A place for my thoughts on business, e-commerce, technology, design and life.
The Freemium Model - The Enterprising Troll
Firstly, this is just my opinion; use it, don’t use it…
Via wikipedia.org, “Freemium is a business model that works by offering basic Web services, or a basic downloadable digital product, for free, while charging a premium for advanced or special features.”
What exactly is the cost of “free”? Nothing is free, the cost could either be incurred by the customer or the provider, but one guarantee is that there is always a cost involved - its the cost of doing business.
That old automatron of “Let’s get them in the door and we’ll become rich” no longer applies today; you need to be creating enough value to keep your free to paid conversion rate up.
Users are a strange breed - a huge percentage of your users will always only use the free version of your product or service and essentially you will still be paying the bills.
Focus on revenue from the start, then build a quality user base - do you really care about the loafers that will undoubtedly burden you with support queries and never spend a dime?
The Freemium model is plagued with the issue of perceived value - how can something for free be of value? This is where your marketing needs to kick in …
So, before you vigorously consume the Freemium model, check that:
- This is the business model you want to start off with.
- Ensure that your business can scale to meet the requirements of free AND paid users.
- You know your revenue streams.
- You don’t play in the dark forrest, ensure that you are creating tangible value.
Thoughts?
Further Reading:
12 May 2010 · Comments
