Question

Within the context of “free as a business model”, please identify and discuss a company that uses “free” in its value proposition. Please be sure to provide information regarding customer segmentation as well as the specific patterns used in marketing to its selected customer segment. Finally is the free offer really free? Why or not please explain

Answer 1

Answer: Under the priced based Value Proposition, companies offer the value for free.marketers know that price based value proposition is the way to fulfil the needs of price-sensitive Segments of customers. For eg. Southwest, easyJet, and Ryanair are offering low price business models and providing low cost air travel.

Metro free paper, flicker open sources and google are the examples of free value proposition.

Metro has started offering the newspaper to the customers for free in stockholm. Now they are providing in many cities around the world.Metro has focused on providing free newspapers(based on Free value proposition business model).

They have targeted the customer segments: People travel in public transport, high traffic commuters and young commuters.

Patterns used in marketing to its selected customer segment: Under this they worked on their distribution network in order to gain the high circulation. They have also signed the distribution agreements with public transport networks.They have also hired the sales force. They have reduced its editorial cost so that they can create a paper to entertain younger commuters.It has also booked the news racks at train and bus stations to compete in the market.

"Free offer is not really free" -Free business model is actually a very potential and viable model in the market.it is not really free.These business models are of three types.

1)Free offers based on advertising: Facebook account ,Metro news paper,google accounts are the examples of this type of business model. These organisations revenue source is not the service that they providing for free but advertising is the real source of revenue like newspaper ads and google ads.

2) Freemium( free+ premium):Flickr, Lose It application on i-phone and Skype are the examples of this type of business model. It is the combination of free services and paid premium services.In this type of business model organisations first provide the free services and for better experience and additional services experience the offer paid premium services.

3)Razor and blades model /Free offers tempt the customers for repurchase:Jio mobile phone network by reliance company is the example of this type of business model. Jio networks first offered the free mobile sims and free calling network to the customers then they encouraged them to purchase those services. In this type of model, organisations first offer free services with the purpose of encouraging the customers for the future purchases.

So, These free offers are not really free.