Originated from the words ‘free’ and ‘premium’, this pricing strategy can be used in business models which both offers free and premium services. Though this pricing strategy cannot gain success on the Internet, services by the sellers can be offered near to zero variable cost. With little or no incremental costs, the company can gain a huge increase in the customer base.
Why Use Freemium?
Freemium is a business model that helps you to make more money. It is the process of adapting to your business with the changing situations of the market. The software companies and the Internet service providers can use this policy without any hesitation.
Circumstances of Freemium Pricing
Freemium pricing can be applied in various circumstances like:
- Sometimes, the students are allowed with free services while the corporations are paying for them. This will help the students to get attached with the services and later when they enter the workforce will definitely buy them. This can be considered as the long term strategy as students may take long time to enter the workforce and gain positions.
- Some limited usage may be allowed in this strategy. For example, a single free download every month can be allowed. When the users get involved with the service, they can pay for the increased usages.
- Few features of the services can be utilized for free of cost. But if expanded version with improved features can be used, they should be charged with a price.