By Anna Ribas, on 11 August 2022
Are you wondering what a freemium business model in marketing is? It is the name of a model based on offering a product or service for free but offers extra features as part of a paid subscription.
But why use this type of model and how do you implement it in a company?
What Is a Freemium Model and Why Use It?
A business based on the freemium subscription model offers users a product or service for free. However, in order to access the more advanced features, you need to pay for them. In other words, a basic version is offered with the idea being that a percentage of users will pay for the premium version. However, in order to get a certain number of users to upgrade, the basic version must be of the same quality as the premium version despite having fewer features.
The freemium model can generate revenue and attract customers if it efficiently delivers what is promised. It can usually reach a large number of consumers since its basic version is available for free. This means that the higher level of virality it achieves, the higher the probability that some of them will upgrade.
What Types of Freemium Models Are There?
- Limited features: The free version offers basic functions, while the paid version offers more advanced options.
- Limited time of use: Sometimes the free version is valid for a certain period of time, similar to a free trial. After that time has elapsed, the user must pay to use it indefinitely.
- Limited number of licenses: Some software is free for a certain number of users. When you want to add more users, you need to upgrade.
- Ad free: In the free version, there are ads, while in the premium version, the ads are removed.
Depending on the type of product or service offered, one type of freemium model will be more appropriate than another.
Examples of Freemium Models
Spotify is one of the most representative examples of a freemium model for an ecommerce business, since it has a free version that works perfectly but contains ads. Many users opt for the paid option so that music playback is not interrupted.
Dropbox is another notable example, which offers 2GB of cloud storage for free and has different payment plans for users who want to increase the amount of storage they have.
A freemium business model can be applied to practically any type of company and can generate very good results. Would you try implementing one for your business? Let us know in the comments below!