Introduction to Freemium Business Model
What is Freemium?
Freemium is a business model in which the owner or service provider offers basic features to users at no cost and charges a premium for supplemental or advanced features.
Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium priced value added services or an enhanced version of your service to your customer base.
The word Freemium is combining the two aspect of the business model “FREE” and “PREMIUM”
Free + Premium = Freemium
And was coined by Jarid Lukin of Alacra in 2006 after venture capitalist Fred Wilson came up with the idea
Chris Anderson (Wired Editor in chief) likened freemium to handing out muffins on the street to entice people to start eating your muffins. But with muffins there’s a significant cost to giving away each muffin. With digital goods, you can give away 90% of your product for free, without any cost for those goods.
He says ‘free users’ aren’t free loaders, and that it’s okay to let the minority (paid users) subsidize the majority. Because the free users will recommend to friends, it’s a great form of marketing. And for those paid users, many of them are very strong customers — they may be price insensitive, with very little churn.
Importantly, this means that freemium is NOT the same thing as “premium with a free sample.”
A restaurant that offers free appetizers is not a freemium business.
Why You Would Go Freemium
There are basically two reasons to go for a freemium business model:
• Marketing. By definition, having a free product makes it really easy to get customers. And internet economics make this very attractive, because the marginal cost of every new free users will be very low. Free users can also be good marketing because even though a free user might not convert, they can invite other free users who might.
• Network effects. A network effect is what happens when a product or service becomes more valuable the more people use it. A phone isn’t very useful if you can’t call anyone else with it. But once everyone you know has a phone, it becomes a pretty valuable thing to have. If you’re in a market that lends itself to network effects you’re going to want to have a free basic product because if you don’t someone else will and will use the network effects to crush you.
What Freemium Needs To Work
According to Phil Libin (Evernote Founder/CEO Phil Libin –whose Freemium company is very profitable), here’s what you need to be able to do to make freemium work:
• Get lots and lots of free users. It seems obvious, but it’s important to keep in mind. Freemium is a numbers game: if only 1% of your users are going to pay you, then you need to have lots and lots of free users (millions, typically) to make that 1% enough money.
• Get all of these users to stick around. Also important, as we’ll see.
• HAVE A PRODUCT OR SERVICE WHO’S VALUE TO USERS INCREASES WITH TIME. This is the biggest thing that most people miss, hence the caps. The value of your service needs to increase the more people use it. A classic example is Spotify, where you create all your playlists and organize your music. Once you’ve done that, as investor Sean Parker says, “We’ve got you by the balls,” and you’re much more likely to pay up. The value of Spotify to you has gone up from being just music to music, your playlists and your friends’ playlists, so paying starts to make sense.
• Keep costs low. Also seemingly obvious but actually a big deal: freemium works because the marginal cost of each additional user is low, so you need to keep your operating costs correspondingly low. Again, internet economics, through things like open source and the cloud, help, but that’s not going to be true for everyone.
FACT: with Freemium vast majority of your users use your product for free and a minority pay.
Examples of Freemium
For Services
My favorite example of a freemium service is when I was at college. No matter what bar I went to, they were offering free food such as burgers, hot dogs, peanuts or fried chicken in hopes they would have us pay for something premium, that being a beer or a mixed drink. Did this work on us? Every time!
Another famous freemium is that of a Kirby Vacuum. Have you ever had someone come to your door and ask you if they could setup an appointment for them to do a cleaning of a room for free? You either knew what was going to happen or you said to yourself, heck yes!
Well if you made the appointment, you knew a salesman would come in and clean a room in your house with an outstanding vacuum cleaner. After they cleaned your room, you hoped they would do more with this great product but instead, they wanted you to buy it. You either said yes, no, or have them call you back because you are thinking about it (which is a no).
How is this freemium service? It is a freemium service because they are giving you something free, that being a clean room, and they are trying to sell you something at a premium, which is the vacuum.
Freemium for Web 2.0
If you take a look at the ever popular Flickr website, they use freemium too. Flickr lets their free costumers upload their photos and other items for the world to see. The unfortunate thing is that people can only upload an limited amount. If you want the premium service, that being unlimited storage space, you can buy it for an extra 24.95 a year.
There are a lot of freemium Web 2.0 properties on the web today. It is a business model that is not going away!
Free Digital Photos – Giving free small size digital pictures free on a website whilst the standard size one had to be paid for
Trillian – the basic service is free, but there is paid version that is full featured
Freemium for Software
There are more and more freemium software programs coming out each day. One of the most popular ones is well, any anti-virus program. They let you use it with great protection. Take for example AVG Free Anti-Virus. You get a great program if you download it but if you want added protection, you must pay 49.95 per year.
Things to look out for my considering Freemium
It is important that you require as little as possible in the initial customer acquisition process. Asking for a credit card even though you won’t charge anything to it is not a good idea. Even forced registration is a bad idea. You’ll want to do some of this sort of thing once you’ve acquired the customer but not in the initial interaction.
