Wednesday, 27 February 2013

Is Freemium Business Model The New Success Mantra?

Over the years, ‘Freemuim’ have evolved out as a new business tool to help manufacturers and service providers earn a fortune. The word ‘freemium’ comes from the words free and premium. It describes a business model where you give away a part of the main product free and then sell premium products. This not only gives customers a freedom to try out a new product or service, but also improves awareness and trust about the product.

A new study published by iYogi Insights show some interesting statistics about customer’s behavior and the success rate of Freemium products as compared to paid products. The online survey by iYogi Insights gives a better picture about an average American consumer, using technology in all aspects of his life. The survey had 2,002 respondents share their experience of Freemium products or services.

One of the most important findings of the survey is the change in consumer behavior, with the rise of internet usage.  With new technologies coming up every day, consumers are not comfortable to pay their hard-earned money for each product. Freemium offers a unique way to help customers delve deeper into the understanding of the new products or service. The research proves that Freemium products give manufacturers and service providers their first traction in the market.

What is the Freemium buzz all about?
Freemium provides a medium to introduce a new product or service in the market. It involves offering a basic version of the product or service to the customers for free, but charging for the premium service that is meant for long-term use. It gives new products a niche to carve out their future in the market and helps manufacturers and service providers benchmark their products and services.

Here’s a quantitative analysis of the research conducted by iYogi Insights team:
  • 100% customers agreed to the use of Freemium products or services.
  • 42% users subscribed to the product or service after experiencing it.
  • First-time users show higher conversion rates after using the Freemium product.
  • 39% agreed to have experienced free one-on-one consultation with experts in energy saving, nutrition and fitness, lasix surgery, and career consultation.
  • About 60% customers agreed to have experienced iYogi tech support as their first Freemium consultation with a technology expert.
Freemium products give customers a chance to put value to the product. It’s their decision-maker. iYogi Insights research highlights a very important point – “Your confidence in your product to be able to offer it for free, speaks volumes in its favor.” 

Should you consider freebies?
Of course, why not? Who doesn’t like a free version game on their Smartphone, a sample of the newly launched perfume, or a support service that is being offered for free? There are endless examples of Freemium products and services that offer superior value to their customers. Google is the finest example of a service that is being offered for free. Freemiums like LinkedIn and SlideShare offer excellent restricted-features service for free. However, they offer Pro versions for high-end customers. Similarly, CyberScrub offers free-trial period based Freemiums. Through this, they convert their free customers to the paid ones.

Is Freemium the decision-maker?
Yes, it is. Freemiums create happy-to pay customers. Through Freemiums, customers are able to unlock the value of a product and are, in most of the cases, convinced to buy the product. It gives the customers a level of confidence while buying the product and proves to be a stepping stone in the revenue generation path. As it is rightly said, “The way to get a million people to pay is to get a billion people to begin using your product.”

According to the research conducted by iYogi Insights team, there was an upsurge in the overall conversion rate after the introduction of Freemiums. The statistics are as follows:

  • Entertainment proved to be the king. Movies and videos experienced an overall 65% conversion rate.
  • 41% customers found cloud-based services to be useful and were willing to pay for these services.
  • About 34% customers are willing to pay for products that help them optimize their day-to-day productivity.
  • With an overall 100% experience rate, 37% people are willing to pay for security software for better  protection against viruses and other security threats.
  • 30% music lovers agreed to pay for the paid product after trying out their freebies.
  • VOIP services attracted a 41% conversion rate through their Freemium products.
  • Among others, data backup service experienced about 46% conversion while new-age games attracted 26% conversion.

Will Freemium stay or fade away?
If it can’t sell for free, it can’t sell at all. The benefits of freebies on the users as well as on the company or service provider cannot be ignored. The end results are mutually dependent. While on one hand, Freemiums provide users a certain level of confidence in the new product; they offer better conversion rates to the companies and service providers. Nearly 60% respondents agreed to have experienced the benefits of free one-to-one advice session with an iYogi expert. This clearly shows the power of Freemium in creating customers. Freemiums are much more than just being a marketing strategy. They provide better results when compared to advertising the product through campaigns or word-of-mouth. Freemiums give users a chance to come back for the free product, finally turning them to a customer who is happy to pay for the product or the service.

Have you ever experienced a free product or service and were finally convinced to buy it? Was the end product similar to the free one? Did the Freemium service work for you? Share your experience with us to discover the other side of Freemium business model.