Publication records

Firms commonly run field experiments to improve their freemium pricing schemes. However, they often lack a framework for analysis that goes beyond directly measurable outcomes and focuses on longer term profit. We aim to fill this gap by structuring existing knowledge on freemium pricing into a stylized framework. We apply the proposed framework in the analysis of a field experiment that contrasts three variations of a freemium pricing scheme and comprises about 300,000 users of a software application. Our findings indicate that a reduction of free product features increases conversion as well as viral activity, but reduces usage – which is in line with the framework’s predictions. Additional back-of-the-envelope profit estimations suggest that managers were overly optimistic about positive externalities from usage and viral activity in their choice of pricing scheme, leading them to give too much of their product away for free. Our framework and its exemplary application can be a remedy.

 

View all ESMT Working Papers in the ESMT Working Paper Series here. ESMT Working Papers are also available via SSRN, RePEc, EconStor, and the German National Library (DNB).

Considering markets with non-pivotal buyers we analyze the anti-competitive effects of breakup fees used by an incumbent facing a more efficient entrant in the future. Buyers differ in their intrinsic switching costs. Breakup fees are profitably used to foreclose entry, regardless of the entrant’s efficiency advantage or level of switching costs. Banning breakup fees is beneficial to consumers and enhances the total welfare unless the entrant’s efficiency is close to the incumbent’s. Inefficient foreclosure arises not because of rent shifting from the entrant, but because the incumbent uses the long-term contract to manipulate consumers’ expected surplus from not signing it.

 

View all ESMT Working Papers in the ESMT Working Paper Series here. ESMT Working Papers are also available via SSRN, RePEc, EconStor, and the German National Library (DNB).

The case study describes developments at Heraeus, a successful mid-size company from Germany that markets a wide range of high-grade precious metal products worldwide. It presents the developments of the segment that is active on the market for silver pastes for photovoltaic systems. This market had experienced strong shifts in demand since 2011 – firstly from Europe and North America to Asia, particularly China, and secondly from standard products to customized product solutions. Due to these developments Heraeus had lost its market leadership and recruited Andreas Liebheit as the new head of the segment, who was to get it back on a successful track. The participants will discuss what strategic decisions Andreas Liebheit should make to counter the market developments and what implications these decisions will have in particular on marketing and sales, the global organization structure and leadership culture of the segment. Beyond the strategic aspect, the case can serve to explore what conclusions Heraeus should draw on a company-wide level from the developments of the segment.

• Analyzing situation and trends on a technology-driven, global B2B market.
• Understanding challenges and opportunities of small/medium companies (‘hidden champions’) when competing with big corporations in niche markets.
• Reflecting options of changing business strategy and reviewing their implications, in particular regarding:
• the global distribution of the internal value chain of a company
• leadership culture when shifting the business focus from the western hemisphere to Asia
• HR requirements when moving from product to solution business

NOTE: This case does not have a teaching note and is not available via our distributors. If you are interested in this case, please contact either the author or publications@esmt.org.

The traditional business models of industrial enterprises are endangered. Simultaneously, modern data-based technologies enable the development of complex service solutions that can be marketed as innovative business models. By analogy to the application options that are known as Industry 4.0 in Europe we will refer to them as business models 4.0. However, in many cases, the introduction of business models 4.0 is not as successful as expected due to cost overruns. In this paper we have identified nine major cost traps that must be observed for target definition, marketing and implementation. In addition, we highlight measures to help avoid these cost traps.

This publication is also available in German and Chinese.

Operations management scholarship has focused on reference-group adoption positively influencing focal-facility adoption; i.e., positive imitation parameters manifest due to the presence of mimicry and contagion. We instead argue that the incentive to adopt a quality-management system can be inversely related to reference-group diffusion. Our theoretical model formalizes the potential for strategic substitution and negative imitation parameters to be applicable in quality-management adoption. We compile a dataset of 2,895 facility-level observations that allows for three different industry-level reference groups; i.e., domestic industry, domestic exporters and foreign exporters. When undertaking probit estimations that do not account for appropriate fixed effects, we find positive imitation parameters which support the presence of mimicry and contagion. Yet when accounting for fixed effects, the imitation parameters turn negative in line with the presence of strategic substitution. Furthermore, the negative influence of reference-group adoption on focal-facility adoption is robust across the three reference groups.

 

View all ESMT Working Papers in the ESMT Working Paper Series here. ESMT Working Papers are also available via SSRN, RePEc, EconStor, and the German National Library (DNB).

Central banks are under increased scrutiny because of the rapid growth in, and composition of, their balance sheets. Therefore, understanding the processes that shape these balance sheets and their consequences is crucial. We contribute by studying an extensive dataset of banks’ liquidity uptake and pledged collateral in central bank repos. We document systemic arbitrage whereby banks funnel credit risk and low-quality collateral to the central bank. Weaker banks use lower quality collateral to demand disproportionately larger amounts of central bank money (liquidity). This holds both before and after the financial crisis and may contribute to financial fragility and fragmentation.

