With ongoing changes in our socio-economic spaces, there is no doubting the fact that business, as usual, is a long-gone phase. In this Covid-19, most businesses are being forced to relook and revise their business models. While they do so, the internet is undoubtedly the next best place business owners would want to be. For me, the question in my mind is, what is the best business model can be adopted as businesses do the digital migration. In this article, I attempt to explore the freemium business model and give a few reasons which make it one of the models to consider.
Defining A Freemium Business Model
Broadly defined, a freemium business model is designed to offer controlled free online service/products to consumers while a price is set if one wants premium access. Its genesis is rooted in the need to charge consumers for the content they usually got for free. As a result, business owners generated a method where they separated what could be accessed for free and what had to be paid for. From this, a fraction of free users naturally gravitates to become paid subscribers.
With the freemium business model, there is an increased possibility of developing platforms that serve two purposes, revenue generation and marketing. Revenue generation usually comes in the form of advertisements given that your free content can lure constant and persistent visitors. As a result, the free content acts as a marketing tool and a quality signal for customers to continue using your services and gravitate to premium content.
You would also want your free content to be structured and packaged in such a way that customers are encouraged to subscribe for premium content. Apart from just giving out free content, you also want to control the amount of free content you give out otherwise some consumers have a growing sense that access to online content should be for free. Failure to balance the mix might give you negative results as some consumers will not have an urge to pay for extra premium content.
Why You Should Consider It
Freemium business models owe their success to the psychology of free inherent among consumers. Where a free offering is placed on the market, a customer`s mental barriers are altered in a way beneficial to businesses owners. ‘Free’ makes people think they have nothing to lose if they join your offering so long as it has a promise of value to them. Provided that you have valuable free products and even more valuable premium content, traffic to your platforms will grow exponentially. This is why freemium business models are valued by businesses seeking to have a huge online following.
However, what I have also noticed is that online platforms using a freemium model fail to adequately, convert their free users. This is largely because once users get to use your offering, more often than not, they hardly think of paying for premium services. To avoid such a scenario, this goes back to the need to strike a balance between what you give out freely and what you peg as your premium content.
Who Can Use A Freemium Business Model
Businesses with products/services which can be accessed over the internet are well suited to adopt this business model. This is so because of structures created by this business model suit perfectly with automating a business process such as sales and product/service delivery.
While a freemium business model can best be adopted by an internet-based organisation, small businesses might fail to use such a model given the fact that it requires a lot of investments in building the online infrastructure. However, if, as a small business, you lack the adequate resources to migrate to the online platform, fortunate enough is the fact that there are tones of business models from which you can find one that meets your needs.
The Value Of Free Users
Before you think of dishing out free content on your website you want to first understand the value you stand to gain from your free users. Some businesses would want to make sure their free users allow them to create additional revenue streams through advertising. I mean, you will benefit greatly if you manage to create content that attracts a whole load of traffic. Some would see the entire model as one necessary for platforms useful in marketing. Either way, you could save an awful amount of money in marketing your online platform. Your free content should do the trick just right for you.
Value For Other Customers
You also want to understand if users of your free and premium content portray a certain value to potential customers from the moment they start using your services/products. Do you think they might recommend your product/service to other users? In this respect, the value can be inherent where a user can share their experience with another user. Sasai can be a quick reference where for one to enjoy the free calls, you need another user to call. Consequently, you are bound to encourage other people to use your service in that manner. In some cases, you also want to think of the value offered to your clients based on the premise of added value. Take for example Zimbo Cash, there is an added value to the user if he/she encourages other users to join the platform using his/her link.
This is perhaps the most critical element you need to consider when redefining your business model. You should take note of the fact that if you spend a lot of money and time servicing free users there is a risk that you will lose a lot of money. What you want is to focus on the other end of the scale. Your paid customers! In servicing your free customers, the cost of such services should always be lower than unit monetary returns from paid users.