Posts Tagged ‘ Freemium ’

Vahan Karian’s Business Growth Tips: The “Freemium” as a Growth Strategy

Entrepreneur and business consultant Vahan Karian talks about the value of “freemium” offerings in growing a business, in running both startups and large, established companies.—

The term “freemium” was coined in 2006 to describe the business model of giving away a service in order to create a large base of loyal users, some of which would then return to purchase an enhanced version of the service. Since that time, countless businesses have built success on the freemium model. Done right, freemium doesn’t need to be expensive or complicated, and it has the potential to turn your brand into a household name through much-coveted word-of-mouth advertising.

Most freemium products are online services. The most common approach is to support them with advertising, and the larger the base of active users, the more success the company will have in attracting quality advertisers. This is essentially the model employed by the free entertainment papers found on many city street corners.

Another option is to give away the product without advertising, but offer an enhanced version for payment. Given a large enough user base, even a small conversion rate will lead to long-term profitability. Online companies like file syncing service Dropbox rely on this principle.

The key to success in the freemium market involves the creation of a great product or service that many people want to use and talk about. If you limit the freemium product too much, it won’t receive organic, word-of-mouth adoption and your efforts will be wasted. It is better to err on the side of too much functionality than too little. After all, if you have nothing new to offer in the premium version, you simply limit your business model to advertising revenue, which is a viable choice.

Another important consideration in freemium offerings is scalability. Do not offer a freemium product with the same cost-per-user into perpetuity. This may be manageable with 10,000 users, but the overhead might bankrupt you at 10 million users.

These qualifications aside, you have an infinite number of ways to make a freemium product work for your company, whether you run an online business or a traditional, bricks-and-mortar one.