Freemium is a business model that works by offering basic services for free, while charging a premium for advanced or special features.
-Wikipedia
Like many people, I watch where my money goes. Sure, I have my vices that I’m less careful with, but for a lot of things I can be downright stingy. When it comes to the Internet, I’m a bargain shopper.
There are quite a few businesses out there using the freemium business model, but I wanted to take a quick moment to look at the ones that have turned me from a free user to a paying user and the business lessons we can all learn from this.
Pandora One
Pandora is an online radio station. Give it an artist, genre or song name and it will craft a station with similar music. I’ve played with other services like Blip.fm and Last.fm, but none of them seemed to create stations I liked very much. The service is free, it just runs some minor ads. Since I usually had it in a window sent to my system tray, ads really didn’t bother me.
Then they came out with an application for my BlackBerry. At first, the only ads I saw were for Dockers. I’m not really sure how the music I was listening to made them think I was in the target market for Dockers, but whatever. Then suddenly the ads went away. I think that was more of a glitch than a plan. But now I could listen to my music anytime anywhere. For free.
Recently, they launched Pandora One. It is $36 dollars for a year. A couple of the upgrades I really didn’t care about, such as the higher sound quality (I usually listen with headphones, so the difference will be negligible), the “mini player” (still too big) and the site skins. No ads are a nice feature, the extended play time is good and the new desktop app isn’t bad. But still not things I really “need”.
So why did I buy? I like them. They have consistently rolled out new features, made the service better and haven’t made the ads detract more from the user experience than when I signed up. The few times I’ve contacted support, the response has been quick, friendly and helpful. It works where/when I need it to. Plus, it’s only $36 for a year and that will work both on mobile and my computer.
Picnik/Flickr
Picnik is an online image editing web site. Sure, it’s not as powerful as Photoshop, but for the quick edits, plus a lot of just “fun” stuff, it’s fast and easy. Again, they offer a free version or a paid upgrade that is $24.95 for the entire year. Similar situation to Pandora: consistent upgrades, friendly support, easy to use, integrates with the rest of my online life. Coming in under $50 per year makes it a no brainer for me.
Flickr is the storage side of my photos. Free option includes 100MB of uploads every month, plenty for most people. Easy to use, again, integrates with my “digital life”. The paid upgrade is only $25 per year and you get a lot of great features. I took it a step beyond and got an Eye-Fi memory card, so now my pictures are uploaded automatically, making 100MB seem a lot smaller. Great community, great features, great price, great help – again, the decision to pay was easy.
MailChimp
Talk about a fun company. MailChimp has a fun logo, they include very entertaining links at every turn of working in your account, again, they integrate with my digital life. Free option gets you 100 subscribers and 6 campaigns per month. PLENTY for most people. To upgrade to 500 subscribers and unlimited campaigns, it only costs $10 per month. Since I’m still in the process of transitioning from my old provider, I’m still below my 500 count and I didn’t bat an eye at the $10 because I like MailChimp as a company.
Annual Expense
So I now pay a total of $85.95 to listen to as much music as I want, store and share as many photos as I want and have fun editing those programs. I could spend that much on CD’s in a month or on software upgrades for photo editing easily. Plus I like these companies. (MailChimp isn’t included in here because it is a 100% business expense, but it would tack on an additional $120/year in my case, but I make well over that per month in the returns it brings me from customers)
Will I Buy Your Service?
Since we want people to buy from us, I’ll share my criteria for getting me to consider buying from you.
- Do you offer me anything for free? Can I try you out? Or at least do you offer testimonials from previous customers? Can I see examples? If not, I’m not likely to buy.
- Can I get to know you? Do you have a blog, Twitter account, Facebook page or otherwise? I want to know if you’re someone I’m going to get along with.
- Will you keep going? Can you keep rolling out new features and stay innovative or am I going to have to keep switching providers? That’s why I left my old email newsletter provider, they just weren’t keeping up and changing isn’t easy.
- Are you reasonably priced? The economy is tough, there’s a lot of competition, you either need to be above and beyond the best at what you do, or you need to be competitively priced.
- Are you going to lock me in? Do you offer shorter contracts? Can I at some point get all of my data back from you? Hopefully I won’t have to if you follow steps 3 and 4, but it’s nice to know in advance.
- Are you easy to reach? I shouldn’t have to click more than once (and it should be easy to find) to get in touch with you. Make it easy.
What are your requirements to pay for a free service?
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