Freemium is a Business Model that offers basic services for free while charging premium for advanced features. Skype is a good example of Freemium Service. Any voice call within the network is free, but, there is a premium for call outside the network. The best part of this business model is that you, as a service provider, can make customer understand why they have to pay money for paid service. I think the business model that focuses on user value and monetize the value is very powerful compared to others.
The major advantages for Freemium service are:
1.You can attract a lot of consumers to try the product and lower the hard competition of the web. This model generates even more buzz and communication about the product.
2.You can generate habit by offering free service upfront that, in the long run, can produce loyalty for your product.
3.This model keeps you busy all the time to innovate new concept. Customers stick to you for your value and trust you provide. So, any user specific innovation gives you competitive edge to reach your product to the customers.
4.More and more products are accessible free on the Web now a days. So, this business model is a new marketing tool on a very fast moving market.
5.You can eliminate all customer obstacles in the initial acquisition process. The customer does not need any download or plugins to start. Only thing is that you have to make sure before launching the product that it should work well in different environment like Windows or Linux etc.
6.This model keeps your overhead cost minimum. That is because you have to ensure that customer do not pay anything for overhead that you are creating.
7.Third parties can be the ‘official’ sponsor(s) of the website. This could include fixed adverts, integration of third-party branding (colours, slogans) and/or licensing agreements.
8.You can establish a platform to draw more audiences with this model. Then, charge the third party for sponsorship.
9.During the economic downturn, it is hard to find venture capital and advertisements for start-up companies. They can use Freemium business model to monetize their products.
To conclude my story, Freemium is a wonderful business model for generating regular income, cash-flow. If you are planning to launch a new product during the recession time, you can give it a shot.