Freemium pricing of dropbox Essay

845 Words Feb 11th, 2015 4 Pages
Huang Ge
MGT401
Prof. Patton, Joseph
2/3/2015
Case 2
1. Describe Dropbox’s “Freemium Pricing strategy” to get users and revenue. What was this strategy? What did the company hope to accomplish with this strategy?
Dropbox is a company providing remote-storage over the internet, cloud storage service as well. The “Freemium Pricing Strategy” is a popular pricing strategy which company provide client a basic service without paying a dime and premium services were paid. Dropbox offers 2GB cloud storage space for free and 1TB for $9.99 per month. The basic service attracts millions of customer to use and like it. On the other hand, the major revenue is generated by paid customers which weights 60% of total revenue.
Moreover, Drew Houston,
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As well, in long-term, Dropbox builds brand image and cultivates customer habit. With huge potentials, Dropbox is valued at over 4 billion dollars.
2. What were the negative results or failures of this strategy, if any?
The competition of cloud storage market is very intense, which makes Dropbox profitability less sustainable. Consumers may turned into other giant vendor such as Google, Apple and Amazon.
“Freemium Pricing” and incentivize mechanism bring some negative influence on Dropbox. Customer prefer to get more storage with recommend to friends and their friend will do the same thing to get free upgrade by doing the same thing. This will increase Dropbox operation cost by purchasing more servers and maintain them.
For venture capital investor, great volatility of future revenue means high risk. The value of Dropbox may be overestimated. Low user conversion rate, loss of customers and make people always want use Dropbox for free will be hidden risk for Dropbox.
3. What was the strategy that Dropbox used for corporate/business customers? Describe this strategy and its results.
Firstly, Dropbox was applying the “Freemium Pricing Strategy” to acquire basic users. According to Drew Houston, his goal was to get individuals to use and like it so much that they, in turn, got their employers to sign up as well. Dropbox was offering a product

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