What is Freemium?
Freemium is combination of the words "free" and "premium," freemium is a type of business model that offers basic features of a product or service to users at no cost and charges a premium for supplemental or advanced features. A company using a freemium model provides basic services on a complimentary basis, often in a "free trial" or limited version for the user, while also offering more advanced services or additional features at a premium.
Under a freemium model, a business gives away services at no cost to the consumer as a way to establish the foundation for future transactions. By offering basic-level services for free, companies build relationships with customers, eventually offering them advanced services, add-ons, enhanced storage or usage limits, or an ad-free user experience for an extra cost.
The freemium model tends to work well for internet-based businesses with small customer acquisition costs, but high lifetime value. It allows users to utilize basic features of a software, game, or service for free, then charges for "upgrades" to the basic package. It is a popular tactic for companies just starting out as they try to lure users to their software or service.
Since the 1980s, freemium has been common practice with many computer software companies. They offer basic programs that are free for consumers to try but have limited capabilities; to get the full package, you have to upgrade and pay a charge. It is a popular model for gaming companies as well. All people are welcome to play the game for free, but special features and more advanced levels are only unlocked when the user pays for them.
Freemium games and services can catch users off guard, as they may not be aware of how much they (or their kids) are spending on the game since payments are made in small increments.
Source: investopedia.com
By TROY SEGAL Updated December 02, 2021
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