The freemium model is a business approach where an account, typically with limited functionality, is offered for free with the hope that the person eventually upgrades to a paid premium account. I must admit that we don’t do a freemium model for any of our products (we do have a free product, Visitor ID, but that is more of a generic freebie). With that said, I have a few thoughts on the model:
- Many entrepreneurs think it is the holy grail of business models only to learn that many companies won’t even use a product for free
- At its core, freemium is simply a lead generation mechanism, much like open source
- It is incredibly difficult to get someone to upgrade from a free version to paid version
- Offering a free version of a product often times attracts a different crowd compared to a free trial
- Many labor intensive items like support, on-boarding, and policing (e.g. if email marketing is involved) are expensive and difficult to scale with lots of non-paying customers
My goal is to one day have a successful freemium product, but to date the feedback I’ve received from entrepreneurs that have one is that it is much more difficult than they expected.
What else? What are some more thoughts on the freemium model?