Journal Article

Optimal Software Free Trial Strategy: The Impact of Network Externalities and Consumer Uncertainty

Cheng, Hsing Kenneth, Liu, Yipeng

2012

Overview

Many software firms offer a fully functional version of their products free of charge, for a limited trial period, to ease consumers' uncertainty about the functionalities of their products and to help the diffusion of their new software. This paper examines the trade-off between the effects of reduced uncertainty and demand cannibalization, uncovers the condition under which software firms should introduce the time-locked free trial software, and finds the optimal free trial time. As software firms have the option of providing free trial software with full functionalities but a limited trial time or limited functionalities for an unlimited trial time, we develop a unified framework to provide useful guidelines for deciding which free trial strategy is preferred in the presence of network externalities and consumer uncertainty.

• Publisher: INFORMS,The Institute for Operations Research and the Management Sciences (INFORMS),Institute for Operations Research and the Management Sciences
• Subject: Analysis / Commercial products / Computer software / Computer software industry / Consumer economics / Consumer preferences / Consumer research / Cost efficiency / Cost functions / demo software / Economic aspects / Erfahrungsgüter / experience goods / Experimentation / Externalities (Economics) / Externality / Freeware / Impact analysis / Information storage and retrieval systems / Marketingmanagement / network effect / Network effects / Netzwerkökonomik / product sampling / product trial / Software / software free trial / Software industry / Softwareindustrie / Studies / Sumer / time-locked free trial