Freemium Model

What is a freemium ? Ever heard of the term freemium business model ? How does it work and most importantly how to make it successful?

So, what is a freemium ? A freemium refers to a business model whereby the creators let users experience their product, free of charge, untill a certain point whereby the user is so hooked on the product then they start charging money. This is extremely effective as people LOVE 💕 free stuff and will be more inclined to try your product (Patel,2015). As the product is free the user’s expectations will also be lower hence easier to satisfy them as they do not stand to lose anything in the process of using the product. The key to making a freemium business model successful is to make sure your product has distinct differences between the free and paid version. The free version should be able meet the basic needs of the consumer but the paid version should be that extra bit that makes your product special.

For example Sportify removes ads and lets the user have full control of their library, playing whatever they want, whenever they want. Sportify is now worth a whopping $2 billion with a revenue of $7billion in sales in 2019 (Nusca,2019).

The main reason why freemium models fail to work is because the paid version does not offer any incentive or enough value for consumers to convert. An example of a freemium product that is not successful would be Youtube Premium. Youtube Premium offers their users ad-free video streaming of all videos hosted by Youtube. The problem with this is that most advertisements are relatively short or skippable after a few seconds hence, consumers do not feel that it is not worth paying for it. Another reason is that ad-blockers are readily available everywhere and most of them are also free which makes Youtube Premium’s key feature redundant.

Do you own any products that operates on a freemium model ? what made u want to pay for them ? Do let me know in the comments section !

Reference List

Nusca, A. (2019). Spotify saved the music industry. Now what?. [online] Fortune. Available at: https://fortune.com/longform/spotify-music-industry-profits-apple-amazon/ [Accessed 25 Feb. 2020].

Patel, S. (2015). 7 Examples Of Freemium Products Done Right. [online] Forbes.com. Available at: https://www.forbes.com/sites/sujanpatel/2015/04/29/7-examples-of-freemium-products-done-right/#3e5127256f15 [Accessed 25 Feb. 2020].