Getting Benefits from Freemium Business Model

Get to Market Faster. Lure Users from Competitors.

The so-called freemium business model is getting increasingly popular. In the light of tremendous competition for user’s time and attention, the introduction of this model is more than justified. Launching your service as a freemium business solves the critical issue of reducing the cost of acquiring users. According to statistics, 80% of users do not use paid services and they are unlikely to ever use them; 5% of users do not appreciate the free of charge stuff and prefer buying things, and 15% of users cannot decide whether to go for paid services and products or not.

By using the freemium business model software/webapp companies get an amazing opportunity to reach out to those many users who can still be convinced to pay for what software and application developers are offering.

Also, when entering a competitive market, the freemium model seems to be a solid way to obtain a necessary “critical mass” of users.

Remember: “The only way to get bigger is starting small.”

Probably one of the best examples of a successful implementation of the freemium business model would be a popular file storage service called DropBox. Unlike many other companies offering limited functionalities for free, DropBox provides the same set of features for all users. And only the storage space exceeding a certain limit requires a fee.

It should be mentioned that there will be a fairly small percentage of users willing to opt for a paid version of a service - probably 1 to 8%.

As to the eternal dispute about the choice between the trial subscription and the freemium model, the right decision pretty much depends on a type of service. Ideally it would be great to have both versions to offer either a premium subscription or a free option after a full-featured trial period is over.

How to set prices for the service? Well, you just need to experiment here and try to learn users’ opinion.

The introduction of fees for services previously provided for free is very much likely to result in users quitting, their negative reaction and bad publicity for the company in social media and beyond. Therefore it is worth attempting to find an alternative source of funding.

For example, Skype after being purchased by Microsoft displays ads during a call for those users who do not have money on their accounts. Although it is obvious that Skype users must be not very happy with this kind of advertisement.