BUSINESS FREEMIUM MODEL - HOW IT CAN HELP YOUR ONLINE BUSINESS

The Freemium business model gives your online business the opportunity to increase the initial customer user rate and gain useful consumer insight to alter marketing strategies. Spotify uses the 'Freemium' Business model by offering their consumers the opportunity to have access to limited amount of services for free.

(spotify.com, 2020)

WHAT IS THE FREEMIUM BUSINESS MODEL?

The ‘Freemium’ business model is a business model that creates limited access to all consumers who wish to try a business' services or product for free. However under a limited access, with an option to ‘upgrade’ or enter a subscription to be able to access the full services or product.

The Freemium model is successful for businesses such as ‘Spotify’ because it gives their consumers the opportunity to ‘try before they buy’ essentially.

Not only does this model provide online businesses to suppress the barrier of entry issue, it also allows the companies to gain a greater understanding of their customer base.

Why the Freemium model will help your online business succeed:

1 - Attract a larger audience

By giving your potential customers access to a freemium version or your services or products, you will obtain a greater customer base. With a greater customer base you will be able to determine what type of customers are worth exercising value into. It also gives your business a greater chance of obtaining paying customers due to them upgrading to the premium model if they enjoy what your company offers.

2 - Gain customer insights

With the use of the Freemium business model your ability to obtain a greater audience, also gives you access to customer data. With this your business can determine what type of customers offer more value to the business. From this you can successfully segment your customer base to determine who is the target audience.

3 - Assist in developing a marketing strategy

With access to more informative customer insights, your business will be able to develop killer marketing and communications strategies that will turn those ‘Freemium’ consumers into paying consumers.

References:

Voigt, S. and Hinz, O., 2015. Making Digital Freemium Business Models a Success: Predicting Customers’ Lifetime Value via Initial Purchase Information. Business & Information Systems Engineering, 58(2), pp.107-118.