At Alunta we have decided to createa a dictionary for words and important terms related to running a subcription busniess. You are now reading about “Freemium”.
The freemium model contributes to a company's revenue by offering a basic version of a product or service for free, while charging for premium features or enhancements. This allows the company to attract a large user base and convert a portion of those users into paying customers. Additionally, the model can generate indirect revenue through advertising or data collection. It's important to note that the success of the model relies heavily on the perceived value of the premium features and the conversion rate of free users to paying customers.
While a freemium model can attract a large user base, it also presents several risks. One major risk is the potential for low conversion rates. If only a small percentage of users upgrade to the premium version, the company may struggle to generate sufficient revenue. Additionally, there is the risk that users may become satisfied with the free version and see no need to upgrade. Offering a product or service for free can also devalue it in the eyes of consumers. Finally, providing support for a large number of free users can put a strain on resources.
Check out other topics in our subscription dictionary below. We've gathered the ones we find most relevant in relation to freemium.
