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

Abstract

ABSTRACTOffering 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.