Freemium is a business opportunity that is hardly to underestimate. It allows without spending more advertising to offer attractive offers and thus to forge a lasting link with many customers are the companies to develop while based on free to test their concept. You still have to know how to put it in place.
Freemium has established itself as a strategy for retaining customers.
Make customers addictive to product or service is the bet of more than one company. Moreover, if you have tasted software for your security, you will be systematically offered to acquire greater protection thanks to an additional modest subscription. The same is true of the press which after having entered you by a very interesting start of article encourages you to continue reading by a subscription or by a donation. Freemium is a highly popular model lately.
How to define freemium exactly?
Freemium has its origin in the word “free” which means “free” and “premium” which refers to a high -end offer. This economic model is based on the provision of a product or service. It is at the base free to attract as many users as possible. The concept does not stop there! By offering more extensive features, it aims to transform a simple user into a customer for the same type of offer but more advanced and above all, paying. The rise of innovation but also new technologies allows the emergence of this business model. The Freemium model has become the most used model by companies on the web, the Internet being the best distribution channel for this type of operation.
The different types of freemium
That of time in time gives users right to use unreserved service for a given time. The consumer must however quickly realize the interest of the offer so as to join the paid offer, this is what the leader of graphic software offers for example: Adobe. Another type of freemium is based on the restriction of certain features. The free version must be interesting. It remains limited in its use so as to push the buyer to adopt that more advanced to acquire more advanced functions. This model is very popular with online video games like OnlinefootballManager which makes it possible to charge the most keen players.
Limitation in volume is to charge consumers beyond a certain volume used: we recognize emailing software like SendinBlue. More subtle, another type of freemium, going through a digital offer, aims to encourage the user to buy the physical version of the product or service offered. This is the case for e-books that introduce various works. The consumer will buy the paper version for its authentic appearance. More recently, platforms only offer extracts from books or music. To have access to the entire content, the user must pay supplement. Another principle stems from the call to donations. There is talk of making all of the content available to Internet users and offering them to make donations whose amount they can choose as Wikipedia. Note that these models can be financed entirely or partially by advertising.
The conditions for setting up a freemium business model
First, the offer must receive a large number of users. The reference base of free consumers must be the largest and the widest possible in order to maximize the chances of obtaining, on this model, a significant conversion rate. The more they use the free service, the more the probabilities so that they adhere to the one paying are high. But that’s not all. You must not forget that if the acquisition is difficult, loyalty also represents a challenge.
A model that holds its limits
The majority of failures on the basis of a freemium model, originally have a similar cause. The profitability threshold is long to reach. The conversion rate grows slowly at the start due to the low number of people using the service. Its growth depends on the evolution of its virality. It is therefore necessary to take into account the time of return on investment, which is not always easy to manage for the company. Added to this is the cost of acquiring new users: communication campaign … You must keep in mind that opting for this type of model requires patience before reaching the profitability threshold. Many companies fail because they fail to maintain financial balance during this crucial phase.
When freemium leaves the web …
Recently, several companies have adopted this model, outside the sphere of the Internet. However, the cost generated by free service is not negligible. To allow a certain viability of the chosen model, this cost must oscillate around zero, but it must also decrease. Otherwise, to compensate, you will have to increase the price of the paying service to cover these expenses. Too high a price would considerably drop the conversion rate and therefore the number of customers. This increase would impact the development of your business, its turnover strongly questioning the viability of the business model.
