Freemium Model & How It Works: The Ultimate Guide to Growing Your Sales

The software development industry has seen some rapid growth over the last decade. Its specifics call for certain changes in the way the software-based businesses are operated and marketed. The freemium model has proven to be one of the most effective ways to boost the profits of the industry regardless of the size of the project. But what’s the secret to its success?

The answer is quite simple. The principles of this model fit the dynamic of the digital market perfectly. Internet-based businesses have a relatively low customer acquisition cost. Combined with a very high lifetime value, the use of the freemium becomes very appealing to business owners and their customers alike. But in order to benefit from it, you have to know how to use it properly.

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A Tool for the Job

As the name suggests, the freemium model is a middle ground between a publically available product and a pain one. The term was coined fairly recently, but the model itself actually existed for quite some time now. It was first used in the 1980s but made popular only with the rise of internet-based projects and the software development industry.

It can’t be called straightforward. Even though there have been some successful projects that used this model, statistically turning it into revenue is problematic at best. The exploits of freemium-based businesses deserve an essay. You can easily get yourself a great one at Essay Pro. But to figure out more how to boost your sales with freemium, just keep on reading.

Not every internet-based business can benefit from the freemium. Applying it without any forethought can be of little use to your project. And in some cases, even cause serious damage. That’s why the first thing you want to do when considering this approach is to make sure your product suits the model. There several general criteria you can use to determine it.

  • Low product support costs;
  • High lifetime product value;
  • Viral potential;
  • Modular nature;
  • Seamless transition between basic and premium versions.

The premise of the model is quite simple – you offer some benefits of your product for free. Then, you offer users a paid upgrade for additional functionality. At its core, it’s a modified version of a demo distribution. The demo is giving the customer an unfinished product and offering them to buy the full version.

Freemium, on the other hand, starts as a completely functional stand-alone thing. It’s the additional upgrades that take the role of an enticing bonus that a customer can obtain with a fee.

Good and Better

The most important part of making freemium work is the design of its respective parts. It’s in this phase that developers are the most vulnerable to making mistakes. By adopting this model, you are effectively separating your product into two parts. One that is publicly available for free or very small cost, and one that offers upgraded functionality for an additional fee.

The balancing of the two is very important. The first thing you need to realize is that it’s not a demo. In order to be effective at attracting more users, your public part must be an efficient, although slightly imperfect product. The services it offers should provide your potential customers with a positive experience.

On the other hand, the maintenance cost for the first phase should be sustainable. Remember that you’re sacrificing profits for the sake of publicity. If you can’t sustain a huge amount of users while making a minimal investment, the model is going to collapse.

At the same time, the second phase (the one that is actually supposed to bring you some income) has its very own set of requirements. Ideally, it should offer functionality that would enhance an already decent range of phase one. All while making the process of upgrading as effortless as possible for the customers.

Marketing Over Revenue

Freemium can be a very powerful tool. But if you’re considering using this model, you should understand that its main purpose is not profits. There has been a couple of successful and highly profitable freemium projects. However, statistically, your business is unlikely to become the next Skype or Facebook.

The main purpose of the freemium is not revenue – it’s marketing. The free component can help you grow the following of potentially paying clients rapidly. Transitioning them from a free base to a premium version is a whole new thing. It can take a lot of time. Which can prove to be too much for a high-effort high-investment product?

Conclusion

The internet technology today allows for quick and efficient distribution of a product to an incredible amount of customers. This makes the use of the freemium model more viable than ever. It’s especially useful for smaller projects. As a marketing tactic, it can attract more attention to the work of aspiring developers, serving as a transition product for more serious projects.