Don’t require any downloads to start. Don’t require plugins. Support every browser with any material market share. Make sure your service works on various flavors of Windows, OSX, and Linux. In short, eliminate all barriers to the initial customer acquisition.
And make sure that whatever the customer gets day one for free, they are always going to get for free. Nothing is more irritating to a potential customer than a “bait and switch” or a retrade of the value proposition.
Does Freemium Work?
It does. You can tell it works because more and more companies are using it especially in the phone and software world.
Danny Rimer, the London-based venture capitalist with Index Venture said Freemium works because you reduce the main stumbling blocks of product adoption. He said web-based users who don’t have to pay for it will often start evangelizing the benefits to others.
Currently the bicycle shop looks like this
After looking at this Site I was able to transform it to the one below on the URL:
http://www.simplyolan.co.uk/bicycledoctor.html
I was able to make the home page and the contact us page.
HELP! I think this is for David. Please I dont know where to find the Home work in the forum, I dont know how to login into the forum to make comment. I have used it once before but I am lost. Is the login into it the same as my login into wordpress? please help!!
Bad Sites
http://www.videosoniclab.com/
- There is no colour scheme
- Too many boxes
- To many things trying to get ones attention at the same time
- The title of this site was called Home
http://www.aiseikai.or.jp/
- Bad colour scheme
- Too many Flashing and scrolling stuff
- To many things trying to get ones attention at the same time
- The title of this site was called Top page
http://art.yale.edu/
- No colour co-ordination
- Font types dont match
- Too many frames
- To many things trying to get ones attention at the same time
- The title of this site was called Top page
Good Sites
http://www.johnlewis.com/
- Not too many colours
- Although there are more than 2 font types, they are justified and used sensibly
- Positioning and navigation buttons are superb
http://www.sainsburys.co.uk/sol/index.jsp
Few colours
Font matches
Navigation button and layout brilliant
http://www.ibm.com/us/en/
- This site looks very simply but there is soo much in it
- There are not too many colours
- The fonts are simple and do match
- Banners, navigation and links, in short beautiful layout
I had to strip the whole site after the comment of last week and start afresh with only XHTML and when that was validated, I added CSS. I will add more CSS as the week goes
Welcome to MA Web Design & Content Planning.
My first post in this blog is about the designs I like. I will only give you three of them!
Scissor
I saw this multifunctional scissor first at Rymans and I loved it! Because I wasn’t buying it at the time I only could take a picture of it on the stand hence the wrapper on it. This is meant to be normally a scissors but it has evolved and could not only act as a tool to cut stuffs but could be used as a bottle opener and cut used as a nut cracker. When I search further on amazon website I found that the item has more qualities which I list below
Technical Details
- Multifunction Stainless Steel Kitchen Scissors & Bottle Opener 8 Inch In Black
- Ideal To Cutting Fish / Ideal to cut Bread / Ideal to open Bottle
- Ideal to Cut poultry / Nut Cracker / For cutting wire and other craft Projects
- For Cutting Vegetables / For Cutting Soft Box and Pouch.
http://www.amazon.co.uk/Multifunction-Stainless-Kitchen-Scissors-Bottle/dp/B005NDAQDA/ref=sr_1_7?s=kitchen&ie=UTF8&qid=1318161428&sr=1-7 This a good value for money.
Convertible Highchair
We have this convertible Highchair that my daughter has used for 6 years and could still use for the next 3years. This chair could be used as a baby highchair and also be used as a chair and table for eating or studying . I like the Design!
Stabilo S Move
The Stabilo S move a Pen is a very cool pen. The first picture above is one of a normal Stabilo Pen. I like the S Move because they could either be for left handed people or right handed people. I also found out from the web that
“If children are to learn well, they must be holding their pen or pencil in a comfortable position and minimise pressure so they can write or paint in a relaxed manner. With STABILO, right-and left-handed users can choose the STABILO EASYergonomics version developed specially for them. STABILO is the first writing instrument manufacturer to develop pens offering these ergonomic benefits.
In addition, the pens’ low weight and ergonomic shape, the hand muscles do not tire prematurely. The result: children and adolescents can concentrate for longer periods of time and have more fun when writing or drawing.” http://www.anythinglefthanded.co.uk/acatalog/stabilo_smove_pens.html
Examples of a Good Website are
Ebuyer
I love this site because of the beautiful user experience I get from it whenever I used it. When I go to the site at time all I want to know or see is the deal of the day and that is easily seen on the home page. I like the sectioning too ie Top Deals, Technology Deals, Connected Home Deals etc. Navigation on this site is also beautiful (easy to navigate to the outlet 
)
Ebay
I like this site because of its good search engine. The help function is easy to find and to use. Categorized menu on the side which makes search and navigation easy
The “your recent search” is cool! for returning users.
It looks simple and its powerful. With the integration of the email, images, video, map at the top of the page makes life easier for users of the search engine.