What is Freemium Model and Why That Matters (Example)

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Freemium is a common term use in business operations. But, do you know what this term means? Many people tend to misinterpret it since they do not have first-hand information about it. This create a lot of confusion among customers since they miss some information whenever this term is mention. Let’s head directly to the point of interest!

The Freemium model is a two-prong acquisition model that is popularly known to classify customers in the premium or the free category.

This decision is made immediately when a customer makes a payment to authorize their access to a particular service account base on their needs.

The users who are in the Freemium model are given a little access to various features and products since they don’t pay for them.

On the flip side, the premium users are given access to multiple features and products. However, they must make payments to continue enjoying the services within a stipulated time frame. Note that the charges for the Freemium model are made before you begin enjoying the services.

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Everything You Need to Know About the Freemium Model

Many people do not understand that the Freemium model offers a naturally nurturing configuration. This model is use to give customers the freedom to interact with various products without the need to deal with the salesperson. Customers use direct entry to get maximum access to everything they need to serve their basic needs. When a product experiences some level of success, the free category users exhaust their free access.

This is an indication that they have no option rather than making payments and getting full access to the products and features offered. After the free trial period, you will be better position to make decisions depending on your personal experience when using the product. You may opt to pay for the Freemium version or abandon it depending on your preferred needs and your individual experience during the free trial.

The Freemium model works better, especially when the product developers offer additional features and products. The model is also known to have superior functionality and other paid upgrade that customers are likely to be attract to and make payments to in order to access them. The goal of the Freemium version is to offer more advanced features and generate advanced and exceptional output.

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The Limitations of the Freemium Model

To make the Freemium model work effectively, you must include some form of limitations that will enable you to attain your goal. These limitations are mainly due to specific features that many people want access to. You can make these limitations in different ways, including:

Usage Quota

The usage quota is a common aspect that incorporates lots of factors. These aspects include limiting the size of the storage system, information dispensing quotas, and the recurrent credits. When the user reaches this point, they have no alternative rather than upgrading to the Freemium model to continue enjoying the additional features and products.

Limited Support

The Freemium model can offer limited support features to the customers within the free category. When you limit the usage of various products or their access, you create some form of friction among users, thus encouraging an upgrade to the Freemium version. In most cases, businesses use this methodology to elevate the friction effect and increase the number of people who pay for the higher tier category.

When you make some form of limitation on various features, you intrigue your customers to want the access to more incredible features that streamlines their operations. But, the product developer should be keen to ensure that the customers do not miss the principal value of the product. Ensure that you create a balance between the two sections to enhance the validity of the two categories.

To create this balance, you need to conduct detailed research and understand the consumer needs and the value they can generate from your products and other things you offer them. After attaining all these essential aspects, you stand a better chance to create an extraordinary balance between the Freemium model and the premium package.

Feature Limitation

There must be a boundary between the free category and the Freemium section. The boundary is the limitation in the access to various features and functionality. The limitation is only impose on the users within the free tier to intrigue them to advance their subscriptions.

Free Trial Vs. Freemium

Many questions are raised as to why organizations don’t prefer using free accounts. Most companies are struggling to answer this question since customers do not understand why the paid account versions are use. A good response to these concerns is that companies try to attain specific goals and address a particular target market and product type.

Similar to a Freemium account, a trial account is designed in a manner that can convert all the available customer leads into potential customers. However, there is a slight difference between a trial and Freemium accounts. The Freemium account lasts for a lifetime, while a trial account is only meant to serve for a shorter duration. After the trial period ends, the owner needs to upgrade their subscription to continue enjoying the services.

The trial account gives users the freedom to access all the essential features of the product in order to encourage them to upgrade at the end of the period. On the other hand, the Freemium model users only have limited access to the product features.

Advantages of the Free Trial Model

The major benefit of the free trial is that the business owner is not obligate to offer support to the consumers who do not make any profit for the company. This means that the support panel does not provide their services to the free trial users since they don’t make any returns for the business. After the end of the trial period, the user is ask to sign up for the premium package or leave. They have no choice!

This mode of operation makes it easier for the business to ensure that it’s only dealing with members who have already paid. As a result, it streamlines operations within the company and ensures that it makes returns from all the customers using the products. Also, the free trial accounts are adept at converting all the free users into paying customers.

Advantages of the Freemium Model

Even though there is a clear boundary between using a free trial account and a Freemium account, a Freemium model remains the best option for customers.

The free trial account is known to cause a lot of pressure on the user since you need to have a credit card during the signup process. Also, the free period only lasts for a shorter period, and you will have no option than to make payments before you continue enjoying the services.

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The free trial account only gives you two options; it’s either you sign up or exit. The Freemium option does not have any pressure, especially for the new customers who are given the freedom to explore and interact with the products without necessarily having to make purchases. Note that various customers do not need the features once they sign up. The needs change as time goes on!

Using this approach makes it easier for the business owner to integrate the products into the workflow of their respective customers.

Freemium Model Examples


Tinder is an excellent example of a Freemium model. It’s a popular dating application that many people across the globe use. The app users are given an option to use it for free they can also make payments for the premium version. The premium model offers additional features that give users a chance to enjoy more features.

Spotify and Apple Music

Apple Music and Spotify are popular music streaming platforms with multiple additional features. You can choose to use the Freemium model or pay and upgrade your standards to enjoy more additional features.

Bottom Line

The Freemium model is an excellent approach to use when you want to increase the rate at which prospects acquire the product. When you create a good premium model with specific limitations a d a good balance, you can easily promote the continued growth of your business. Also, ensure that you maintain all the related costs on the minimum side to increase the number of people who use the services. Even when using the Freemium model, you need to ensure that your business only focuses on addressing specific customer needs and concerns. Customers only prioritize companies that address their particular needs.




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