & Analysis

What should the company do

Dropbox is currently using the freemium pricing strategy. According to this strategy the users are able to use its basic services and will charge a premium upon additional services. The company is currently facing the problem that approximately 96 to 98 percent of individual users is using its services free of cost and not using the premium products.

In order to deal with the problem company should increase its number of users because according the freemium pricing strategy if the company wants to earn revenue from 1 million users then it should have to increase its number of users to 1 billion. The company is using the referral marketing strategy and it works brilliantly and increased the number of users significantly but in order to increase the number of paying users, Dropbox should increase its number of users by adopting different marketing strategies like Trojan horse.

In addition to this the company should educate its users about the product and it could also help to increase the number of paying users. The Dropbox is charging 2 dollar per GB which is equal; the price charging by ICloud but greater than the Google Drive and SkyDrive. Apple is using many other services and a wide range of products as compared to the Dropbox who is not providing any additional service or product like Apple.

Google Drive and Microsoft are also offering many other products and services, therefore charging high price in the presence of such a large and efficient competitors could also be the reason for low paying users. Dropbox should revised its prices for individual users and business users. Charging low price to individual users could increase the percentage of paying users significantly and also can attract many new users which will ultimately increase its profits.

Dropbox is currently following the strategy of referral and providing additional data to free users. Dropbox should introduce the referral strategy for business users and paying users and should offer those discounts or incentive if they brought an additional paying subscriber it would also help to increase the number of paying users.

The other competitive companies like Google, Apple, Amazon and Microsoft are paying many services and products to their users therefore the number of paying users of these companies are high while the Dropbox is using only one service. These companies are also earning huge revenue by providing add services.

 Therefore the Dropbox should introduce more services in order to attract more users, it should increase its product range in order toretain its existing customers and to attract new customers and it also has well public presence and significant amount of users therefore it could earn revenue by providing add services which will also help to attain competitive advantage over its competitors.

Dropbox should also introduces the filter program for those users who never used the premium plan, by introducing such program Dropbox could reduce the number of free users which will decrease the marketing cost and will help the Dropbox by improving its profit margin.

Why Dropbox should follow the recommendations

The company is currently facing the problem of low number of paying users and the number of both business and individual nonpaying users is extremely high. The recommended options could help the company by increasing its number of paying users and by improving its profit margin.

Like if the Dropbox reduces its prices under premium plan from 9.99 dollar to 5 dollar for the first tier of 50 GB users and from 19.99 dollar to 15 dollar for the second tier of 100 GB users then it is expected that the number of paying users will increase to 6 to 10 percent which is currently 1 to 4 percent. Then educating the existing users about the product by making them aware about the benefits of the product it is expected that the existing users will not switch to the other services and will keep using Dropbox if it increase prices later on. By following this strategy company can handle the facing problem, could increase the number of paying users and increase in the number of paying user will increase the profitability of the company.Freemium Pricing at Dropbox Case Solution

It is expected that by using the present referral strategy for the business and individual paying users and giving them incentives or discounts on every new subscription on premium plan could also solve the problem of low paying users. It would also increase the marketing cost, but the associated cost will incur only one time but the benefits could be incur for long term until the subscriber didn’t switch to the other service............................

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