Case Study Analysis and Solutions

Case ID: 610077

Abstract:
Case Solution & Analysis for Pandora Radio: Fire Unprofitable Customers? by Willy Shih, Halle Tecco
Pandora Radio is at a crossroads. Founder Tim Westergren has just been told by a well known VC to get rid of his unprofitable customers in order to get his costs down, but Westergren is not sure that such actions are consistent with his company's business model. Pandora Radio is the largest Internet music stream site, and its rapidly growing user base loves the free customizable music stream under an advertising supported model. Pandora has to pay royalties for every song streamed, and has other variable costs that scale linearly with hours consumed, but it has taken no steps to restrict the amount of usage among its heaviest and most loyal users. Can Pandora make its model work when a significant percentage of its users cause it to lose money?

Keywords:
Business models, Business to consumer, Consumer behavior, Customer profitability, Customer satisfaction, Disruptive innovation, Entrepreneurial management, Execution, Growth strategy, Internet, Strategic analysis, Venture capital, Pandora Radio Fire Unprofitable Customers Case Solution

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