Dropbox: “It just works” Ashan-wa Aliogo
Qualitative Customer Value Proposition -Clear product/unmet need: Seamless synchronization of documents between personal and shared computers that works online and offline, isn’t buggy. Cloud storage + ease of use=competitive advantage -Both B2C & B2B: targeting “power” users + businesses. Provides a larger target market but introduces dilemma of which group and features to prioritize. -Good customer reception: Vote Box allowed for direct feedback from users and testing new features. Simultaneously building and learning from customers. Go-to-Market Strategy -Freemium/Premium model: Users can fully experience the product compared to competitors. Conversion difficulties. Prices are not as competitive: $5/month/10G vs approx $4.58/month w/ unlimited storage (Carbonite). -Partnerships through pre-installation on portable devices like Android. Good but dependency is risky especially if Google releases in-house version of cloud storage -Organic Growth (virality + word of mouth) due to high customer acquisition cost. Model works for B2C but marketing is needed for B2B expansion. Technology & Operations Management -No business development team: challenges expansion to B2B and release of new product lines. Too dependent on word of mouth/virality. Profit Formula -Rapid expansion required to increase barrier entry from top competitors like Google and lock in customers. -Valued based on ease of use therefore quality user experience is key.
Quantitative Premium vs Freemium costing + Marketing -$5.12M/year in cost from freemium users but $0 annual revenue. -$4.6M/year in cost from premium users and $10-$15million annual revenue. -Profit ranging from $300K-$5.3M annually -Costing does NOT include marketing costs due to reliance on viral marketing + word of mouth + lack of business development team. -Top competitor Carbonite incurred $14.2M in debt due to marketing efforts to breaking in B2B space therefore Dropbox will more likely have to spend more to switch over customers + combat native competition due to high risks involved like data corruption and destruction. -As of now they have not perfected their B2C customer acquisition funnel as acquisition is still very, very high (approx. $300/paying client compared to $99/year on premium service). Ranking -Yet to dominate niche: Ranked 6th in consumer backup meaning competitors still have key features that make them preferable despite Dropbox’s ease of use and “sexiness”.
Recommendation Do not venture in B2B product. Marketing/advertising/Conversion expenses (an inevitable cost) will be too high with their current margins. Especially since they have little experience in advertising. Work on improving the acquisition funnel, increasing conversion rates, and expanding profit margins. Be more aggressive in recruiting a business development director. Venturing into this field will increases competition and can distract the team from dominating the consumer backup market. Head to head competition will be very difficult especially with no business development director. They can’t be reliant on viral marketing or word of mouth in B2B as risks are a lot higher. Strategy needs to be thoroughly thought out. Continue to improve UI and product features to become more competitive within the consumer backup niche before branching out. Better to be exceptional at one thing than mediocre at several.