The Anatomy of Profitable Freemium
Choosing the freemium business model can be brilliant or deadly. The difference lies not only in the execution of the marketing, but also in the nature of your product and the design of your business. Can you coordinate all three to become sustainably freemium by making a profit?
Summary:
- Freemium requires a business to maintain two value propositions with a well-designed interaction between the two.
- The premium offering can deliver different kinds of value. You should choose the most profitable one you can under your constraints, which best fits the value your product delivers.
- Using a free car analogy, the kinds of premium value (types of freemium) include: Cargo Freemium, Airbag Freemium, Bomb Freemium, Cruise Control Freemium, and Bells & Whistles Freemium.
- Each type of freemium has unique risks as well as market and funding requirements in order to be sustainably profitable.
- Any of these types of freemium can be implemented poorly. Some types may not work with your product. Correctly implementing any of these types of freemium requires a deep understanding of the value of your product.
- Entrepreneurs should be convinced that freemium is the right choice for their product/market, choose their type of freemium out of knowledge (not fear or ignorance), and re-evaluate this decision regularly.
- Freemium can be extremely beneficial for gaining market share, but if it can’t create sufficient conversions to a premium offering, it isn’t sustainable.
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