What You Can Learn from the Freemium Model

by Charlie Thompson

A new phenomenon is sweeping the world of apps and online services – it’s called freemium. In this blog we explore this novel user acquisition model made popular by digital startups, and demonstrate how it’s a great alternative to traditional member acquisition methods.

I’ve never been a fan of portmanteau, but I’m a big fan of ‘freemium’. It’s the revenue model employed by app and internet startups that allows consumers to access a portion of the service for free, but restricts top features to paying customers. You’ve probably encountered it somewhere; at the moment it’s everywhere.

Well… almost everywhere. Membership organisations are primed to take advantage of the freemium model, but despite its ability to drive better member acquisition, most are stuck in the mud of traditional models. There are a range of benefits which I’ll explore below, but one of the great things about the model is its versatility, you might want to implement it wholesale or just part of it – freemium allows for that.

 

Get members onboard

The most attractive element of the freemium model is its ability to get users onboard from the start. Without the hurdle of a paid offering, users often flock to join and the worst that can happen is that a non-paying user turns into a non-user. On the flip side, if the user sees benefits they will be tempted to pay to unlock the full-featured offering.

In membership organisations, this could be done by allowing potential members access to parts of the paid offering and keeping the best bits for fully-fledged members. Some galleries and museums do this already, allowing visitors to get into the main areas without paying but reserving special collections for members and paying ticket-holders. It's a simple way to open the floodgates to a steady stream of members, with the potential of turning them into paid members.

 

Build your database

Freemium products often require the user to log in using a social media account or email address. This is a clever ploy that opens up the possibility of contacting users with marketing information regularly so, even if they stop using the service, there are still opportunities for conversion. It’s a great way to keep the door open after the user has left the building.

Membership-based organisations could employ a similar tactic, allowing people to become freemium members by providing contact details and then reaching out to sell premium membership through marketing and communications. Databases boom and the organisation has many more opportunities to convert – what’s not to like about that?

 

Respond to needs

Another great feature of the freemium model is tiered users, creating distinct platforms for different levels of cost all the way from free to the top-priced offering. It means that as user needs grow (along with expendable income) the platform grows just enough to support them. Users are happier because they are getting what they want and the company is happy because they are stimulating growth at all levels.

Many organisations have something similar to this in existence. Silver, gold and platinum level memberships are a great example, but the freemium model creates another tier which acts as a gateway to the experience as a whole. The benefits to member satisfaction are obvious – they feel the value of the experience fits the level of their financial commitment.

 

Support revenue with ads

Many freemium models support the expense of providing services to an increased number of individuals by utilising an ad-supported model. This lets users get access to some features for the trade-off of seeing or hearing ads intermittently during their use of the service. It’s also great encouragement for users to upgrade to the ad-free premium service – ads can be a bit annoying.

If your organisation is tied to partner organisations, one way you could justify the freemium model is by advertising your partner organisations to free members. Your partners can pay a reduced rate for the pleasure (third parties can pay full rate), meaning you get a revenue stream out of your non-paying members. How smart is that?

 

At Infinite Rewards, we’re obsessed with boosting membership numbers through intelligent acquisition and retention strategies. Our service provides added value by providing discounts and offers to members, find out more about what we do here.