3 reasons why the freemium model works

There Many types of business models Choose from the time of starting and running the business. However, the freemium business model continues to be a popular option for many startups and established companies. While this business model may not be right for every company or project, it has proven to be an effective alternative for many organizations. There are five reasons why a freemium business model works well:

  1. This is a strategy that reduces friction by allowing users to get started quickly and easily
  2. Freemium products can increase conversion rates compared to traditional price models
  3. Freemium products can make it easier for users to share with others, encouraging referral traffic and user acquisitions.
  4. Freemium products allow you to collect key customer data to better understand the value of your product.
  5. This is less risk for the user.

Since the freemium model gives users the opportunity to try out your product for free, its quality is easy to evaluate. There is a barrier to accessing a paid model that is not present in a free version For example, suppose you have never used the product before and want to try it out of curiosity or interest. In that case, you may be more likely to test a free app that costs money in advance (especially if other options are available).

This means that it is easy for users interested in your software as a service (SaaS) product Determine if they like what they see to pay for additional features below the line. This can increase direct conversion to higher price points when they are confident in your original offer! Although there is Advantages and disadvantages of freemium business modelThis technique has been shown to be very effective and profitable if done correctly.

1. Attract sales of free products and services

A free version of a product is a great way for people to try your product and then upgrade to a paid version.

For example, if you sell pens, you can offer a free pen with every purchase of three or more. This is an effective way to get them to buy more pens in your store and become loyal customers.

Also, let’s say there’s an app that lets users send messages to each other via their phones. Your app is available for free, but users will need to pay to upgrade if they want to send audio or video messages. In this case, your free product attracts customers who may not have been interested in buying something. The more they use the app, the more they become accustomed to using it and finally decide that they want to expand some of its features and buy an upgrade.

2. Reach more customers and users

When you offer something for free but charge for more advanced features, it is understood that your product will be more attractive to people who need those advanced features.

Dropbox, for example, started with a similar business model: the basic version was free, and the premium version cost 99 per year. They found that many of their customers were small businesses and startups that didn’t have $ 99 per year but needed more storage space than the free plan offers. So, they decided to introduce an extra layer between their two options. Now, they offer 2,000 GB of storage for 9.99 / month. This new option provides customers with exactly what they’re looking for — which means less things are preventing them from signing up!

The downside is that not all freemium businesses are successful, but there are some similarities between those who do.

First, they need to provide values ​​that are not found anywhere else. If you offer a free service or product while competing options offer more features, you will have trouble attracting new customers.

Second, they need to make sure that they are somehow making money from their free users — that is, your website may need advertising or other revenue-generating strategies.

3. Build brand loyalty

The freemium business model works well because it allows companies to build a brand loyalty by offering a free product and then launching a paid product. If customers are satisfied with your product and you pay the price, they will probably recommend it to others. This strategy has been shown to increase retention rates.

Also, freemium models help companies focus on creating a better experience and service for their customers because they aren’t worried about creating sales right now. This can increase brand loyalty in the long run.


People want to try before they buy, even if it means buying a premium version of your product. A freemium business model is an interesting option for many companies because it gives consumers a way to know what they are getting and upgrade from free options when they see how valuable it is. If you are looking for a strategy to increase sales, consider offering a free membership level as part of your marketing plan.

Check out 7 examples of freemium business models are working extremely well For more information on the effectiveness of this business model.

Jazmin Merriman on Twitter
Jazmin Merriman

Group Writer: Jasmine Merriman is studying to become a writer, family and marriage therapist. She loves to write about minimalism, business, finance and lifestyle. He likes to inspire people to live more intentionally by showing what he does as an example. Feel free to connect on Twitter @MinimalFE

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