Introduction
Freemium is a pricing strategy where a viable product or service delivery is divided into two phases – free and premium. The strategy is mainly applicable for products such as games, software or for services such as websites, media or added-services. The strategy bars user’s free access after crossing a threshold factors like time frame or product utility after which is the premium stage. During the premium stage user subscribes to the payable service. Users (or Samplers) are given a glimpse of the product; customers sticking are generally continued for a long while as they taste the delivery eliminating the output gap. LinkedIn, WSJ,Skype, WhatsApp, Google Books, iTunes free songs are good banal examples.
Free is shifting cost of a product or service from person-to-person, between now and the future or into nonmonetary markets and back out again. One of the four basic models of Free is Freemium
Hindsight of the names such as ‘lite’ or ‘trial’ versions is Freemium. The strategy works its magic by providing value at first and then using consumer’s addiction to stick to their product.An ideal application of Freemium is while a product is working under a beta phase (MVP – Minimum viable product) [1]. It could act as the ground to find any errors, and understand the various derivative utilities. The strategy gives an advantage to the producer to show his/her quality of the product which otherwise is tedious to explain their counter-part.
One such example is Dropbox which created “Second level user innovations”. The innovations involved: Voters who vote for new features; creating new applications; Pirates who use Dropbox for various purposes without changing the tool itself.
The persuasive technique is economical only when the marginal cost is low. The computing marginal cost of the product is very low. For instance coding and designing a mobile app is approximately same if catered to 10,000 or a million users. This is against the traditional methodology of paid services where cost of production and distribution are prominent and inevitable. Freemium erases competitive markets due to free service which too cheap to duplicate. Skype a VoIP service which generates revenue only from 12% of its users who use their premium services such as Skype-to-mobile calls. LinkedIn makes 75% revenue from premium accounts.
Freemium and it operational effectiveness in
the mobile world
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FMS Scholastic Council