Idea about Freemium Business model
Freemium Business Model
- It is easier to get customers when you are providing free services.
- It allows risk-free testing of product features.
- The more free users you get, the more chances you get for having potential conversions.
- It is better than premium as it gives a sort of free trial of the product before paying for the fully featured product.
- Get lots of users as hypothetically if 1% is the conversion rate, you need to have billions of users to have a million users.
- This model takes time to generate revenues, but once it does, your revenue per user will be much more than the cost per user.
- Your product or service should be engaging and addictive to keep your users involved.
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This model can be successful for plenty of businesses, all you need to know is whether you have a service whose value increases with time hence the customers will continue using it and the conversion rate will increase.
The companies using this business model have different ways of implementing it and hence, various ways of generating revenues.
Traditional Model: This model gives a fully functional free product with rare limits. This model faces extreme difficulty in converting free users to paid users for revenue generation. However, taking the example of the decacorn company Dropbox, the company used a basic freemium model.
Starting Small: This model raises users for free with free sign-ups, giving no organizational control over the service and later offers to sell the service for such control after the limit has reached. Slack, for example, uses this model. It is a cloud-based set of tools and services used by small and large companies to keep everybody in the loop.
Alternate Product: This model is used by companies offering a premium product already. The fully free product is used as a marketing strategy to cross-sell other products. For example, HubSpot launched its free CRM product that is a marketing automation platform.
