There is nothing better than not paying for something and being happy with what you didn't pay anything for. I'm not talking about the esoterics, the sunrise you'll never forget from your first all night party or the so called things in life that are free, I'm sure there are less of those now anyway but things that have a worth to you today.
We used to pay for premium information from experts, leaders in their field and opinion makers at meetings, conferences and the like because we had no other recourse to get the latest trends, futurisms and initiatives. We used to pay for business and entertainment products along with access to applications to make our days easier. Today that has all been turned around and there are no shortages of places to get all of the above and free to boot. The search engines combined with a globalisation of knowledge and opinions has lessened the need for that premium slice we used to pay for along with the burgeoning market providing free applications for everything.
We have so much, that is now free but what if we want more? Surely the forces of the crowd will demand that everything be free and we go on living in an online utopia. You could do it. You could live online, search online, play online, view and listen online for free as long as you live. Yet human nature wants more and that's where "freemium" comes into the equation.
We all use the web, applications and online tools that are free but a lot of people also pay to use more efficient and better versions of the "freebies". The "freemium" business model so succinctly described by Chris Anderson in The Long Tail is turning out to be the model that makes money from the few who are willing to pay a premium for the total package. From Google Apps to Spotify, Skype, the NY Times to my favourite cloud app Dropbox, we are seeing innovation provided free until you get hooked on the product and want to use it to its full capacity.
It's a customer segmentation pricing strategy that works effectively as the "freemium" model requires businesses to rethink their customer equation on acquiring first and then turning that acquisition into revenue. The benefits are quickly demonstrated before they are expected to pay for it and that's a powerful incentive. Apple has seen their coffers expand via mobile game applications that are free and then enticing the hard gamers to pay for the next levels. So much so that last month the top 100 free games on iTunes generated twice as much money than those that charged to download.
"Freemium" has long since raced past the old "free trial period" and the ad-supported free space examples such as Gmail. It has entrenched itself into the expectations of the online community that there are now certain things that will always be free and others that can command a "freemium" price tag. The model requires you to have customer insight because you need to uncover the difference between those casual users who will never pay anymore and the one who truly value your service.
If you can find that customer insight, and if you can offer at least a basic version of your service at minimal cost to your firm, then you may be able to follow the freemium model, and make much more money by letting your customers in for free.
What's your hook?
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