Freemium

Index

The Freemium Model 2

Business Model 3

Freemium Strategy – Benefits vs Risks 4

Customer’s Perceptions and Behaviour 5

The Advertisement of Free – Communicating Value using Freemium 6

From Paid to Freemium – Mailchimp Example 7

Is Freemium the Future Business Model? 7

LisbonLabs Meeting Experience 7

Appendix (Interview, Examples and Graph) 8

Bibliography 13

The Freemium Model

Freemium is a pricing strategy that can be defined as a mix between “free” and “premium” that has been envisioned by Esther Dyson as early as 1994, but only now is catching the attention of new enterprises. Basically Freemium is a new trend that is innovating the technology industry, typically a digital offering that gives away the core product for free with an optional premium quality option. Examples such as Skype, Dropbox, Mailchimp, LinkedIn and Surveymonkey are successful Freemium applications that generate high profits, even compared to paid applications. (Freemium Business Model, 2014)

In a Freemium model, a basic version of an offering is given away for free, with the hope of eventually persuading a sufficient number of customers to pay for a more advanced version. With this model, companies are creating a sustainable businesses and new ways of capturing value among their customer base. For companies what is the value of a free user? They hope to acquire a large base of users and then convert enough of them into premium ones. The value of the user will be based on the probability of converting him into a paying customer, and on the network effects. Thus, a free user can have greater value than a potential paying costumer. A company that chooses to use the Freemium strategy should do it to gain a strong competitive position and lower the costs of its activities by creating an online user community.

(Reime, 2011)

The value proposition of a free offer is meant to attract new users. It is sustainable over time...