Do you know the freemium business model? In this post I explain it to you. But I’ll tell you beforehand that it’s a business model that serves as a good strategy to attract customers.
As entrepreneurs, we strive for our business to consolidate and grow. There are many strategies and business models that can help us. Such an undertaking without a plan and strategies is a false start!
For this reason I would like to introduce you to the Freemium business model this time. It is without a doubt an alternative that might interest you and help you.You have nothing to lose by knowing it!
What is the freemium business model?
Freemium is a business model that consists in offering your services for free, but in a limited way, because in order for the customer to enjoy all the benefits, he has to pay.
That’s why its name is a combination of Free and Premium. Where the former means “free” and premium, as we already know, refers to special, complete and quality services, etc.
This business model is excellent as you attract more clients by offering some of your services for free. Not just for the fact that you use something without paying, but they try your services to make sure you want to buy the paid version.
Advantages of the freemium business model
You have to be aware that there are many people who won’t buy your services because they don’t trust you…or simply because they underestimate you.
For this reason, I consider the Freemium business model to be a very useful tool for entrepreneurs, because we are new, we do not have a recognized brand yet… and the implementation of this model gives the customer the opportunity to try us without risk.
When Microsoft releases a new operating system, it’s possible that many will buy it without even trying. But that’s because Microsoft already has a good image, a brand… something that we as entrepreneurs just entering the market don’t have.
On the other hand, we have people looking for free services. You don’t want to try them out and then buy them, you just want to use your free version. It’s not all bad, because in one way or another these people help you position yourself and create a good image for yourself.
For example, if you have a website that offers to search for keywords to position a blog and you do it for 20 searches for free, it is obvious that many will visit you just to use those 20 words. However, we must not forget that in the eyes of Google, these visits to our platform help us to position ourselves, even if you share us (you could share us with someone who even wants to buy the full service).
There is no doubt that we are ahead of the curve everywhere. Offering a free service and then paying for it is a whole positioning strategy, brand awareness and most importantly customer acquisition.
Ways to approach the freemium business model
We can approach this type of business model in different ways, below I will explain what they are:
1- Service limited in time.
It is this service that you offer for free for a certain period of time. At the end of this period, the customer must pay to continue using the Services. Many rule out this type of freemium, but it’s certainly a good idea.
2- Services limited by capacity.
It may well be for services that you can only use to a limited extent or when storage capacity is limited. Paying for your services increases product usage and capacity.
3- Services limited by functionality.
This is where your product or service provides more than one function. And in the free ones they only offer the basics, but the most advanced ones are limited, the only way to access it is to pay.
4- Services limited by usage.
The most common thing about this type of service is that the customer is offered a license and if he needs more than one he has to pay or rather buy the license. This means that only one license per network is offered free of charge.
5- Services limited by the type of customer.
It’s less common, but it also exists. Here the services are only offered free of charge for some of the customers, whoever fulfills a certain profile has to pay for the rest. An example would be that you have a platform to organize everything related to students’ university studies (calendar, timetable, curriculum, recommendations, courses, etc.). But they only offer it to teachers for free, and if a student wants to take advantage of it, they have to pay. It’s a good idea, don’t you think? Teachers would be our promotional tool 😀
6- Services with advertising.
In this case, the service uses advertising banners to make money. There are people who are bothered by these ads, but they have the option to pay to have these ads removed.
Here are some real examples:
If you know these services, you will find that they have certain limitations. Everything is part of a strategy or business model used to grow and win customers.
It’s like I once said, “There is no such thing as a free internet platform because behind the ‘free’ there is something that benefits the provider and it’s not exactly a scam, it’s a strategy.”
Even if you use an app that claims to be free, you can see that it uses ads. maybe you don’t pay but if you are a means to generate income. Others may not use advertising but have a different purpose, e.g. B. strengthening a project, creating a good image, etc.
Tips for implementing a freemium business model
Without a doubt, this business model is very useful because if there’s anything that attracts more than sales and offers, it’s free! However, not everything is as simple as it sounds. So I leave you some tips that I hope you will take into account:
Free vs Premium:
Your premium version must be much better than the free version, but the free version must be very good as well. It’s not that the premium is great because the free is small, but because the premium is really good. I say this because many people make the mistake of making the free version worse to make their particular version look better than the free one. Remember that Free is just as important as Premium as it serves to attract customers.
How much do you want to earn?
You need to be clear about what you want to win and what you can win so you are not disappointed. When you reach 1,000 free users, 10 (1%) of them are likely to buy your services. And if you offer your premium services for 2 euros, you would generate 20 euros, say monthly. If I had planned to win €2,000 with these numbers, I will be disappointed. So I need to increase the number of customers or improve my services so that they have a higher value. In conclusion, you must keep your accounts very well.
Make sure your competition isn’t offering your premium services for free. I say this because it is logical that you will prefer the free version. You should strive to make your premium version superior, unique and better than many other versions.
Describe the profile of your potential users very well. Only then will you know how to reach them and promote yourself. For example, if you offer an app for managing college assignments, the best way to apply is through educational platforms.
Remember that the premium version exists:
Encourage your free users to upgrade to premium, without putting pressure on them of course. But it’s important to always remember that there is a version with better options.
You must be very aware of the statistics. I am referring to Free Subscriber Numbers, Premium Numbers, Conversion Rate, Bounce Rate… Because this information will help you know how well your strategies are working.
That’s all now…
…I encourage you to try this business model (if your business can adapt, of course). And if you can’t, you can take the program and benefit from it. For example, if you sell sweets to pastry shops, you can offer a few, so you don’t earn anything, just charge what you invested. If your sweets are really good they will buy more but of course at real price nothing free ha ha ha if your product is really good they will like it.
Without further ado I say goodbye. I wish you much success. A hug! Until next time!