The Competitiveness of Zoom’s Pricing Model

The Competitiveness of Zoom’s Pricing Model
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  1.      How does the platform’s underlying technology enable a free version of the product? Zoom's video conferencing platform is hosted on a cloud-based architecture, which allows it to be flexible and scalable. This means that Zoom can provide its basic video conferencing features to a large number of users without incurring significant costs. Cloud-based technology also utilizes virtualization technology that allows providers to create instances of new processes on the same hardware (Zoom Community, 2022). Therefore, the technology is easily scalable to accommodate many users instantly. It is easily scalable and flexible to accommodate more users since it requires instantiating thin clients on the user’s platforms while most of the processing is done on the cloud (Walia, 2019). Secondly, Zoom utilizes a distributed network to distribute the load to various servers worldwide. For each Zoom user, there is a server in the nearest data center that processes the load faster. To ensure smooth processing of video to users, it also uses distributed architecture, multimedia routing, multi-bitrate encoding and application layer quality of service technologies (Walia, 2019). The distributed architecture, multi-bitrate encoding and multimedia routing allow redundancy to ensure no downtime, and each process is processed even when there is a glitch in some part of the network. These features reduce Zoom's operating expenses for every Zoom call and allow the company to offer free products to reel in new customers. Virtualization and the adaptability of a distributed network reduce the operational overheads allowing the company to afford free products without a significant related cost.

2. What are the advantages and costs of offering a free version of the product? A free version of a software product serves as an entry point for prospective and potential clients who may be hesitant to pay for the product they are unfamiliar with (Banerjee, 2021). Historically, Skype had the lion’s share of the teleconferencing market, and other people were familiar with it. To influence people to change or choose Zoom over other service providers, it is important that the potential customer is familiar with the new product and can understand why it offers a better service than the competitors. Thus, by providing a free version, Zoom is able to attract more users and increase its user base. When the customers are familiar with a new product, the service providers can easily prompt them to pay to enjoy better features of the product. A free software version is also meant to provide valuable feedback to the developing company. Users of the free version may provide feedback on bugs, features, and usability, which can be used to improve the product (Banerjee, 2021). A large user base can expand the reach of the software utility, which increases the chance of providing valuable feedback to the developers. A broad user base provides relatively more valuable feedback than a small paying customer base. Users can suggest new features and report bugs which generally improves the quality of the product. A free version of a software product upsells the product to the customers. The service provider showcases the value and features of the products to the new customers. Users are more likely to upgrade to a paid version if they have a positive experience with the free version. A free version also allows the service provider to trap new customers and introduce them to their ecosystem. Most service providers have other products that they can offer to the user of the free version, and the more the user enjoys the experience of interoperability of different systems and products, the user eventually has to remain in the ecosystem. The free version is a way to introduce them and trap them in the software ecosystem. There are also related costs of offering freemium products like zoom. They include infrastructure and hosting costs, customer support costs, development and maintenance costs, legal and compliance costs etc. The company has to incur these costs even when some users may never upgrade to the paid plans. However, the advantages and prospective revenue for those who are eventually converted to paid plans is worth to continue offering the free products. 3. What is the impact of offering a free version of the product on the firm’s competitors? The firm’s competitors have to revisit and review their pricing model to ensure that their version is not prohibitively expensive while there is a free version of the product in the market. The...