An Analysis of Promotional Programs for Cloud Computing: Coupons or Free Trials?

ABSTRACT

Offering promotional programs is a common strategy for firms to induce consumers to make purchases. This paper investigates promotional programs in the market of cloud computing. We identified the following two popular forms of promotional programs for cloud computing services in this paper: the coupon and the free trial promotional program. We first studied the cloud provider’s promotional strategies in the market with complete information and identified the conditions under which each promotional strategy is optimal. The results show that targeted promotional programs are more profitable than untargeted programs. Further, the provider should offer a targeted coupon program in the case of a higher usage cost, weaker network effects and a lower quantity of clients’ tasks to process. In addition, this paper explores the case of incomplete information and finds that the provider will offer untargeted coupons, untargeted trials, or no promotional programs for optimal profits. Finally, this paper studies the scenario in which clients are uncertain about the valuations of the cloud service a priori. We show that trial programs will be more advantageous under such scenario compared to the scenario when clients exhibit no uncertainty.

KEY WORDS AND PHRASES:

• Cloud computing
• free trials
• online promotion
• product information
• promotional coupons
• promotional programs

Acknowledgments

We thank the editor and the anonymous referees for their constructive suggestions and comments through the revision process. This work is supported by the National Natural Science Foundation of China (71402134, 71572138, 71571140 and 71832011).

Additional information

Notes on contributors

Yijiang Liu

YIJIANG LIU ([email protected]) is a Ph.D. candidate in the Department of Information Management and Electronic Commerce at School of Management at Xi'an Jiaotong University, China. His research interests include economics of information systems, cloud computing, and service supply chain management.

Shengli Li

SHENGLI LI ([email protected], corresponding author) is an associate professor in the Department of Information Management at Peking University. He received his Ph.D. in information systems from the University of Florida. Dr. Li’s research interests focus on economics of IS, electronic commerce, and social media. His research has been published in several journals, including Production and Operations Management,  Journal of Management Information Systems, Decision Support Systems and European Journal of Operational Research.