How does freemium strategy affect the demand of the paid premium mobile healthcare service: From an information asymmetry perspective

Abstract

This paper studies the impact of physicians’ freemium strategy on demand for physicians’ paid premium services in the mobile healthcare setting. In addition, the moderating effects of physicians’ quality indicators are investigated with reference to two dimensions: (1) individual-specific quality indicator, related to the physician’s personal skills and measured by the physician’s professional title; (2) hospital-specific quality indicators, related to the hospital’s quality information and measured by the hospital’s grade and location. Using a sample of 71,256 physicians observed over a 15-week period on the largest Chinese mobile healthcare platform, we find that the free service can significantly increase demand for physicians’ paid services. Both the hospital-specific and individual-specific quality indicators reinforce this impact. For chief (and associate chief) physicians working in the tertiary hospital setting and in a large city, a 1% increase in the free service will lead to a 0.358% increase in demand for the physician’s paid Text&Picture consultation service, whereas the increase is only 0.075% for junior physicians in non-tertiary hospitals and in a small city. However, among the most active physicians, the reinforcing effect of the individual-specific quality indicator weakens, while the effect of the hospital-specific quality indicators becomes even stronger. The results provide several implications both from the theoretical and the practical perspective.