Microsoft has raised quite a few eyebrows in recent years in terms of its software strategy. For a company that climbed to prominence by selling licenses for Office and Windows, it's hard for some to grasp the concept that Microsoft is now offering (and plans to offer even more of) its software for free.
The traditional licensing model worked great in the PC era but with mobile disrupting the entire industry, Microsoft realizes a company-wide change is in order. Key to this change is CEO Satya Nadella who has the mindset and is willing to take the kind of risks that his predecessor, Steve Ballmer, likely wouldn't have.
With freemium clearly on the agenda, Microsoft marketing manager Chris Caposella recently outlined exactly how the company plans to cash in on this new (for Microsoft) business model which involves four key strategies: acquire, engage, enlist and monetize.
As The Verge notes, the first step - acquire - simply means that Microsoft is trying to convince new users to try out its software with a free product (think Office for iPad). Once they're in the ecosystem, you need to engage them so they'll be willing to stick around. After that, you must repeat the cycle - enlist more new faces - and most importantly, monetize them all.
Caposella used Apple and Google as examples of ecosystems that are thriving. In the US, he said, Apple focuses most of its marketing efforts on the iPad and iPhone. Yet because they've engineered everything to work together, one product naturally leads to the next and the next without any additional marketing. Their products more or less market themselves through other products.
It's that same sort of strategy that Microsoft is now using. For example, its Surface Pro 3 is deeply integrated with OneNote while Cortana users suddenly find themselves being Bing users.
Getting users invested in an ecosystem now, especially before they defect to a competing platform, is absolutely imperative to Microsoft's freemium plans. Windows 10 will go a long way in helping the company do just that but it's certainly not an ace in the hole.