Box (http://www.box.com) is an online file sharing and personal cloud content ma
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Box (http://www.box.com) is an online file sharing and personal cloud content management service for businesses. The company provides cloud content management solutions to more than 4 million users and companies ranging from small businesses to Fortune 100 companies, including GE and Procter & Gamble. The company employs a "freemium" business model and provides users up to 10 GB of free storage for personal accounts. Aaron Levie, CEO and cofounder of Box, describes the thinking behind the "freemium" business model: "Purchasing decisions have been traditionally made at the top, with software more or less forced upon employees, gift-wrapped in training manuals and convoluted policies. But with the advent of user friendly, free online tools, the balance of power has swung in users' favor."2 So, when businesses evaluate low-cost, on-demand alternatives to traditional enterprise solutions, the first services they will consider are those that their employees know and are already using. While some early investors severely questioned the wisdom of the idea of offering the service for free (i.e., "you're crazy"), Levie feels that the firm has demonstrated the promise of the business model over the past 1o years. In fact, he provides six reasons why a software company would be crazy not to give out software for free:3 1. Lower friction drives faster adoption: hook users early and get their data. 2. High marketing leverage: your users are your most powerful evangelists. 3. It forces you to make a much, much better product: give users a compelling reason to upgrade. 4. Sales will love you: your leads are people who already want your product. 5. Reach traditionally impenetrable markets: your product will seep into new-and sometimes surprising-ecosystems. 6. If users don't want to pay, they don't have to leave: you only lose customers to yourself. Box (Company), Wikipedia, p. 1, accessed at http://en.wikipedia.org on April 15, 2015 2Aaron Levie, "Freemium for Sale: Six Reasons You'd Be Crazy Not to Give Your Software Out for Free," Web2Expo, September 30, 2010, p. 1, accessed at http://web2expo.com on April 15, 2015 3Ibid., p. 1. See also, Vineet Kumar, Making Freemium Work," Harvard Business Review 92 (May 2014): pp. 27-29. Evaluate the "freemium" business model that Box, Inc. employs for personal accounts, isolating the benefits and potential limitations the strategy presents for the firm.Explanation / Answer
Ans.
Brief Overview of What Freemium Business Model is:
It is a Pricing strategy where a product or Service (in case of Software or digital services) is provided for free for the basic version. However business charges money for the premium or upgraded services provided to the user.
Some common Example are:
a. Skype: Free basic version is available . However for skype to phone calling or group calling one should purchase a premium version.
Moving to the case of Box, there are some potential benefits and limitation in the freemium business model. I will list down soem of them:
Potential Benefits are:
1. High quanitity of customers base will be there who will subscibe to the free model. Higher base will lead to higher chances of conversion to the premium version.
2. Higher Base of free customers means more of the employees working at corporates are aware of Box and are accustom to how to use it. For organizations making premium purchase decisions for similar services, this will going to save significant amount of money in tranings and quality issues.
3. Large Demographic coverage will be achieved with the free version. Students can use it and so can small business houses running across geography.
Some Potential limitations are:
1. There is always a chance that free user will never upgrade to the paid version. This way you are forced to serve the customer using some basic services for free for the customer lifetime.
2. With the rapid advancement in technology, there is always a chance that the free customer will find the premium services offered by box for free at the competitor. This leads to lossing that customer for the lifetime.
3. Another major threat is avaialbility of the pirated version of the premium product at torrents or other sites.
4. There is always a chance that a better product offering all the extended services provided by box in premium version will come to the market and will offer it for free. This will lead to mass cannibalization and reduction in the base.
Current fact checks of Box:
Box went public January 2015 and the share price of the firm has remained more or less flat since then. However in recent days the stoc price has plummeted a lot going down by 11.5 % in May. Competition is stiff in the file sharing space and DropBox a major competitor is very aggresive and coming up with an IPO. Also Google Drive a product by Google is gaining lots of traction among users especially in developing markets.
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