WHAT’S NEW

SIMILARPRODUCT

KEY

DIFFERENTIATION

!!!

Submitted by: Section B | Group 6Ayush Gutgutia | Mehak Jindal | Pragna S.P | Shristy Agarwal PGP30368 | PGP30380 | PGP30384 | PGP30168

Submitted To:

Prof. Sameer Mathur

IIM LucknowAugust 12,

2015

“Good companies will meet needs; great companies will create markets.”

- Philip Kotler

WHAT TO

DO???

KEEPCALMAND

HOPE NO-ONE

NOTICES

WHAT COMES FREEWON’T LAST!!!

WHAT LASTSWON’T COME EAST!!!

Offer

Incumbents’ wrong CHOICES

New FREE

Offering

• They shouldn’t

have taken any action

Didn’t take

ACTION

• Should have

taken an action

ACTION

THREAT

Speed with which

paying customers

are defecting

The rate at which the number of users of

free offering

are increasing

Entrants ability to cover its

costs quickly

40% or more a year

5% or more a year

IMMEDIATE THREAT

Launch free product

immediately

Business ModelThreatChange business model

Delayed Threat

Coexist or Delay

launching of free product

Minor ThreatMonitor situation

DEFEC

TIO

N R

ATE

HIGH5% a year or more

Less than 5% a year

LOWLOWLess than 40% a year

HIGHMore than 40% a yearGROWTH RATE

How BIG is the THREAT ???

1. Minor Threat

IMMEDIATE THREAT

Launch free product

immediately

Business ModelThreatChange business model

Delayed Threat

Coexist or Delay

launching of free product

Minor ThreatMonitor situation

DEFECTION RATE

HIGH5% a year or more

Less than 5% a year

LOWLOWLess than 40% a year

HIGHMore than 40% a year

DEFEC

TIO

N R

ATE

GROWTH RATE

Minor Threat:Established food chains vs Fasttrax

• Started in 2006• Snacks and

Deserts ranging from Rs 29 – 90

• To cater local needs and tastes

• First outlet in DPS Mathura Road

VS

“ Your customers are judging every aspect of every transaction and rating everything, from friendliness of people to ease of doing business to quality of product to service after the sale. .”

- Jeffrey Gitomer

2. Delayed Threat

IMMEDIATE THREAT

Launch free product

immediately

Business ModelThreatChange business model

Delayed Threat

Coexist or Delay

launching of free product

Minor ThreatMonitor situation

DEFECTION RATE

HIGH5% a year or more

Less than 5% a year

LOWLOWLess than 40% a year

HIGHMore than 40% a year

DEFEC

TIO

N R

ATE

GROWTH RATE

Delayed Threat:Dropbox vs Google Drive

VS

“When a company identifies the process needed to give the consume a sense of job completion, it can blow away the competition. A product is easy to copy, but experiences are vey hard to replicate.” - Clayton M. Christensen

Google Drive

3. Intermediate Threat

IMMEDIATE THREAT

Launch free product

immediately

Business ModelThreatChange business model

Delayed Threat

Coexist or Delay

launching of free product

Minor ThreatMonitor situation

DEFECTION RATE

HIGH5% a year or more

Less than 5% a year

LOWLOWLess than 40% a year

HIGHMore than 40% a year

DEFEC

TIO

N R

ATE

GROWTH RATE

Intermediate Threat:Embibe vs Toppr

VS

embibe toppr

“Basically, you're selling a world as an actor, right? I mean it's like any sales person: if you believe in your product, you know your product, you sell it a lot better.” - Paul Walker

4. Business Model Threat

IMMEDIATE THREAT

Launch free product

immediately

Business ModelThreatChange business model

Delayed Threat

Coexist or Delay

launching of free product

Minor ThreatMonitor situation

DEFECTION RATE

HIGH5% a year or more

Less than 5% a year

LOWLOWLess than 40% a year

HIGHMore than 40% a year

DEFEC

TIO

N R

ATE

GROWTH RATE

Business Model Threat:Flipkart vs Traditional Stores (Brick and

Motor stores)

VS

“The e-commerce industry is a force that no investor can afford to ignore.” - Cushla Sherlock

OFFER A BETTER FREE !!!

4 Tried and True STRATEGIES

CHARGE

THIRD PARTIE

S

CROSS-SELL

UP-SELL

BUNDLE

1. UP-SELL• Introduce a free basic offering to gain widespread use and then charge for a premium version

•Requirements: A Free product that appeals to a very large user base

A high % of users willing to pay for the premium versions

Related BRANDING Concept

Positive Brand AssociationsRicher Brand

ImageMore

Favorable BrandHigher

Premium

•Sell other products that are not directly tied to the free product

•Requirements: A 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

2. CROSS-SELL

Child Movie Ticket Free with Happy

meal - McD

Free Bookmarks inside – Flipkart

•Builds customer equity

•Promotes diversification and innovation – Brand Extension

Related BRANDING Concept

“First come the innovators, then come the imitators, then come the idiots.” - Warren Buffett

•Provide a free product to users and then charge a third party for access to them

•Requirements: A free offering that attracts either many users who can be segmented for advertisers or a targeted group that makes up a customer segment

Third parties willing to pay to reach these users

3. CHARGE THIRD PARTIES

CHARGES companies to ADVERTISE to its millions of users

•Making a product or service better

•Facilitating targeted marketing or advertising

Related MARKETING Concept

“Know what your customers want most and what your company does best. Focus on where those two meet.” - Kevin Stirtz

•Offer a free product or service with a paid offering

•Recommendations: Products or services that can be bundled with the free offering

A free product that needs regular maintenance or a complementary offering

4. BUNDLE GOODS

PACKAGE TIE-IN SALE

Related MARKETING Concept

INDUCING TRIAL

Bundling a pair of goods pays if their demands are

negatively correlated

BELIEF:Products

must generate a respectable level of revenue

and profit

Profit-center

structure and

accounting system

it employs

Rethink on

offering free

products

Nintendo AnalysisAn Example

NINTENDO

ROVIOVS

NINTENDO in a Dilemma!!!Nintendo is a big player in the Indian

market….But was taken aback by Rovio’s free

products!!

What should NINTENDO have done

Ignore the THREAT???

Or

Introduce its own FREE product???

NINTENDO is facing a BUSINESS MODEL THREAT…

So it SHOULD NOT ignore it!!!

RECOMMENDATIONS

Nintendo can launch its games like MARIO and

POKEMON at PLAY STORE and APP STORE

Of course FREE OF COST!!!

Tie up with companies like SAMSUNG and APPLE for installing their games

by default on their phones to increase their customer base

How willNINTENDO

earn

Nintendo can charge third parties like ad companies for advertising their products in between games

Have the customers make in-game purchases, like MARIO has LIMITED

LIVES, so you can buy it by SPENDIND a few BUCKS

You can modify your POKEMON AVTAR by spending some money

CONCLUSION

If a new company enters the market and offers a product for free, then the incumbent company should

Identify the

THREAT levelRESPONDaccordingly

How can you COMPETE with FREE ??? (1/2)•Think hard about what you offer that’s unique

•Compete with free by being priceless - The common strand is personal experience

“Companies that solely focus on competition will ultimately die. Those that focus on value creation will thrive.” - Edward de Bono

•Napster offered consumers to download free music•Apple : iTunes, charged a fee per download• In the end, the BEST PRODUCT wins•Focus on:•Building a truly great product •Great service to back it up

People have proven time and time again that they'll choose (and pay for) a better

product over a free one!

How can you COMPETE with FREE ??? (2/2)

Thanks for your time