Freemium model: characteristics and examples where to apply it

Freemium

As the company that you are, since you will have an eCommerce, you should know that there are many ways and models to set them up. One of them is the freemium model, do you know what we mean?

If you have never analyzed this model before, and yet you want to offer it to your customers because you consider that it would be an important differentiation with respect to competitors, keep reading because we will analyze it in depth.

What is the freemium model

Free sample and unlimited access

The first thing you should know about the freemium model is that it is characterized by offering free products. However, it would be the basic product. For improvements or for more features, then you would have to pay.

In other words, there would be two levels:

  • On one hand, the free level (free) which is the one that gives you limited access.
  • On the other hand, the premium level that would have more features.

An example could be that of a robot. As an eCommerce, you could offer the robot for free. But to program it, to move, to do things, etc. then you would have to go to the premium level.

In other words, you offer the "base" for free, but really your business is for those people to buy the paid level, which is where you are really going to earn money.

What the freemium model seeks is to give users the opportunity to have a product, and also for free. But, to get the most out of it, they have to pay for these additional services.

Its operation is quite easy to understand: You have a service or a product that you give away for free. For example, GPT Chat. Everyone who registers can use your program. But after a while, you release a better version, debugged, without errors, more accurate, more efficient… And it is paid.

Everyone you have recruited with the free version will have two options:

  • Stick with the free one even though it is limited.
  • Switch to the paid one to continue enjoying the tool but with more privileges.

What is the goal of the freemium model?

Subscription

With all of the recent above, you are no doubt thinking that the investment is too much, since you offer something for free and then have to trust people to move to the paid level. And the truth is that it is. However, We are talking about a model that seeks to lower the cost of customer acquisition. That is, you make it easy for customers to use your product and, if it's good enough, then you hook them with new features and improvements.

Let's take another example. Imagine that you create a console and that you decide to give it away to customers. This only has one game and also the functionalities are limited. However, every week you release new games and if they want to get them, they have to go to the paid level to get them.

You only give away the "shell" but the truth is that this console could do much, much more. It's similar to mobile games. where you have a free part and another that you must pay for it.

Examples of companies with a freemium model

Right now it is possible that some companies come to mind. Or maybe not. But surely some of the ones that we are going to quote you will sound familiar to you.

Canva

Canva is one of the best known tools, both by designers and those trying to make the creatives to post on social media.

Well, as you know, Canva has a free part and, later, a paid model, subscription, through which new functionalities, tools are released...

This implies that, First, you capture them with what you offer them for free. And if they are happy with it in the end they will end up using the paid version.

LinkedIn

Similar to what happened before. You have the free version where you can create your profile, publish, connect, search for jobs... But, in the premium version it has much more.

Advantages of the freemium model

online shopping and consumption

After all that we have talked about, you will already have in mind some of the benefits that this model offers over others. But, to make it clear to you, and taking into account that the conversion rate is not usually high (between 1 and 10%), its advantages would be the following:

  • The user can test the product without paying for it. Which means less decision making because, being free, you can feel more relaxed buying it and more willing to try it.
  • Scalability. In the sense that, as time goes by, it is possible that the needs of the users change and that, although at first they do not require anything extra, in the long run they do need the premium level. For example, important system updates that are free for a while and then only at a premium level.
  • The free calls. Everyone will want to try something for free and use it. Only a few will pay for all the features. But what is clear is that there will be more interested parties and the company and the brand will sound more than if everything were paid. And that implies more recognition and visibility.

Now, despite the fact that the advantages can be very tempting, you have to keep in mind that there are some drawbacks that you should always keep in mind:

  • Attract the "wrong" customers. That is, people who do not fall within your target, but who like "free". You know that these are not going to buy you in the end and it would be an unnecessary expense (that you will not recover).
  • An unsustainable business. In the sense that what you need is to generate income, and that implies investing in products that you are going to give away hoping that people will be encouraged to subscribe. Also, if the free product isn't good enough, you won't be able to arouse interest in the premium one, and if you overdo it, you can prevent people from buying more features if they don't see enough of them to invest in it.

And up to here we can tell you about the freemium model. The truth is that there are many business ideas that could fit quite well in this one. Can you think of any or would it be a good idea for your eCommerce?


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