PGP30299 Alex ToppoPGP 30416 Abhinav GoyalPGP 30117 Vasu PalGroup 1

Competing Against Free: Indian Perspective

Indians in general love free products

and freebies

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

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

Business Model Threat

Delayed Threat

Immediate Threat

Minor Threat

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

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.

Shaadi.com3 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

Airtel TalkFree 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

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.

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

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 smartphoneStep 2: Book one leg of a round trip for Rupee 1 only.Step 3: Book the return ticket of the round trip at regular faresStep 4: Confirm the booking and make payment

CHARGE THIRD PARTIES

Provide a free product to users, and charge the third party for access to them

INDIAN EXAMPLE: FREECHARGE.IN

Offering attracts many users Third parties are willing to reach

these users

• The average payment gateway charges are typically in the 1.8-2% rangeA 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

OTHER EXAMPLES

BUNDLE

Offer a free/discounted

product or service with a paid offering

BUNDLE MATHS

INDIAN EXAMPLE: PIZZA HUT

Product can be bundled with free offering

A Complementary offering