Dropbox currently has 200 million users, but only 1.6% are paid subscribers. To address this, the document proposes a new pricing strategy with multiple tiers: 1) a 1GB free tier, 2) a 25GB "Pro" tier for $3.99/month, and 3) a 100GB "Premium" tier for $9.99/month. It also recommends maintaining Dropbox's referral program which provides storage bonuses to both referrers and receivers. The goals are to increase conversion rates, broaden Dropbox's offerings to different customer segments, and emphasize its benefits over competitors like higher quality service and data security.
5. Main Issues
Low Conversion Rate: 1.6% of Total Users
Total Cost of servicing a Free Customer: $49/year
for using 16GB of space
Competition is offering a similar service for a lower
price
6. Free
25 GB+
100 GB+
Unlimited
Free
Up to 25 GB
(1GB + 1GB per Referral)
Pro
$3.99/month or $39.99/year
Premium
$9.99/month or $99.99/year
Business
$800/year per 5 users
Pricing Strategy
Product Line Pricing
Strategy to target
different target
segments.
Reduction of free
storage space to reach
a higher conversion for
premium packages.
Free Trial for a limited
period of time.
7. Free Account
Up to 25 GB
[1GB + 1GB per Referral]
Offering
1GB of Cloud Space
Accessible only by PC users
Limited sharing features
Referral Promotion
25GB per 1 year
[After 1 year, the user will have the choice to upgrade
and keep the additional storage space or go back to the
basic offer]
Mobile Access
Referrer receives 1GB/year per Referral, up to
25 GB
8. Pro Account
Offering:
25GB of Cloud Space
Access to all platforms
Mobile-PC sync
Full sharing features
Price:
$39.99/year
$3.99/month25GB of Cloud Storage
Starting at $3.99/month
9. Premium Account
Offering
100GB of Cloud Space
Mobile and PC access
Additional Features:
- Automatic Backup
- Customizable Archive by file type
- Premium Customer Service
Price
$99.99 / year
$9.99 / month
100GB of Cloud Storage
Starting at $9.99/month
Premium
10. Reasons for Success
More
Options for
Premium
Packages
High Quality
Service with
Additional
Features
Established
Positive
Brand
Reputation
Differential
Value compared
to competitors
More Storage
Space at a
Competitive
Price
Reduced
Total Cost
per Free
Customer
11. Customer
Segmentation
+
Referrals
Product Line
Pricing
Expanded offering portfolio
Different offerings to different market
segments
More suitable offerings according to
market segments
Encourage trial purchases
Encourage upgrading
Outcomes
Maximize profits
Maintain brand’s quality perception
SustainableBrand
Perception
Overall Benefits
12. Conclusion
DropBox is trapped in a model which produces low
conversion rate from free to paid service (1.6%).
We recommend implementing a Product Line
Pricing Model and target different market segments
by broadening the offerings to the target audience:
1GB freemium
25GB DropBox Pro
100GB DropBox Premium
We suggest maintaining the Referral Strategy, by
offering a storage bonus for a limited time, to
encourage our users promote our services.
As a result, the implementation of the strategy will
lead to the increase of:
Customer Base
Conversion Rate
In addition to the proposed activities, we suggest
emphasizing the brand’s benefits in comparison to
the competitors:
Higher service quality
Higher data security
Platform independency