Freemium = Free + Premium
Freemium describes a business model where company give away a core product for free and then generate revenue by selling premium products to a small percentage of free users (Freemium, 2015). The idea is to make customers fall in love with the free version, and once they love it, they are willing to make a purchase for an upgrade version and spread the word about it to others.
This has become a booming business model, y'all know Candy Crush Saga right? The very popular game that drives everyone crazy.
So, this Candy Crush Sage is the example of freemium model, where you can download the game for free, when it is not "free" actually, you have to pay to unlock some features such as getting more lives, or even pay for an extra moves when you can't solve the game. According to ThinkGaming data, Candy Crush has 6.7 million active users, and the developer has earned $633,000 per day and became the App store's no1. top grossing app. Even myself had spent almost $50 dollar for the game, it was so addicting, that I could not stop playing it anywhere anytime.
Well, freemium business model can be a quick way to attract customers to download or get your product, moreover the word of mouth can be built quickly, such a smart way without having to pay a lot of money to advertise your product. However, freemium business model can be a bad model if we see from different perspective, from the point of view of gamers, it can be a bad thing as they have to pay to continue playing, when actually they can pay once for a game that would take them forever to play.
Well, to make freemium works, there are certain ways according to Gold:
1. Educating your customers about the benefits they will get by paying for an upgrade version.
2. Minimize the cost to serve free subscribers
3. Maximize marketing spend efficiency to generate excitement and virality.
4. Fence your paid offers from your free offers in a way that create a compelling free-to-paid migration path.
5. Establish clear, effective calls to action to drive conversion.
So, are you a pro freemium games? If not, why?
Reference:
https://www.zuora.com/academy/guides/is-freemium-right-business-model/
Hey Ivana, you are posting an interesting information here, I really enjoyed reading it. I totally agree with you on this problem, I have nothing against freemium games but I am against their misleading ways to make us the customer to make too much micro transaction. Sure the game is free, but the company of the game can earn money from ads. and I rather watch an ads rather than paying real money just to progress on the game that I played, that money could go somewhere else to someone that needed it more. Thank you for your post and please visit my blog at http://digitalfeeder.blogspot.com.au/ don't forget to follow me back. Cheers!
ReplyDeleteHi Calvin thankyou for your comment. I agree with you I have nothing against freemium business model not only with games as long as it provides something better once we make a real purchase. I think it really depends on the industry, game industry and music industry such as Spotify has been very successful with its freemium model.
ReplyDeleteThere's an assumption that developers are the one who benefits from freemium apps because it generates more profit, but in fact it's only some developers with popular apps that nailed it. On the other hand, it's not straightforward for consumers too, a fairly high percentage of us benefit because we get good games for free now, but that’s only because a small percentage of players are spending a lot. (Hill, 2014).
I would like to now what do you think benefit from freemium? Especially in game industry. Thankyou!
Reference: Hill, S. (2014). Freemium apps: necessary evil or plain greedy?. Retrieved 21 August, from http://www.androidauthority.com/freemium-model-good-bad-thing-384124/.
I for one don't see whats wrong about this business model. If we look at most of the businesses around right now, most of them offer customers an opportunity to pay a little extra to obtain a certain benefit. Be it like an express queue to board a plane, priority when calling a help line, being able to have access to something before the rest of the general public and etc. Time is money and these companies are capitalising on this. For games like Clash of clans and Boom Beach, to immediately complete the building of a structure, gems are used. These gems can be bought with real money, which saves the player from having to wait hours before it is normally built.
ReplyDeleteThankyou for your comment! :D In my opinion, it depends on whether the developers aim to provide gamers who download their games with a wonderful game experience where their personal wealth does not make an influence on how they progress through the game or they to earn huge amounts of money through players when they allow players to buy items that help them progress faster in the game.
ReplyDeleteHi Ivana! I'm a candy crush saga fans too so I can totally relate to your experience and opinion about freemium business models! I'm totally okay with freemium that is a new way for developers to create money. But once I find out that I have to pay certain amount of money to be able to continue using the app, I will stop using the app immediately, unless I find out that the app is important and able to help me in my daily life then I won't mind spending money on it.
ReplyDeleteI think when you created freemium business model, it is important to firstly ask who is your target customers, to be able to decide how to price it. For example an app if you create an app that targets students, they will likely will ignore your app if it isn't free, but if you target professionals, they are more willing to purchase the app, in another words charge only for apps that those markets willing to spend money.
DeleteI'm assuming you are a student because you are not willing to spend much money on certain app, but do you have any app that you think is helpful for your life? My favourite freemium business model is Spotify! I do not mind paying $12/month, because I can't live without music, when I go back to my homecountry, Spotify free version is not available, but with premium version I can save the songs and still be able to listen to music wherever I am!
Reference:
http://www.entrepreneur.com/article/249062
Hi Ivana, I myself is against freemium applications, I think that it's either a totally free apps or premium apps all the way right from the start. There are some apps that you have to agree to pay right after you open the apps after download. For me, In app purchases is very appealing however, I would not waste my money on those purchases. It is just very misleading for the apps users. I understand that it is a marketing tactics that these applications developer company have to do, but it is just unfair. It would not be a problem if I know that the apps is premium right from the start, I would be more than happy to purchase, on the other hand, when an app is free at first then it starts in app purchases it is somehow deceiving and dissatisfying for consumers.
ReplyDeleteWhat a great comment! I know it's annoying when you find out that what is free from beginning is not actually free later. I think that's why it is important for developers to educate the customers on premium services, and make them comfortable enough to make a purchase decision. The more understand what they can get from premium services and why they need it, they are more willing to pay for it. Moreover, developers can set a price that is able to deliver the customers value and focus on things that freemium business cannot give for example, customer service.
ReplyDeleteReference:
https://www.zuora.com/guides/is-freemium-right-business-model/
I agree with you, I think developers should educate the customers about premium business model, the benefits that they will get when they make a purchase, otherwise they will feel dissatisfied and stop using the app once they know that they have to spend money to unlock some feature or to continue using the app. Basically they need to promote more on the benefits of premium models :)
ReplyDeleteHi Ivana, that was a good post about freemium :)
ReplyDeleteI am not that addicted with games, actually. Yet, Candy Crush is a good example of Freemium apps. At first, the Candy Crush allows us to download for free but they "influence" us unconsciously to purchase if we want a "short cut", e.g. instant access to the next level. I think, in order to maintain the Freemium Strategy, developers needs to make sure that users will stay because the strategy will work when the users start to love the product and at the end, they will become loyal to the brand. What do you think?