pricing strategy - [dropbox]
TRANSCRIPT
DROPBOX
Somerville - Team 2
Kehinde AdewunmiByungjin An
Michela CaltranLucia Lozano
Vladimir Martyanov
Agenda
Present Situation
Competitors
Main Issues
Pricing Strategy
Reasons for Success
Overall Benefits
Conclusion
Present Situation
Dropbox17%
Apple (including
iTunes)27%
Amazon15%
Google Drive10%
All others combined
14%
Market Share
Users: 200 Million
• 98% Unpaid - 196M • 1.6% Paid - 3.2M• 0.15% Business - 300K
Free Account
Premium Account
$99.9/year $9.99/month
$19.99/month
Referral Program:
500 MB of additional free space for referrer and receiver, up to 16GB per referring account.
2GB
50 GB
100 GB
Competitors
$1009080706050
$40$30
20$10
0
20 25 27 50 GB GB GB GB
Products Ratio
Google Drive $1.2/GB
Apple iCloud $2/GB
Microsoft SkyDrive $0.37/GB
DropBox $2/GB
Main Issues
Low Conversion Rate: 1.6% of Total Users
Total Cost of servicing a Free Customer: $49/year for using 16GB of space
Competition is offering a similar service for a lower price
Free
25 GB+
100 GB+
Unlimited
FreeUp to 25 GB (1GB + 1GB per Referral)
Pro$3.99/month or $39.99/year
Premium$9.99/month or $99.99/year
Business$800/year per 5 users
Pricing Strategy
Product Line Pricing Strategy to target different target segments.
Reduction of free storage space to reach a higher conversion for premium packages.
Free Trial for a limited period of time.
Free Account
Up to 25 GB [1GB + 1GB per Referral]
Offering
1GB of Cloud Space
Accessible only by PC users
Limited sharing features
Referral Promotion
25GB per 1 year
[After 1 year, the user will have the choice to upgrade and keep the additional storage space or go back to the basic offer]
Mobile Access
Referrer receives 1GB/year per Referral, up to 25 GB
Pro Account
Offering:
25GB of Cloud Space
Access to all platforms
Mobile-PC sync
Full sharing features
Price:
$39.99/year
$3.99/month25GB of Cloud Storage
Starting at $3.99/month
Premium Account
Offering
100GB of Cloud Space
Mobile and PC access
Additional Features: - Automatic Backup
- Customizable Archive by file type
- Premium Customer Service
Price
$99.99 / year
$9.99 / month100GB of Cloud Storage
Starting at $9.99/month
Premium
Reasons for Success
More Options for Premium Packages
High Quality Service with Additional Features
Established Positive Brand
Reputation
Differential Value compared
to competitors
More Storage Space at a
Competitive Price
Reduced Total Cost per Free
Customer
Customer Segmentation
+Referrals
Product Line Pricing
Expanded offering portfolio
Different offerings to different market segments
More suitable offerings according to market segments
Encourage trial purchases
Encourage upgrading
Outcomes
Maximize profits
Maintain brand’s quality perception
Sust
ain
able
Bra
nd
P
erc
ep
tio
n
Overall Benefits
Conclusion
DropBox is trapped in a model which produces low conversion rate from free to paid service (1.6%).
We recommend implementing a Product Line Pricing Model and target different market segments by broadening the offerings to the target audience:
1GB freemium
25GB DropBox Pro
100GB DropBox Premium
We suggest maintaining the Referral Strategy, by offering a storage bonus for a limited time, to encourage our users promote our services.
As a result, the implementation of the strategy will lead to the increase of:
Customer Base
Conversion Rate
In addition to the proposed activities, we suggest emphasizing the brand’s benefits in comparison to the competitors:
Higher service quality
Higher data security
Platform independency
THANK YOU