Revenue Sources and Marketing
A music app with 850 subscribers who pay $\$9.99$ a month knows exactly how much it earns and where every peso comes from. Deciding how a company makes money and how it presents its offer to the public is just as important as deciding what it sells. That is the job of the commercial system.
Revenue sources
Remember: total revenue is price × quantity. If you want to review how it relates to costs and profit, go back to the earlier notes.
The freemium model
Many apps combine free access and a subscription in a model called freemium: the basic version is free and the full version (premium) is paid for with a recurring fee. This way, the company earns revenue from the users who pay, and sometimes from advertising in the free version too.
The logic is that the free version works as a showcase: if it is useful, users get hooked and recommend it; if it is limited, some users will want to pay to get more features.
Classify these businesses according to their main revenue stream (product sales, subscription fee, advertising or brokerage commission): a streaming TV platform, a free…
Classify these businesses according to their main revenue stream (product sales, subscription fee, advertising or brokerage commission): a streaming TV platform, a free online newspaper with ads, an estate agency and a hardware shop.
A productivity app uses a "freemium" model: the basic version is free and the full version costs 120 pesos per month. a) What are its revenue streams? b) Analyse one…
A productivity app uses a "freemium" model: the basic version is free and the full version costs 120 pesos per month. a) What are its revenue streams? b) Analyse one risk of this model and reason why the free version must be useful yet limited.
A music platform has 850 subscribers paying $\$199.80$ per month. a) Calculate its monthly revenue. b) If the number of subscribers grows by $10\ \%…
A music platform has 850 subscribers paying $\$199.80$ per month. a) Calculate its monthly revenue. b) If the number of subscribers grows by $10\ \%$ and the price does not change, calculate the new monthly revenue. c) Comment on which lever increases revenue more: gaining more customers or raising the price.
The risk of a single revenue source
Keep in mind that revenue is only part of the story: the company must also produce what it promised, at the expected cost and with the expected quality, because a large part of its margin comes from there.
A theater company relies almost entirely on ticket sales, and a crisis causes attendance to plummet. a) Explain the risk of having a single revenue stream. b) Propose…
A theater company relies almost entirely on ticket sales, and a crisis causes attendance to plummet. a) Explain the risk of having a single revenue stream. b) Propose three realistic alternative or complementary revenue streams for this company and evaluate which one you would implement first.
The marketing mix: the four "Ps"
The marketing mix is summarised by the four Ps: product, price, place and promotion. State which "P" each decision belongs to: choosing the packaging, setting the launch…
The marketing mix is summarised by the four Ps: product, price, place and promotion. State which "P" each decision belongs to: choosing the packaging, setting the launch price, selling online only, and purchasing social media adverts.
The figure shows the marketing mix with its components around the business. Identify the missing component, marked with "?", and give an example of a decision for that…
The figure shows the marketing mix with its components around the business. Identify the missing component, marked with "?", and give an example of a decision for that component for a brand of fresh juices.
Design the complete marketing mix for a backpack brand made from recycled materials aimed at students: define the product (two distinguishing features), the price (with…
Design the complete marketing mix for a backpack brand made from recycled materials aimed at students: define the product (two distinguishing features), the price (with justification), the distribution channel and two promotional actions consistent with the brand.
Pricing strategies
A business launches a new soft drink into a market full of similar brands. Explain the difference between a penetration pricing strategy and a price skimming strategy,…
A business launches a new soft drink into a market full of similar brands. Explain the difference between a penetration pricing strategy and a price skimming strategy, and reason which one you would choose if the objective is to gain customers quickly.
A shop sells 1 000 T-shirts per month at $\$20$. It estimates that if it lowers the price to $\$16$, it would sell 1 400. a) Calculate the revenue in both cases. b)…
A shop sells 1 000 T-shirts per month at $\$20$. It estimates that if it lowers the price to $\$16$, it would sell 1 400. a) Calculate the revenue in both cases. b) Reason why lowering the price does not always increase revenue and what this depends on (price elasticity of demand).
Place and promotion
Go back to the beginning: the music app earns through subscriptions, decides its price, and communicates it with promotion; every decision of the commercial system affects how much revenue it brings in.