Definition:
Freemium is the merging of the words “free” and “Premium”, referring to services, software programs or mobile applications that are offered free of charge to users, but usually with limited functionality, since additional features are only available through an economic charge. With the freemium business model, users can try the product or service without committing to buying it. If users decide that the product or service is good enough, then they will probably decide to pay for the paid version offered.
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Origin of the Freemium model
The freemium business model dates back to the early 1990s, when software was first marketed in a free format. The first example was AOL, which offered a free version of its online chat service to get new users. Since then, the freemium business model has been successfully applied to many other digital products and services.
Advantages of the Freemium model
The freemium business model offers a great opportunity to get new customers without having to make significant investments in advertising and promotion.
- It allows users to test the product or service and know its quality before committing to pay premium prices.
- The freemium business model is a great way to build customer loyalty by offering exclusive features and content for premium users.
- With the freemium business model, companies can earn a significant amount of recurring revenue through monthly or annual subscriptions.
- It’s a great way to evaluate the market and get user feedback before officially launching a product or service. This helps companies improve and ensure that the product is ready to be released to the market.
Differences between Freemium and Freeware
Freemium and freeware are two different business models for software developers. The main difference between the two models is that the freemium software offers a free basic version and a premium version with exclusive features and content. In contrast, freeware software is completely free for all users.
Freemium Alternatives
An alternative to the freemium business model is the pay-as-you-go model. This model offers users a limited amount of access or use without having to purchase a full subscription. This means that users can test the product or service before making a long-term investment. Although this model can be effective for some products and services, it also has some limitations. For example, the pay-as-you-go model does not provide the same amount of recurring revenue as the freemium model and requires a higher investment in advertising to attract new customers.
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