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. In simple words Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc. then offer premium priced value added services or an enhanced version of your service to your customer base.
Things to consider before implementing Freemium business model-
- Freemium may work for u if u have: great long term retention rate, product value increases over time, low variable costs.
- Create a business service with business processes which is highly robust, so it is scalable and doesn’t need large numbers of people to grow.
- Analyse how user use your system and assess the data, you will come across gaps in the system which you can address through premium service and it means more sales.
- Make sure you show them the value of features and how they can leverage features coming with premium subscription.
- Have reasonable pricing for premium subscription, if its too high competitors can cause dent to your business. High free user base tends to keep away the competition.
- Tease users with data on premium stuff and thus continue to entice them.
- Dont try to target 40-50% user base to convert into premium users, 10% conversion is too good rate.