Optimal Design of Free Samples for Digital Products and Services

Abstract

Marketers of digital content such as books, news, video, music, and mobile games often provide free samples of the content for consumers to try out before buying the product or signing up for subscription. Similarly, firms selling software (such as software as a service), and cloud-based services may provide free limited-version products or a free-trial period for the service. In this article, the authors focus on how firms should design such free samples to maximize their revenue. They examine in an analytical setting how quality and other design parameters of the sample affect profit generated by the product or service. They then test the normative implications in the application context of a book publisher that provides free samples for the books it sells online. Using a field experiment, the authors vary the design parameters of the sample and, based on the demand estimates, provide recommendations for the firm on the optimal design of the sample. They find that, rather than being substitutes, free samples of the entire content can be very effective in increasing revenues. Furthermore, they find that higher-quality samples have a greater impact on the sales of popular content. This has important implications for freemium and free-trial business models.