learn how it works, its advantages and 3 practical examples

Freemium is a business model based on the creation and availability of a free product or service.

However, as the user progresses through their consumption journey or the object of the relationship

no longer adequately meets demand, the company offers a paid option that has extra functionalities

or more advanced features.

Due to digital transformation and increasingly demanding consumers, companies need to find new

and different business models to offer a satisfactory experience to the consumer, whether it is

products or services, or information. In this way, it is possible to guarantee audience loyalty and, of

course, outperform the competition.

In this case, we are not talking about B2B and B2C, but about the adoption of freemium. For those

looking for effective ways to reinforce their brand presence using other strategies, in addition

to digital marketing , and to create a closer relationship with the consumer, this can be a very valid

practice to incorporate into your business. The idea is to attract users with a free product, win

them over and maintain their loyalty through a paid version .

So, how about learning a little more about freemium, how it has changed the market, and what the benefits can be for a business when adopting this strategy? Below, we will cover the following topics:

Check out our post!

What is freemium and how does this model work?

Freemium is a combination cameroon phone number list of the terms “free” and “premium” (which

gives the idea of ​​being something of better quality or more exclusive). In practice, it is a business

model that offers a free service and/or product that, however, becomes paid for in order

to have some extra or more advanced functionalities.

The concept was first developed in 2006 by American venture capitalist Fred Wilson, who blogs about

investments, the Internet and new technologies. The main idea was to build a wider customer base

with the free service and gradually show the features they could acquire by subscribing to paid packages.

This practice can often be confused with offering free samples, however, the situations are completely

different, since here the objective is to strengthen the relationship with the potential client until the

perception of value in using the product or service is awakened, and finally, to ensure that the amount

charged is not rejected by the user.

Although the ultimate goal is the same – to offer an experience so that the user can get to know the

product or service better – samples usually have a duration period. Within the freemium model, the

user who decides not to pay continues to enjoy the product or service without a deadline to end the

relationship or without generating problems with the company that offered it.

After all, it makes no sense to present the consumer with a low-quality service and/or product and

believe that they will be interested in a possible upgrade. Worse: the experience with the brand will be

negative and the result will be the opposite. Consumers want to feel valued by companies and there is nothing better than free satisfaction, right?

What are the most common examples of freemium on the market?

To make it clearer for you how this are patients ready for ai to take over medical tasks? model works, we have selected 2 examples of companies that adopt freemium as a sales strategy and manage to differentiate themselves within their market segments. Check them out!

Spotify

Spotify is the best example of those who  cnb directory adopted freemium as a business model and achieved excellent results. The service offered is the same for all users, who can listen to their favorite artists, create playlists and listen to major releases, but those who do not pay are interrupted by ads from time to time.

By subscribing to the premium package, the user is no longer interrupted by ads and can also download songs to their device and listen to them even when offline. In other words, Spotify offers the same service to everyone, however, those who are willing to subscribe to one of its plans end up having these extra features.

To give you an idea of ​​Spotify’s success, the conversion rate of its business model – which usually does not exceed 5% in cases of success with freemium – reached 26.6% . According to information released by the platform itself in 2015, of the 75 million monthly users, 20 million are subscribed to premium services.

Dropbox

Another company that stands out in this model is Dropbox, a SaaS that offers an online file storage and sharing service. Based on the cloud concept, users can save, exchange and access documents anywhere with Internet access. Anyone is entitled to 2 GB of free storage.

However, for those who want more space, the company offers a premium service, with plans aimed at individuals and companies. Each has its own specificity, however, the big difference when it comes to paying is having more storage space. The strategy seems to work, as the conversion rate is around 4% .

What are the advantages of adopting this strategy?

So, how about better understanding the advantages of adding freemium to your business plan? We list the main advantages for your company when adopting this model.

Increasing brand value

The main benefit is, without a doubt, the increase in the value of your brand . After all, you are providing a free and quality experience to the user. Even if they do not subscribe to a premium plan, you create a closer and healthier relationship with a potential consumer, i.e. your lead.

Brand awareness also increases, as more people become aware of your brand and recognise it in relation to competitors as a result of the spread of your services and/or products. In addition, more and more consumers will enjoy the benefits of your products or services, and this can be a great attraction opportunity at the beginning of the conversion funnel.

All of this contributes to those who want to be seen as an authority within their market and stand out from the competition in the eyes of consumers.

More information for the consumer

Another positive aspect of freemium is the access to data on your audience’s behaviour and profile . For your sales and digital marketing strategies, this can be extremely efficient: by knowing the user you want to turn into a loyal consumer of your products and/or services, the chances of conversion increase considerably.

By collecting this information, you generate insights not only for communication actions, at a time when knowing your persona makes a big difference, but also to identify which premium features may be more attractive to each user.

More efficient than the premium

By offering only a small sample of what the user can use and then limiting its use, you have a shorter time window to introduce the product and better understand what your target audience really wants. Therefore, the freemium model is more efficient than the single model based on offering exclusively premium products or services .

In addition to the benefits of bringing your brand closer to the consumer – which can facilitate loyalty – and creating more efficient marketing actions, it is easier to achieve a friendly and easily recognizable conversion of value. Do you want an example? From the feedbacks , you can further reduce your CAC (Customer Acquisition Cost) and, consequently, increase the ROI (Return on Investment) of your marketing and sales efforts.