Intro to FreemiumFreemium is a business model that offers a basic version of a product or service for free, with the option to upgrade to a premium version for a fee. It has become increasingly popular in the tech industry, but has also been adopted by other industries.
- Free: How Today's Smartest Businesses Profit by Giving Something for NothingChris Anderson was one of the first business leaders to utilize and evangelize the freemium model. In this book from 2009, he covers topics such as what is freemium, how it applies to different industries, and how to get the economics of providing something for free to work.
When to Use FreemiumFreemium is best used when the product or service has a large potential customer base, when the cost of producing the basic version is low, and when the premium version offers significant value to customers. It can also be effective for generating buzz and attracting new customers.
- The Three Rules of FreemiumChristoph explains the pros and cons of the freemium model, and then provides three questions to drive whether to use it: 1) Does your paid plan have a gross margin of 80–90%? 2) Does your free plan attract the right audience? 3) Is your product inherently viral?
- Freemium vs Free Trial: Which is Better for SaaS Startups?David Sacks discusses the pros and cons of two popular models used by Saa S startups: Freemium and Free Trial. While Freemium offers a free basic tier with premium functionality behind a paywall, Free Trials provide full functionality for a limited time, after which users must pay or stop using the product. • Sacks, who has experience with Yammer, a successful viral Freemium model, generally recommends the Free Trial approach due to its ease of implementation and coordination with sales and marketing efforts. Free Trials create built-in urgency and help in measuring ROI and lead value. • Freemium is better suited for viral or networked products that aim to encourage user-generated content, network effects, or bottom-up adoption. Sacks shares the success story of Yammer, which experienced rapid growth through its Freemium model. However, he highlights some drawbacks of Freemium, such as low urgency to buy and the complexity of maintaining a functionality-based paywall. • Sacks advises choosing the model that aligns with factors like User Adoption, contribution to network effects, willingness to pay, and the sales process.
How to Implement FreemiumImplementing Freemium requires careful consideration of pricing, features, and marketing. It is important to offer enough value in the basic version to attract customers, while still leaving room for premium features. Freemium can also be used as a way to upsell customers to other products or services. It is important to track metrics and adjust the model as needed.
- How to Monetize a Freemium BusinessMelissa and Abbie provide a detailed step-by-step guide to freemium monetization that covers: planning your model, user segmentation, campaign design, and how to test and iterate.