Blockchain is a distributed, digital transaction technology that allows for securely storing data and executing smart contracts in peer-to-peer networks. In a survey among German energy executives, the German Energy Agency GmbH (dena) and the European School of Management and Technology (ESMT Berlin) have compiled their opinions, current and planned actions, and visions of the future role of Blockchain in the energy sector. More than half of the 70 respondents has already experimented with Blockchain or plans to do so. 21 percent consider Blockchain a game changer for the energy supply industry. 60 percent of the respondents believe that a further dissemination of the Blockchain is likely, and 14 percent expect niche applications. The survey also covered potential use cases: Around half of the use cases mentioned by respondents are related to process optimization, including billing, sales and marketing, automation, metering and data transfer, mobility, communication, and grid management. The second half is linked to public and private trading platforms, in particular peer-to-peer trade, and decentralized energy generation. Respondents urge decision-makers to speed up the process of putting Blockchain at the top of their agendas and express concerns that Germany and the European Union might be lagging behind in a global comparison. The rapid launch of prototypes should verify the functionality of the technology and attract a sufficient amount of users to rapidly reach a critical mass. They also fear that the current regulatory framework is not suited at all to accommodate Blockchain applications. The dena / ESMT analysis reveals that the cost-cutting potential of Blockchain applications has its limitations. Especially in markets where digital solutions already exist, the technology will have to compete with fairly efficient processes. By contrast, nascent markets, such as public charging and billing transactions for electric vehicles, offer possibilities of the Blockchain to become the dominant design. [Blockchain ist eine dezentral organisierte digitale Plattform, die sichere Datenspeicherung und Trans-aktionen in Peer-to-Peer-Netzwerken ermöglicht. Welche Auswirkungen wird Blockchain auf den Energiesektor haben? Die Deutsche Energie-Agentur GmbH (dena) und die European School of Management and Technolo-gy (ESMTBerlin) haben Entscheidungsträger der deutschen Energiewirtschaft über ihre Einschätzungen, bestehende und geplante Aktivitäten sowie ihre Vision zum Thema Blockchain befragt. Von den rund 70 Entscheidungsträgern, die an der Umfrage teilnahmen, experimentiert bereits mehr als die Hälfte mit Anwendungen der Blockchain oder plant derartige Vorhaben. 21 Prozent sehen die Blockchain als Game-Changer für die Energieversorgung, 60 Prozent halten die weitere Verbreitung von Blockchain für wahrscheinlich und 14 Prozent erwarten Nischenanwendungen. Nach zukünftigen Anwendungsbereichen der Blockchain-Technologie befragt, fallen rund die Hälfte der Anwendungen in den Bereich öffentliche und private Handelsplattformen, insbesondere Peer-to-Peer-Handel und dezentrale Energieerzeugung, während die andere Hälfte der genannten potenziellen Anwendungen unter dem Begriff „Prozessoptimierung“ zusammengefasst werden kann, einschließlich der Themen Abrechnung, intelligente Zähler und Datenübertragung. Hier werden weiterhin Vertrieb und Marketing, Automatisierung sowie Elektromobilität, Kommunikation und Netzmanagement genannt. Nach konkreten Handlungsfeldern befragt, empfehlen die Teilnehmerinnen und Teilnehmer der Umfrage Entscheidungsträgern aus Politik und Wirtschaft, dem Thema Blockchain größere Aufmerksamkeit zu widmen, und äußern Bedenken, dass Deutschland und die Europäische Union im globalen Vergleich ins Hintertreffen geraten könnten. Zudem bewegen sich einigen Kommentaren zufolge Blockchain-Anwendungen in einer Grauzone des derzeitigen Rechtsrahmens. Die Finanzierung von Pilotprojekten und Prototypen sollte die Möglichkeiten der Technologie bestätigen und die Einführung kommerzieller Anwendungen für den Massenmarkt beschleunigen. Die dena-/ESMT-Analyse zeigt, dass das Kostensenkungspotenzial von Blockchain-Anwendungen für die Energiewende begrenzt ist. Insbesondere in Märkten, in denen sich bereits digitale Lösungen bewährt haben, trifft die Technologie auf starke Konkurrenzprodukte und -dienstleistungen. Im Gegen-satz dazu besteht in entstehenden Märkten die Möglichkeit, dass Blockchain in Zukunft zum dominierenden Design werden kann, beispielsweisebei öffentlichen Lade-und Abrechnungstransaktionen für Elektrofahrzeuge.]

German edition of the study: Blockchain in der Energiewende. Eine Umfrage unter Führungskräften der deutschen Energiewirtschaft. For the press release click here.