Common Myths About Freemium Pricing

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One of the reasons why you should invest in competitor-monitoring software is to collect sufficient business intelligence to get your pricing strategy right. This aspect of your business has no room for miscalculation. Your ability to identify the sweet spot when pricing your products or services at certain points can help you achieve your specific goals.

The freemium strategy is among the unique pricing strategies that you can observe today. A combination of “free” and “premium,” freemium works even if it seems like a fast way to reduce your profit.

Despite its popularity, much of this strategy is still shrouded in mystery. Here are some of the misconceptions about freemium:

Freemium Pricing Makes Sense to Internet Products Only

There is no denying that freemium is the pricing strategy of choice used to sell app developers and other Internet-based technologies. But it does not mean that it can’t work for different kinds of offerings. As long as your offerings meet the elements of a successful freemium pricing strategy, your company should reap its benefits.

For starters, you should only consider freemium when your product is something most people need or want, has promising market potential, costs low to create or maintain, and can completely function as an independent service without any charge.

Many products lack at least one of the elements mentioned above, so it is imperative to run the numbers before you should even consider taking the freemium route.

There Is Just One Kind of Freemium Model

Usually, businesses employing the freemium pricing method hope to turn a profit by covering free customers to paying customers. In most cases, though, the second group represents just a tiny portion of the overall number of customers, which may seem to be too small to render a product commercially viable.

But not all companies using this pricing strategy makes money off of the product alone. It is often silly to focus solely on the very product to push your business to profitability and achieve sustainability.

Some software developers offer paid features to not users but the organization to which those users belong to gain more control over the system. Some companies use freemium pricing to attract people only and to monetize free users through advertising within the product. Others rake in cash through revenue-sharing with third parties.

The point is that there are many existing proven models to adopt. You can even come with your own model to use freemium pricing to maximum effect.

Free Trial Is the Same as Freemium

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Offering a product as a “free trial” is not a form of freemium pricing unless it is established to the users that it will not be offered as such forever. The notion of an unlimited free trial can backfire on you since the users might just switch to a similar product they can use for free instead of signing up to a subscription.

The psychological effect of freemium is a powerful one. Calculate the risks of using this pricing strategy to harness its maximum potential.

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