Go back twenty years, what did the concept of ‘Free’ mean in the business world? If you’ve been in the business world for long enough, you’d probably reply “everything comes at a price” or “there is no such thing as a free lunch.”
Fast-forward to twenty-seventeen. Does this ideology still have any relevance, can your company hand out “free lunches” and still generate revenue? Is this an opportunity to create loyal customers?
Traditional brick-and-mortar retailers are exempt from this concept as they still get their revenue from face-to-face transactions with customers. However, if you were to ask yourself how does Microsoft, Dropbox, Spotify and BaseCamp make money if they are offering their products for free in some capacity? The answer is in the title of this blog post – Freemium.
These companies, and many more, have understood that providing a great free product for consumers will in-turn create loyal customers who are willing to pay for premium versions of the product. Just check out how Spotify has done this between their ‘Free’ and ‘Premium’ offerings, they ensure that their offering is completely available under their ‘Free’ offering but then for add-ons such as ‘Ad removal’ and ‘Listen offline’ for their ‘Premium’ deal.
If we take a step back and insert ourselves into this concept, imagine a business has came to you and offered you both their ‘Free’ and ‘Premium’ deals to you, it would only make sense to choose the free option. However, if you found yourself using this product daily and became a part of your routine, would you be more willing to invest $10 a month?
This is how these companies are creating revenue. Creating unmatchable loyalty through an excellent service to the point where consumers are willingly choosing to put money towards a premium version of the free product.
The movement is already amongst us, smart phone apps are the biggest groups of retailers who have made the switch to freemium-based revenue generators. The 0.99c for every three lives on ‘Candy Crush’ per user, per year, per product lifetime, it adds up to a $6 billion company. As the feeling of completion and increasing incomes greaten within consumers, we will continue to see more service-retail sectors making the switch to Freemium.