Get to know the Freemium business model and learn how to strengthen your relationship with your audience – WAU
Freemium is a business model based on the creation and availability of a free product or service, however, which is now paid to have some extra features.
As consumers become more demanding, companies need to find new and different business models to be able to offer a satisfying user experience and, of course, outperform the competition. In this case, we are not talking about B2B and B2C, for example, but the adoption of freemium.
For those looking for efficient ways to strengthen their brand presence and create a closer relationship with the consumer, this can be an extremely valid strategy to fit into their strategy. The idea is to attract users with a free product, win them over and manage to attract them to the paid version.
How about, then, learn a little more about freemium, how it changed the market and what can be the benefits for your business by adopting this strategy? Next, we’ll cover the following topics:
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What is fremium and how does this model work?
Freemium is the combination of the terms “free” (free or free) and “premium” (which gives the idea of being something of better quality or more exclusive). In practice, it is a business model that provides a free service and / or product, however, which is now paid to have some extra features.
The concept appeared in 2006 with the North American venture capitalist Fred Wilson, who writes about investments, the Internet and new technologies on his blog. The idea is to create a larger customer base with the free service and, little by little, show the features that they will be able to access when signing up for paid packages.
In what he claims to be his favorite business model, Wilson believes that the process begins with offering a free service. Then, the attraction is made from strategies like Buzz Marketing or even organic search engine search. The idea is to show, little by little, the benefits of having paid services.
That is, anyone who is interested can download the program or use the service without spending a single cent, but only those who subscribe to a paid plan will have full access to the services offered by the tool. It can often be confused with a kind of free sample, however, they are completely different situations.
As much as the final objective is the same – to offer an experience so that the user gets to know the complete product or service better – the samples usually have a duration. Within the freemium model, the user who chooses not to pay will continue with the service without any time limit, using it without any problem.
The use of freemium can be motivated by many factors, from the search for a larger base of potential customers to the increasing the relevance and credibility of your brand within your market. And all this is only possible from the free – and efficient – offer of its services in the basic version.
After all, there is no point in presenting the consumer with a low quality service and / or product and thinking that he will be interested in a possible upgrade. Worse, the experience with your brand will have been negative and your shot may backfire. He wants to feel valued by companies and nothing better than free satisfaction, right?
Therefore, it is necessary to find a middle ground that is sustainable for your business and also satisfies the consumer. Adding advertisements in the free version, for example, can be an alternative. Gradually, you show the user how good it can be to migrate and try to convince them that extra services can be even more useful.
What are the most common examples of fremium on the market?
To make the operation of this model even clearer for you, we have separated two examples of companies that adopt freemium as a sales strategy and manage to stand out within their market segments. Check out!
Spotify is the best example of those who 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 the main releases, however, those who do not pay are interrupted by advertisements from time to time.
When subscribing to the premium package, the user is not interrupted by advertisements and can still download the songs on his device and listen to them even offline. That is, Spotify offers the same service for everyone, however, those who are willing to subscribe to any of their plans end up having these extra features.
To get 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 subscribe to premium services.
Another company that stands out in this model is Dropbox, a SaaS that offers an online file sharing and storage service. From the concept of cloud, users can save, exchange and access documents anywhere they have access to the Internet. Anyone is entitled to 2 GB of free storage.
However, for those who want more space, the company offers the premium service, with plans aimed at individuals and companies. Each has its specificity, however, the big difference when paying is having more space for storage. The strategy seems to work, since the conversion rate is around 4%.
What are the advantages of adopting this strategy?
How about, then, better understanding what are the advantages of adding freemium to your business plan? We list the four main benefits for your company when adopting this model!
Increase in 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 for that user. As much as he doesn’t subscribe to a premium plan, for example, you create a closer and healthier relationship with a potential consumer, that is, your lead.
Brand Awareness, for example, also increases, since, with the promotion of its services and / or products, more people are getting to know your brand and using what it has to offer. 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 consumer information
Another positive aspect of freemium is the access you have to consumer behavior and profile. For your Digital Marketing strategies, for example, it can be extremely effective and useful. By getting to know who you want to become, in fact, a consumer of your products and / or services, the chances of conversion increase.
By collecting this information, you generate insights not only for your communication actions, but also to identify which premium features may be most attractive to each user. At a time when knowing your persona is a differentiator, not bad to have all this information at home, right?
More efficient than premium
By offering only a small sample of what the user can use and then limiting their use, you have a shorter interval window to present your product and better understand what your target audience really wants. Freemium is therefore more efficient than the traditional premium model.
In addition to the benefits of bringing your brand closer to the consumer – which can facilitate loyalty, for example – and create more efficient Marketing actions, it is much easier to achieve this conversion. An example? Based on feedbacks, it is possible to further reduce your CAC (Cost of Acquisition per Customer), for example.
Freemium is, therefore, an efficient strategy for those who want to strengthen the brand’s presence within their segment of activity and, at the same time, strengthen ties with users who can become paid customers. After all, do you want better advertising than being useful every day to your target audience?
The digital transformation has changed the way we relate as a society and, of course, this ends up reflecting on the market. Freemium is an example of this, made possible through the various online channels. How about, then, go even deeper into this subject? We have listed the top 5 digital business models for you to invest in!