Utilizing Public Betas and Free Trials to Launch a Software Product
By Amit Mehra, Rajib Saha
Production and Operations Management | November 2018
DOI
doi.org/10.1111/poms.12740
Citation
Mehra, Amit., Saha, Rajib. (2017). Utilizing Public Betas and Free Trials to Launch a Software Product Production and Operations Management doi.org/10.1111/poms.12740.
Copyright
Production and Operations Management, 2017
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Abstract
Many software product firms release a public beta prior to launching its product. Public betas are adopted by innovator consumers and firms use free feedback from these consumers to improve the quality of the product. While trying out the public beta, innovators also learn their product preferences accurately. In addition, opinions expressed by the innovators about the software on public forums like blogs, etc., can introduce a perception bias about the product's quality among the imitator consumers. Therefore, there are demand and cost side trade-offs in introducing public betas. In addition to public beta, firms can introduce product trials along with the product. Product trials serve as a learning mechanism for all consumers (innovators and imitators), unlike in the case of public betas where this benefit accrues only to innovators. We examine the firm's optimal strategies to introduce public beta and/or product trial. We show that introducing public beta does not necessarily result in a higher-quality product. However, even when the quality is lower, consumer surplus and social welfare can be higher. Interestingly, while introducing public beta in addition to trial may appear to be optimal, it may not always be so. We show that similar results hold for products with network effects. We also find that even though the marginal value of quality to consumers is higher for products with network effects, the quality of the product can sometimes be lower than the quality in absence of network effects.

Rajib Saha is an Associate Professor of Information Systems at the Indian School of Business (ISB). He works broadly in the areas of Economics of IT and IT-enabled business models and data mining. His research explores questions related to crowds and platforms, pricing and operationalisation of digital goods, B2B contracts, network analytics, and more.

Prior to joining ISB, he taught graduate-level courses in the area of Operations Management and Information Systems at the University of Rochester, and worked in the IT industry for several years at organisations such as Oracle and Novell.

Professor Saha received his MS and PhD in Business Administration from the University of Rochester, New York and B.Tech. in Computer Science and Engineering from the Indian Institute of Technology, Kharagpur.

Rajib Saha
Rajib Saha