competing against free_iim lucknow
TRANSCRIPT
Brand Management
Competing against
Geetanjali(PGP30136) | Kiran(PGP30029) | Navya(PGP30152) | Shrey(PGP30281) | Siddhesh (PGP30141) | Yogesh(PGP30385)
Consider…
You are an incumbent player
And a new entrant offers a similar product ….
And sells it for FREE !!
What would you do?
How to competeagainst F R E E ?
How & When to respond ?
Assessing The Threats
1. Ability of new entrant to cover up cost quickly
2. Speed at which your paying customers defect
3. Growth Rate of customers using the Free Offering
Choosing Whether & When To Respond
Companies must quickly respond with a free Offering by revisiting their Business Model
Bottom Line:
A radical Rethinking of Business Model is needed
Business Model Threat
Indian Context
Delayed Threat:Entrants User’s Growth Rate> Established Firms Defection Rate
Immediate Threat:If your firm’s revenue take a major hit with the free offering
Indian ContextYour first Free Ride
When both Defection Rate and Threat is Low, the incumbent should continue to monitor the situation.
Common
Mistakes
Companies
Commit
Too slow to respond
or didn’t respond at all
Company DID NOT correctly identify
threats
They mistook
Immediate &
Business model
threats as
Delayed &
Minor threats
Leading to
Domino’s Free home delivery
Pizza Hut emphasis on fine dining
The advent of the free voice calls
Traditional telecom operators
And there were those that responded too fast
Entry of Vistara
Price Wars
Incumbent’s Arsenal of Weapons : In case of Threat
Large User Base Advanced technical know-how Substantial Brand Equity Financial Resources Market knowledge Access to important marketing
and distribution channels
Introduce Better Free
Product
Tried & Tested Sales and Pricing Strategies
Up-sell Down-SellCharge Third
PartiesBundle
Free offering
+premium Version
Free offering
+ Sell other products
Free offering
+Access fee
for 3rd party
Free offering
+Paid
offering
4 Tried-and-tested
Strategies
1. UPSELL
UPSELLING
Seller induces the customer to purchase more expensive items, upgrades or other add-ons in an
attempt to make a more profitable sale.
FREE 14 DAYS
2. CROSS-SELL
Want fries with that? Something to Drink? An ice cream after the lunch?
3. CHARGE THIRD PARTIES
CHARGE THIRD PARTIES
Provide a free product to the users and charge the third party for
access to them
4. BUNDLE
Big Basket Combo
Obstacles in adopting Free Strategies
1) Belief : Product must generate own revenue & profit
2) Profit Center Structure and accounting system
3) Cost accounting system not tuned to measure Actual Cost
Summary
1) The free concept
2)Assessing the threats - > Choosing whether and when to respond
3)Common mistakes companies make
4)4 tried and tested strategies
5)What’s holding them back ?
References
• Competing Against Free, published in Harvard Business Review by David J. Bryce, Jeffrey H. Dyer and Nile W. Hatch in June 2011 Volume.• http://www.tatasky.com• http://www.airtel.in/personal/digital-tv• http://www.mcdonaldsindia.com• www.flipkart.com• http://www.dominos.co.in
THANK YOU