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DROPBOX
Somerville - Team 2
Kehinde Adewunmi
Byungjin An
Michela Caltran
Lucia Lozano
Vladimir Martyanov
Agenda
Present Situation
Competitors
Main Issues
Pricing Strategy
Reasons for Success
Overall Benefits
Conclusion
Present Situation
Dropbox
17%
Apple
(including
iTunes)
27%
Amazon
15%
Google Drive
10%
All others
combined
14%
Market Shar...
Competitors
$100
90
80
70
60
50
$40
$30
20
$10
0
20 25 27 50
GB GB GB GB
Products Ratio
Google Drive $1.2/GB
Apple iCloud ...
Main Issues
Low Conversion Rate: 1.6% of Total Users
Total Cost of servicing a Free Customer: $49/year
for using 16GB of s...
Free
25 GB+
100 GB+
Unlimited
Free
Up to 25 GB
(1GB + 1GB per Referral)
Pro
$3.99/month or $39.99/year
Premium
$9.99/month...
Free Account
Up to 25 GB
[1GB + 1GB per Referral]
Offering
 1GB of Cloud Space
 Accessible only by PC users
 Limited s...
Pro Account
 Offering:
 25GB of Cloud Space
 Access to all platforms
 Mobile-PC sync
 Full sharing features
 Price:
...
Premium Account
 Offering
 100GB of Cloud Space
 Mobile and PC access
 Additional Features:
- Automatic Backup
- Custo...
Reasons for Success
More
Options for
Premium
Packages
High Quality
Service with
Additional
Features
Established
Positive
B...
Customer
Segmentation
+
Referrals
Product Line
Pricing
 Expanded offering portfolio
 Different offerings to different ma...
Conclusion
DropBox is trapped in a model which produces low
conversion rate from free to paid service (1.6%).
We recommend...
THANK YOU
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Pricing strategy - [Dropbox]

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Case: Freemium Pricing at Dropbox
Proposed Marketing Strategy

Published in: Marketing
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Pricing strategy - [Dropbox]

  1. 1. DROPBOX Somerville - Team 2 Kehinde Adewunmi Byungjin An Michela Caltran Lucia Lozano Vladimir Martyanov
  2. 2. Agenda Present Situation Competitors Main Issues Pricing Strategy Reasons for Success Overall Benefits Conclusion
  3. 3. Present Situation Dropbox 17% Apple (including iTunes) 27% Amazon 15% Google Drive 10% 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
  4. 4. Competitors $100 90 80 70 60 50 $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
  5. 5. 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
  6. 6. Free 25 GB+ 100 GB+ Unlimited Free Up 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.
  7. 7. 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
  8. 8. 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
  9. 9. 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 / month 100GB of Cloud Storage Starting at $9.99/month Premium
  10. 10. 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
  11. 11. 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 SustainableBrand Perception Overall Benefits
  12. 12. 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
  13. 13. THANK YOU

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