Competing Against Free

1. PGP30299 Alex Toppo
PGP 30416 Abhinav Goyal
PGP 30117 Vasu Pal
Group 1

2. Competing Against Free: Indian Perspective
Indians in general love free
products and freebies

3. Weapons they needed to win a head-to-head battle
An established
customer base
superior
product
features
A strong
reputation
– Brand
Value
In two-thirds of those
cases, the incumbents
made the wrong choice
They introduced their
own free offering too
quickly
Responded too slowly
Did nothing at all
The ubiquity of the profit-center structure
and mind-set

4. Assessing the Threat
Factors
affecting
Threat
The entrant’s
ability to cover its
costs quickly
enough
The speed with
which your paying
customers are
defecting
The rate at which
the number of users
of the free offering is
growing
Reasons for Entrant’s
Self Destruction
Fish Bone Diagram
Can’t convert nonpaying
customers into paying ones
Can’t cover costs
Can’t find a third party that will pay for access
Examples of Self
Destruction

5. Business Model Threat
Delayed Threat
Immediate Threat
Minor Threat

6. Upsell
• Introduce a free basic offering to gain
widespread use and then charge for a
premium version
• Requirements
• Large enough user base to ensure profits
with low conversion rate
• A high percentage of users willing to pay
for the premium version

7. Gaana.com
Premium Account
• 6 months- Rs720
• Unlimited HD Download on iPad, iPhone, Android &
Windows Phone
• Stream in High Definition on web & mobile
• Listen songs in offline mode
• No Ads on web & mobile
• Download on 5 devices.

8. Shaadi.com
3 amazing features that make Shaadi.com
even better!
• Promote yourself to matches
• Drive responses via email, chat, phone & SMS
• Get featured, get noticed!
• Standout even more with Bold Listing &
Spotlight
• View additional Profile details
• View additional details and select better Matches

9. Airtel Talk
Free Charge
• App-to-app calls across the
world but within the airtel talk
community,
• Chat Instant Messaging
• Video calling & file sharing
Nominal Rates
• Call back number service from
India
• Calls to any landline & mobile
using airtel out calling feature
• SMS out service

10. Cross-Sell
Sell other products that are not directly related to
the free product
• Requirements
• Broad product line, preferably one that complements the
free product
• The ability through partnerships to sell a broad line of
products to users of the free product
• Cross subsidization: is the practice of charging
higher prices to one group of consumers in order to
subsidize lower prices for another group.

11. Ryan Air
• Offers roughly 25% of its
airline seats free but cross-sells
a variety of add-on-services
such as seat reservations and
priority boarding
• Onboard
• Food
• Scratch-card games
• Perfumes
• Digital Gadgets

12. SpiceJet
Here’s how you can book your
Re 1 ticket on Spicejet mobile
app:
Step 1: Download the Spicejet’s
mobile app on your smartphone
Step 2: Book one leg of a round
trip for Rupee 1 only.
Step 3: Book the return ticket of
the round trip at regular fares
Step 4: Confirm the booking
and make payment

13. CHARGE THIRD
PARTIES
Provide a free product to
users, and charge the third
party for access to them

14. INDIAN EXAMPLE:
FREECHARGE.IN
 Offering attracts many users
 Third parties are willing to reach these
users

16. • The average payment gateway
charges are typically in the
1.8-2% range
A recharge site makes a little
less around 0.5-1%.
• Another revenue stream is the
commission from brands on
redemption of their free coupons
offered by the recharge site.
REVENUE
MODEL

17. OTHER EXAMPLES

18. BUNDLE
Offer a free/discounted
product or service with a
paid offering

19. BUNDLE
MATHS

20. INDIAN EXAMPLE: PIZZA HUT
 Product can be bundled with free offering
 A Complementary offering