Why do we see so many entrepreneurs adopting the Freemium business model? Giving away their base product for free to anyone who wants it and hoping that users will ultimately pay for a more-full-featured premium version – almost always at the low, low price of only $9.95 per month? Do they have a business death wish? Or did they fail to answer this question? Whatever the answer, they ultimately find that —
Freemium is Freemicide
No one will pay for an upgrade to a product unless it materially increases the value to the buyer. And in most cases, the free product already meets the user’s needs. There is absolutely no compelling reason to upgrade. Of course, there will always be exceptions i.e. Dropbox. However, we believe a better model is —
Try it. You’ll like it.
You will make more money if you give your product away for a free-trial period and then require payment, even if it is only $0.99 or even $0.49 per month. Set the price below the pain threshold and capture revenue from your early adopters. However, recognize that they are probably Geeks, and that you must capture populous packs of princes, proles and peasants to be truly successful – and maybe even charge them $1.99 per month after a 2 month free period. There is a reason why drug dealers will give you free samples for a week or two. Assuming that your product actually fills a need, once your users are hooked, they will be delighted to pay you. Worst case scenario – you find out that no one wants your product before you blow your kid’s college savings.
— Steve Hogan