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

Hsing Kenneth Cheng () and Yipeng Liu ()
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Hsing Kenneth Cheng: Department of Information Systems and Operations Management, Warrington College of Business Administration, University of Florida, Gainesville, Florida 32611
Yipeng Liu: Department of Operations and Information Management, Kania School of Management, University of Scranton, Scranton, Pennsylvania 18510

Information Systems Research, 2012, vol. 23, issue 2, 488-504

Abstract: 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.

Keywords: software free trial; time-locked free trial; demo software; experience goods; network effect; product trial; product sampling (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (44)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:orisre:v:23:y:2012:i:2:p:488-504

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