Sworkit: Taking the Free out of Freemium?
(5 pages of text)
Maryland-based Nexercise App Inc.’s fitness application (app) Sworkit provided app-based workout routines that required no equipment. In October 2017, the app was available in a free version with advertising, or via subscriptions that included additional features and no advertising—a classic example of freemium pricing. While 1.5 million people made use of Sworkit each month, the large majority of these were free users, and only a small portion converted to paid subscriptions. The Sworkit leadership team faced several challenges related to their reliance on advertising revenue, including unpredictability and low value per customer; this led them to re-evaluate their pricing model. Would eliminating or reducing Sworkit’s free access better enable management to capture value from the popular app?
This case is suitable for graduate students or advanced undergraduate marketing students. The case is intended for core graduate-level marketing courses or undergraduate- and graduate-level marketing strategy courses. The case will also fit well in courses on digital marketing or pricing.
The case provides a thorough investigation of the costs and benefits of a potential move away from freemium pricing and forces students to contrast freemium pricing with more traditional approaches such as converting free users to customers and customer retention. It allows students to explore how product and price need to complement each other for a successful freemium execution and helps illustrate the marketing mix as a whole, the promotional mix, and online intermediaries. Digital marketing students can apply course concepts in their recommendations for the case, which will also expose students to the Apple App Store and Google Play. Financial information provided in the case enables students to perform customer lifetime value calculations. After working through the case and assignment questions, students will be able to do the following:
- Describe freemium pricing and explain the challenges inherent in this model.
- Describe the benefits and challenges of subscription pricing models, which are increasingly used for both digital and non-digital products.
- Explain how the Apple App Store and Google Play act as marketing intermediaries for digital products.
Arts, Entertainment, Sports and Recreation
United States, Small, 2017
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