Question

Blue Horizon Inc. is an Internet service provider. It provides a router free of charge when users sign up for a two-year wireless service plan. In this plan, userspay in advance irrespective of whether they use the Internet package during the two-year period or not. Which of the following business models does this scenariobest illustrate?

A.A combination of the razor-razor-blade model and the subscription-based business model
B. The pay-as-you-go business model
C. A combination of the freemium business model and the pay-as-you-go business model
D. The direct sales business mode

Answer 1

A) A combination of the razor-razor-blade model and the subscription-based business model

Step-by-step explanation:

The razor - razor blade model is used by companies that sell a good at a very low price, but then they sell you the parts or components needed to use that good at a very high price. In this case the router is given for free but it includes a two year contract.

That two year contract is the subscription based business model, similar to the used by cell phones companies that upgrade your phone but in exchange you must agree to a contract extension.

Answer 2

The correct answer is the option C: a combination of the freemium business model and the pay-as-you-go business model.

Step-by-step explanation:

On the one hand, the freemium business model is a way of ensuring future business transactions that a company can use by allowing users to utilize basic features of the service, such as in this case the router.

On the other hand, the pay-as-you-go business model is a way that the company can charge their customer and it does it by requesting the payment of the service in advanced of the use, no matter how much they use it.

In conclussion, Blue Horizon Inc is using a combination of both the freemium model and the pay-as-you-go model due to the fact that they offer a free router for their customer but they pay the service of internet in advanced as well.