Archive for the 'Business, Marketing, Product' category

Smart pricing

Jan 24 2011 Published by Ben Chong under Business, Marketing, Product, The Daily Geek

I had to re-partition a hard disk recently.

If you don’t know what that is, you’ll appreciate the whole point of this article.

The deal about “partitioning” a hard disk is to define how it is to be used.

In my case, I had a computer with Windows 7 on it. I wanted to install Linux (another operating system) on that same computer. So I wanted to create some space on the hard disk for Linux. The task of creating this space is the task of “re-partitioning’ the hard disk.

By now you will probably appreciate the fact that re-partitioning a hard disk is not something you’ll do everyday.

This is something that the folks at Paragon Software Group seem to understand well. They sell a software tool, the Paragon Partition Manager, to help you re-partition your hard disk. Price: $39.95.

They also sell a version that has a single-use license for a mere $9.95.

Think about it. How often would anyone need to repartition a hard disk? Mostly never. But when you do, you’ll probably just do it once. Like me.

So a low-cost single-use license for this kind of product makes absolute sense. It caters to someone who knows that he needs to partition his hard disk just once and doesn’t want to pay too much for a full-blown partitioning tool.

You might argue that Paragon doesn’t have to create such a product: I would have had to pay $39.95 for the full product and still just use it once. They would have made four times the revenue.

But then, at $39.95 would I still choose Paragon’s Partition Manager? Probably not.

There are a several competing products out there with varying capabilities and cost. Windows 7 itself includes a (free) partitioning tool, which unfortunately (or fortunately, if you are Paragon) doesn’t work well in all cases.

By creating this low-cost, single-use version of its partitioning tool, Paragon has a very well positioned product that neatly balances price with capabilities.

Comments are off for this post

App Stores and the new business model

Nov 15 2010 Published by Ben Chong under Business trends, Business, Marketing, Product

MacRumors has a good article how the “freemium” business model is becoming more popular among iPhone app developers.

The “freemium” model is where a basic version of a software or service is available for free. A version with more features is available as a paid product or service. Wikipedia has a more complete description here. This model is not a new concept. Shareware has been around for awhile and a lot of shareware developers use the “freemium” model.

With the advent of the Apple app store and other similar mass market, easy-to-use application market places (Android Market etc), the “freemium” model has become more important.

Part of this is due to the price of software. When the first PCs appeared, off-the-shelf software cost hundreds of dollars. Today, the most popular non-free apps on the Apple App Store cost 99 cents. Users can also choose to view only the free apps.

This means that to generate reasonable profits, the volume of users is more important than ever. To generate this volume, the barrier to a user trying out the app has to be as low as possible. Today’s app stores take the technical barrier out of the way: you don’t have to be a genius to install software from the Apple App Store. The only other significant barrier to adoption is the price. Hence, the importance of making a free version available.

The challenge for the product manager, when considering the “freemium” model, is how to determine what features/functionality goes into the free version and what goes into the paid version. On one hand, you want the free version of your product to be sufficiently useful and attractive and consumers will actually want to use it. On the other hand, you want the paid version to be sufficiently differentiated so that some (hopefully large) subset of the users will actually want to pay more for the additional functionality. Considering that it is already difficult, from a time and resource point of view, to create a single, compelling product, here you have to create not one, but two compelling products!

There are also challenges, from the engineering standpoint, in terms of creating a migration or upgrade path from the free to the paid version: whether the user simply “unlocks” the new features with a serial number or an installation of a new version of the product is necessary.

Challenges notwithstanding, the “freemium” model may be the best approach. The MacRumors article concludes by saying that app developers are finding that the “freemium” model is more lucrative than other monetization strategies like advertising.

Comments are off for this post

Android and the future of software

Oct 30 2010 Published by Ben Chong under Business, Marketing, Product

The Register had an article about how Microsoft is trying to hold back the open source tide by levying royalty payments on Acer and Asustek for their use of Android.

The article also talks about how Microsoft is failing to come out with a business model to compete against open source projects/products like Android.

I think though, that the question is not really one of open source versus proprietary or closed source.

The real Microsoft vs Android question is what is today’s new business model?

Is it one whether the software product itself is the end to itself? Or whether it is a means to an end? Whether or not the product uses open source is irrelevant.

For traditional Microsoft products (Windows, Office etc), the software is the end. Microsoft gets its revenue at the point of purchase of the software.

For Android, the software is the means to the end. Google does not get meaningful revenue when you buy an Android device. Rather, Google gets its cut when you use the device.

This difference reflects the economics of the new millenium: the product itself is no longer the major part of the business model. It is only a means to executing on the business model.

With the old approach, the consumer lifetime value is limited. Once the product is sold, there is no additional revenue. That is why companies like Microsoft come up with frequent and sometimes useless version upgrades: to get additional revenue from existing users. A subscription model is a variation of this.

With the new approach, the consumer lifetime value is practically limitless. As long as the consumer is using the product, she is generating revenue for the company. Since the product is basically “free”, there is almost no barrier to user upgrades and continued usage.

As a product manager, this new approach presents its challenges. You can no longer just focus on the product itself. The latter is now part of a larger ecosystem: the business/revenue model. This will mean integration with other services and products.

On one hand, you have to make sure that your product is usable, that consumers want to use it. On the other hand, you also have to make sure that the product is sufficiently well integrated with your company’s monetization products and that the users will use your product in such a way that they will generate meaningful revenue.

The upside is that the revenue potential is enormous. Just look at Google.

Comments are off for this post

ZumoCast

Oct 06 2010 Published by Ben Chong under Business, Marketing, Product

If you have been reading this blog, you will know that I have been trying out ZumoDrive and Dropbox.

Both of services are, at the fundamental level, file caching services where you want to access the same files from different devices (PCs, Macs, iPhones, iPads, Androids etc). Both ZumoDrive and Dropbox keep a copy of the files online (in the “cloud”) and you can either use their proprietary applications or a web browser to access these files.

Zecter (the folks behind ZumoDrive) launched their new ZumoCast streaming service recently.

What ZumoCast does, is not so much as cache a copy of your files in the “cloud”, as stream your files through the “cloud”, with a focus on video and music streaming.

The downside, compared to regular ZumoDrive or Dropbox, is that the computer where the files reside, has to be powered on and running, along with the ZumoCast application.

The upside is that to stream music or video to the device that you have at hand, all you need to do is to go to zumocast.com (via a web browser), sign into your ZumoCast account, and select the music or video you want to listen or watch. The selected media file will playback through the web browser without the need to install a player application.

I use a MacBook Pro for both work and home. I have a separate user account for work use (along with a Windows VM running on VMware Fusion) and another user account for personal stuff. My iTunes library is stored within my personal account.

Before ZumoCast, I could not access my iTunes music when I am on the work account.

However, with ZumoCast, I log into the personal account and start the ZumoCast application. Then I do a user switch and log into the work account. Now, I start up a web browser, log into zumocast.com, and then before you know it, I am streaming music from iTunes!

This may not have been the original intended usage, but it works pretty well and I am really happy with it.

Comments are off for this post

Older posts »