A freemium model is a business model that offers both free and paid versions of a service or product. Usually, this involves giving users free access to basic features, while offering premium features for a price.
If you run a small business, the freemium model helps you overcome one of the biggest product strategy hurdles: getting customers to give your product a chance. In comparison to a free trial business model, a freemium plan helps reduce barriers to signing up. Since users know they don’t need to enter payment details or remember to cancel a subscription, they may be more likely to create an account.
Once users are on board, the free version provides a risk-free way to try out your product, which is a huge advantage if your business doesn’t have an established reputation. When customers are convinced of the value, it’s a breeze to upsell premium features without aggressive campaigns.
If you’re working with a limited advertising budget, a freemium model may be the answer. It enables bloggers and journalists to experiment and review your product, which leads to free media coverage. For a small business, this increased visibility can go a long way toward reducing advertising costs.
Freemium models are particularly useful for internet-based services and software. One example is the email marketing platform MailChimp. Users with up to 2,000 email subscribers and 12,000 sent emails per month can use the program for free; after that, they can upgrade to different paid plans for unlimited sending, demographic information, enhanced support, and more. Other popular businesses that use a freemium model include Match.com, Evernote, Pandora, and Spotify.