10 Questions to Answer If You're Considering a Freemium Business Model
Is freemium the right model to support your business objectives?
Would freemium be an effective lead generation, conversion, and revenue-driving strategy for your subscription business?
Ask yourself these 10 questions to determine if freemium is a good pricing model for your business.
#1. Does your service have viral adoption potential?
Viral adoption helps minimize the marketing spend needed to drive free adoption.
To what extent do you expect existing users to encourage others to adopt your service?
Freemium All Stars: Yammer and PayPal
#2. Do you have a low cost-to-serve service?
Assuming that you will have a large number of free users, low marginal costs are essential to making this model work.
Can you afford to support each free user?
Freemium All Stars: Asana and WhatsApp
#3. Does your service have a huge potential market?
Given that the free-to-paid conversion is typically low, a service that has potential for a mass audience is another way to make it work.
Is your service something that a lot of people want or need?
Freemium All Stars: Hulu or Dropbox
#4. Do you have a clear and compelling migration path for your users?
To convert your free users to paid subscribers, you need to make it beyond easy for them to take the leap.
Have you invested in creating a seamless migration strategy? Are your calls to action so compelling that people can’t help but upgrade?
Freemium All Star: Spotify
#5. Does the value of your service increase the longer that people use it?
Some services inherently increase in value or stickiness the longer you use them, making it too “costly” to make a switch.
Does your service make it hard for people to switch at the drop of a hat?
Freemium All Stars: Evernote and Flickr
#6. Can you monetize even free subscribers?
If you’re going to have a large base of free users, are there ways you can monetize them outside of a subscription fee, e.g. selling ads?
Freemium All Stars: Pandora and New York Times
#7. Do you have the capacity to prevent people from gaming your system?
Wherever there’s a system, there are going to be people who try to game it.
Do you have the resources to create a rock-solid infrastructure to keep the freeloaders at bay?
Freemium All Star: ShopRunner
#8. Does your service get stronger when more people use it?
Some services become more valuable to an individual user when there are more subscribers.
Is your service powered by a big user base?
Freemium All Star: Match.com and Yammer
#9. Is there potential for two-sided monetization of your service?
For a service with multiple audiences—e.g., corporations and individuals—there can be an opportunity to drive paid conversion in different ways for each.
Do you have entry points for revenue building?
Freemium All Stars: Ariba and LinkedIn
#10. Do you have the infrastructure to serve a mass audience?
To capitalize on freemium, you have to be ready for it.
Have you got your operations and infrastructure totally dialed?
Freemium All Star: WhatsApp