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Being Evaluated on P&L<br />when your price is FREE!<br />Kristin Oberhaus<br />Product Manager<br />W3i<br />
P&L responsibility<br />Estimate Loss or Cost<br />Technology upgrades<br />Overhead costs<br />Labor Capitalization<br />...
P&L responsibility<br />Determine Profit or Price<br />Conjoint analysis<br />Surveys<br />Interviews<br />Secondary Resea...
Determine Optimal Price<br />Best Estimate<br />Supply and demand lines constantly change<br />Round<br />Using psychology...
P1*Q1&gt;COGS+AO<br />Price*Quantity <br />must be greater than<br />Cost of Goods Sold + Allocated Overhead<br />
Types of Free<br />Cross-subsidy<br />A free product entices you to purchase another product<br />Three-party<br />One par...
A Christmas Story<br />http://www.youtube.com/watch?v=zdA__2tKoIU<br />Nonmonetary<br />Parents proving gallons of Ovaltin...
Bad Experience for Ralphie<br />Expectations were high<br />Commercial was “crummy”<br />No transparency<br />New understa...
How to profit from free?<br />Value, not price<br />Must determine not the first purchase or upgrade from free, but lifeti...
V1*Q1&gt;COGS+AO<br />Value*Quantity <br />must be greater than<br />Cost of Goods Sold + Allocated Overhead<br />
Charging a Very Small Amount<br />What is the difference between free and 1¢<br />All else being equal, everything<br />Ps...
Success with Free<br />Jell-O<br />Gillette<br />Yahoo!<br />Google<br />W3i<br />Twitter<br />
www.w3i.com<br />
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Being evaluated on P&L when the price is FREE!

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Wise software product managers must be aware of all revenue-generating models to bring in the cash to keep their business thriving. Most of us are evaluated on the Profit and Loss for our products and as such are well versed in the mechanics of determining the optimal price point. What happens when that price point is free? Research shows that .5-2% of consumers actually pay for their software, which leaves 98-99.5% using the software for nothing.

So, how does one make money on “Free”? Learn about proven no-charge business models that can pay off quickly using minimal in-house resources and generate the cash or traffic you need to survive in this down economy.

This presentation covers many of the free models, including try and buy, freemium, ad-supported, and cross-subsidy or save-and-shave, and open up discussion on any additional models that the audience has used. Much of the information will come from the experiences at W3i, who delivers software to nearly 10 million users a month – all for free and from the many discussions occurring since the release of Chris Anderson’s book “Free- The Future of a Radical Price”.

Published in: Business, Technology, Design
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Being evaluated on P&L when the price is FREE!

  1. 1. Being Evaluated on P&L<br />when your price is FREE!<br />Kristin Oberhaus<br />Product Manager<br />W3i<br />
  2. 2. P&L responsibility<br />Estimate Loss or Cost<br />Technology upgrades<br />Overhead costs<br />Labor Capitalization<br />Vendor Negotiations<br />
  3. 3. P&L responsibility<br />Determine Profit or Price<br />Conjoint analysis<br />Surveys<br />Interviews<br />Secondary Research<br />Espionage<br />Regression lines<br />Scatter Diagrams<br />
  4. 4. Determine Optimal Price<br />Best Estimate<br />Supply and demand lines constantly change<br />Round<br />Using psychology and the rule of 9 or 5 to end a price point<br />Increase the price<br />Allows for sales to discount<br />
  5. 5. P1*Q1&gt;COGS+AO<br />Price*Quantity <br />must be greater than<br />Cost of Goods Sold + Allocated Overhead<br />
  6. 6.
  7. 7. Types of Free<br />Cross-subsidy<br />A free product entices you to purchase another product<br />Three-party<br />One party pays for the privilege of the second party to enjoy the products of the first party<br />Ad supported<br />Freemium<br />An ok product is free, the great version costs money<br />Nonmonetary<br />Altruistic or charitable giving<br />
  8. 8. A Christmas Story<br />http://www.youtube.com/watch?v=zdA__2tKoIU<br />Nonmonetary<br />Parents proving gallons of Ovaltine<br />Three-party<br />Radio network providing Little Orphan Annie<br />Freemium<br />Ability to purchase radio show on CD today<br />Cross-subsidy<br />Decoder ring entices the drinking of more Ovaltine<br />
  9. 9. Bad Experience for Ralphie<br />Expectations were high<br />Commercial was “crummy”<br />No transparency<br />New understanding<br />Financial<br />Reality<br />Entitled<br />Early<br />
  10. 10. How to profit from free?<br />Value, not price<br />Must determine not the first purchase or upgrade from free, but lifetime value<br />Will this person to return for more product over the course of time, even decades?<br />Will this be viral, giving you “free” customers?<br />Will this promote cross-subsidies to occur?<br />
  11. 11. V1*Q1&gt;COGS+AO<br />Value*Quantity <br />must be greater than<br />Cost of Goods Sold + Allocated Overhead<br />
  12. 12. Charging a Very Small Amount<br />What is the difference between free and 1¢<br />All else being equal, everything<br />Psychological factor in free requires no thought<br />Any price, even 1¢, requires a decision<br />
  13. 13. Success with Free<br />Jell-O<br />Gillette<br />Yahoo!<br />Google<br />W3i<br />Twitter<br />
  14. 14. www.w3i.com<br />

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