What is Freemium?

The basic rule of a freemium business model is as follows: it provides an essential product or service that’s always free; those who like it may then buy access to the “premium” portion. A common misconception of the freemium model is that it is assumed to be a free trial. They believe the model only allows them to test a product or service for a limited time before they have to buy the actual product. Compared to a 30-day free trial, the freemium model is more practical. Likewise, open access will be more compelling and user-friendly. It is one of the reasons freemium has become popular, if not the most popular.

It’s entirely possible that you’re using freemium products every day without even knowing what the “freemium product” is. The term “freemium” is a combination of two words – “free” and “premium.” It describes a business model in which the owner shares the core aspects of his product with a large number of people and sells the premium ones to a smaller group. Nowadays, freemium has become the dominant business model among internet startups and smartphone app developers.

Understanding Freemium

Despite these distinct advantages, freemium is still poorly understood. Many startups have tried this business model but failed to make it work. There is no single recipe for success, but there are tips worth taking into consideration. For instance, a potential entrepreneur creates a digital product that has 20 features. He has to choose five that will be free to anyone who registers on the website while the rest is available to those who pay later. If the creator notices that certain free features are not attractive enough for users, he or she has to improve them or share more for free. Regardless, it is important to note all the needs and feedback received.

The best practice is to find the optimal balance between traffic and paying customers. Balancing is the trickiest part because some users may cancel a service they pay for when they believe they could get it for free. The company has to understand the way their customers think. Some of them become subscribers and some draw in new members who, in turn, become clients. The important aspect is attracting new customers while retaining the old ones by regularly envisioning, updating, and keeping their product fair.

The Advantages of Freemium

Freemium is a remarkable solution for businesses because of three main reasons:

First, it is a way an entrepreneur can get more users hooked on the product. Everyone likes things for free. If users know they don’t have to pay, they are more likely to get involved and invest. This business model forces an entrepreneur to be flexible – think of the scalability of a product and take care of customers at the same time.

Second, by using freemium, a company can get more media coverage. The online market is full of bloggers who can’t wait to write about new tools and applications. It is easier for them to write about the product when they can receive it for free.

Third, an entrepreneur can get more attention because of word-of-mouth marketing. Users receive a message via email or within the product that invites them to share a short post about it on social media. Harnessing this method, the entrepreneur will gain popularity on the internet (provided the product is good and original).

Successful Examples of Freemium

A few examples of companies with successful freemium marketing models:

Skype is for their implementation of a freemium strategy. They allowed users to make free computer-to-computer calls and sell premium products in the form of voicemail, conference calls, and connection to landlines and mobile phones. 

Another company is Dropbox, which is a popular cloud storage platform. They gave a free plan for up to 2GB of space for backups and simple file sharing. If users needed more space, they could receive an extra 1TB by paying $9.99 per month.

Meanwhile, HotSuite is a favorite media management tool. They offer free plans for individuals who want to manage up to three social profiles; it also provides business plans for those who need more.

This business model became increasingly popular and, therefore, more profitable. In today’s digital era, businesses will turn to the freemium model to maintain a competitive edge.