Pricing Intervention on Linkedin - Pricing Strategy

        Pricing Intervention: LinkedIn’s Premium Subscription

        Strategy for Recent & Future Graduate Students

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Group Assignment

April 30th, 2018

TABLE OF CONTENTS

Introduction        2

The Potential & Target Market        3

Current Pricing Model

Surveying the WTP of the Current Pricing Plan        4

Competition        5

        5

Financial Analysis        6

Conclusion        6

Appendix        

Introduction

LinkedIn is a powerful recruiting, job seeking, and marketing solutions tool for individuals and businesses for over a decade. These three tools are the main revenue stream for the social media website. During the most recently reported quarter in January 2018, LinkedIn has reached a network of over 500 million users worldwide^[1], an unparalleled reach compared to its competitors. Out of the 500 million users, 25% are considered “active” users using LinkedIn at least once a month for their professional needs^[2].

LinkedIn currently follows a freemium pricing model, according to which any user can open a profile and search for jobs for free. If a user subscribes to a paid monthly plan, “Premium Career”, he gains access to some extra features. These include being highlighted when applying for a job, an access to a full list of profile viewers, 3 InMail per month and statistics comparing him to other applicants or company's current employees^[3].

The conversion rate of LinkedIn, from free to premium accounts, is estimated around 0.4%, which is considered low compared to other services using the freemium model (See Appendix 1). In addition, the yearly growth rate of the revenue from premium subscribers is around 3.8%, which is lower than the yearly growth rate in number of users (See Appendix 1). We believe this is a concern to the board of directors and may indicate an existing non-optimal pricing strategy.

In this essay, we will suggest a potential segmented solution for the concerning trend. Currently, LinkedIn currently uses a non-segmentation strategy, offering premium packs for a fixed annual or monthly paid price that targets all users worldwide, regardless of age, job experience or education level. Their current subscription models have almost no fencing mechanism (except for the recruiting package), and its attractiveness is highly dependent on what the users want at a specific moment in time, which will be explained further in the Current Pricing section. Therefore, we will suggest segmenting the user base to offer a more targeted, fenced, and cheaper subscription package to college students and recent graduates called “The Grad Pack”. We will present research and results from data collection to show that the targeted group for this new plan has a lower WTP than the current cheapest subscription plan offered by LinkedIn. This population is price-sensitive but are highly interested to find a good job to start their career. The group is also growing over time in numbers presenting a sustainable revenue opportunity for LinkedIn. After establishing the potential of this group, we will summarize the current pricing model and describe research we conducted to reveal the target group’s WTP and needs when searching for a job. We will also present Competitors’ current offering that supports the disadvantage of LinkedIn’s current subscription plan to Career-seekers. Following that, we will describe the pack that we suggest offering and describe in detail what should be its price and why. We will conclude with a short financial analysis to establish the effect of the new pack on LinkedIn revenue.