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Rick Henkin Karl Kasca
In
This Issue:
- Tip
of the Week - Does the Freemium Model Make Sense for Your Business?
- TheSolutionMovie.com
- Have a topic idea?
Let us know
Tip of the Week- Does the Freemium Model Make Sense for Your Business?
"Freemium" refers to a business model in which you offer a basic
version of your product or service for free, hopefully attracting a lot
of users, and then offer a paid upgrade to a more advanced version. The
hope is that once the "free" users sample what you're offering, they'll
be more willing to pay for advanced features.
In deciding whether or not your company should offer a freemium, Freemium.org says there are 3 criteria that must be met:
- The free product has to be a quality product that people want- It has to have inherent value because it's what drives the business
- The free product must be able to be duplicated digitally-
since only a small percentage of the free users typically upgrade, you
want your costs of production and distribution to be as low as
possible. Online distribution helps reduce these costs
- Your product or service must have a large reach- since only a small percentage will upgrade, you must attract a large number of users for the model to make sense
According to an article on Gigaom.com,
companies that have been successful using the freemium model include
Skype, Pandora, Dropbox, Evernote, Automattic and MailChimp.
While
researching the freemium model for a project that Karl and I are
working on, I found that some people think it's great, some feel that
it only works well with certain types of products, and some feel it
doesn't even deserve to be considered a business model.
However, there are 2 things that they almost all agree on:
- Freemium
models work best with SaaS businesses (software as a service), where
you have a basic or lite version and then an upgrade to the full
version, once they've become addicted to your software and can't live
without it
- Only a small percentage of people (1%-4% on average)
will actually pay, which is fine if you're talking about a huge number
of people, and not so fine if you're not
The freemium
model has actually been around for years in the form of free trials,
free samples, even free admissions to events (with the hope of selling
you something once you're inside).
Does giving something away for free make sense for your business? It's certainly worth considering.
Rick Henkin
PS from Karl: For more on the Freemium model see my blog post: 'Free vs. Value - To Abridge or Unabridge -
That is the Question' which talks about Chris Anderson's book
'FREE: The Future of a Radical Price'
and gives links to where you can read/hear/download the book.
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a topic idea?
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reason that Karl and I've put together this website is to help you
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me with your topic ideas at:
Best
Wishes,
Rick Henkin and Karl Kasca
IncreaseOnlineProfits.comsm
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