Introduction of Software Products and Services Through Public 'Beta' Launches

Public 'Beta' launches have become a preferred route of entry into themarkets for new software products and web site based services. Whilebeta testing of novel products is nothing new, typically such tests weredone by experts within firm boundaries. What makes public beta testingso attractive to firms? By introducing semi-completed products in themarket, the firm can target the early adopter population, who can thenbuild the potential market through the word of mouth effect by the timethe actual version of the product is launched. In addition, theinformation gathered through the usage of the public beta givessignificant insights into customer preferences and consequently helps inbuilding a better product. We build these marketing and productdevelopment implications in an analytical model to compare the differentproduct introduction strategies like 'skimming' or 'penetration pricing'with beta launches. This analysis is done for products of branded andunbranded Web 2.0 companies like Google and Flickr etc. We also examinethe impact of different monetization models like direct pricing andadvertising on the beta launch strategy.