Problem

A venture-backed startup company was providing a valuable online service to a specific vertical market.  The company believed it could improve its profitability by shifting from a “free,” advertising-supported business model to a fee-based model.  In the conversion from “free” to “fee-based,” it was essential to maintain a critical mass of users in order to preserve the overall value of the service.  How should the company structure and price its service offerings in order to become profitable -- while retaining a sufficient quantity of users?

Solution – Pricing Strategy & Business Model

KJ & Co. worked with the management team to generate concepts for alternative service structures.  We then conducted pricing research (using conjoint analysis) among existing users in order to model the tradeoffs across different price levels and varying packages of service features.  KJ & Co. recommended optimal pricing, provided revenue forecasts, and projected user attrition.  Project deliverables included a financial model with alternate scenarios and projected product line P&L statement.

Result

The company successfully made the transition from free to fee-based, meeting its revenue targets and user retention objectives. 

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