Enterprise freemium mode: first set up the stage and then sing

"We are entering an era where free is the standard rather than heresy." This is the amazing language of "The Long-Tailed Godfather" Chris Anderson in his new book "Free: The Future of Business."

Undoubtedly, nowadays, “free” has become a magic weapon for merchants to attract consumers. A variety of gifts, experience coupons and trials can be seen everywhere. However, does the free lunch really exist? As we all know, human beings have never stopped pursuing profits since their own trading activities. It can be said that the profit maximization is the goal of enterprises under the market economy system and the essence of commercial society. In the free economy, in order to achieve a balance of the market value chain, enterprises must in some way fill the value gap brought by free, and “free value-added” is such a typical business model.

Inverted pyramid constructed by "free + paid"

"Freemium (Free+Premium)", a free value-added business model, also known as the "free + charge" model, is a free-to-charge hybrid business model, initially invested by Union Square Ventures. Fred Wilson suggested. This emerging business model relies on providing some basic products or services for free to accumulate popularity, and then launching value-added fee-based services to convert some free users into paying users for profit. This is like setting up a free platform first, not collecting tickets, attracting as many viewers as possible, and then singing, and naturally someone will be willing to get closer position, better service, and more Super Star on the stage. The opportunity to interact and willingly pay for it.

In the freemium business model, “free” is a prerequisite. First, a large database of basic users helps companies better understand consumer demand and improve product and service quality. Second, zero thresholds greatly reduce the resistance of consumers to paying users. After all, there are opportunities for further promotion, such as contact, trial, and experience. It can be said that each additional free user is equivalent to adding a potential paying user. Again, the zero threshold has a strong word-of-mouth effect, and people are often happy to spread and accept any free information, which will help to quickly increase the visibility of products and services.

"Payment" is value protection. It is undeniable that in the freemium model, the proportion of paying users is not large, but according to Pareto's law in economics, 80% of the value is created by 20% of users. It is a core consumer of enterprises. They have stronger economic strength, stronger consumer desire, higher brand loyalty, can support the cost of a large number of free users, and build an inverted pyramid-style profit model.

In a sense, the freemium model subverts the simple gift promotion model in the past. It emphasizes the idea of ​​a platform economy—the market is not only a game between buyers and sellers, but a broader multi-ecosystem. By creating a “platform”, companies can build a space or place for transactions, facilitate transactions between two or more customers, and receive the appropriate fees to generate revenue.

Currently, the freemium model is extremely common among network service companies and software companies. Because the threshold of the Internet industry is low and the cost of digital products is limited. At the same time, the average cost of investing in each user decreases with the increase of users, and the economies of scale make the marginal cost tend to zero. A typical website usually follows the 1% rule: 1% of users support all other users. The viability of this model is that the cost of serving the other 99% of users is almost zero, or even completely negligible.

Free VS fee, configuration is good

For companies using the freemium model, the bigger challenge comes from turning free consumers into paying consumers. If consumers believe that basic free services are already able to meet their needs, they will no longer have the desire to upgrade to value-added services. So, how should we allocate free resources and paid resources more reasonably, so that consumers feel the need and willing to use paid services? In general, free and paid resources can be ranked in terms of content, time, and scope.

Content: Platform free, value-added charges

Consumers get a basic product or service for free, but if you need a higher level product or service, you have to pay a fee. Here, the products or services that need to be paid usually include the following:

First, expand and improve quality. For example, the VIP members of the Chinese website can read the VIP chapter of the novel, get extra points, books and books, and enjoy the unlimited capacity bookshelf. Netease's VIP toll mailbox provides more than free mailboxes. Diversified services (passport, customer service line, username change, etc.), more powerful mailbox functions (improving the number of groups, attachment size, network disk capacity, etc.); Radiohead band provides low-quality MP3 downloads for free on the Internet. High quality disc version music.

Second, personalized and customized, the paid members of China Mobile's Fetion service can enjoy privileged functions and services (special membership logo, point acceleration, friend expansion, create group and join group privileges, rank top, member nickname, etc.); Netizens can play online games such as "Journey" and "Legend" for free, but they need to pay for special items and enjoy more game functions; McKinsey & Company and McKinsey Daily offer free general management advice to customers, selling customized Management suggestions; Teng Xun and Kaixin.com implement a virtual currency purchase system for some virtual goods.

The third is commercialization and specialization. The 360 ​​security guards launched by Qihoo are free for individual users, and charge for professional high-end value-added services. The profit points mainly include online game security, software services, browser search, enterprise services, etc.; Adobe allows Users use Adobe Reader software for free, but charge companies that need to install Adobe Acrobat to make files.

The fourth is to advertise. Many free versions of software often carry advertisements or product watermarks. If users want to use all the functions smoothly without any interference from advertisements during use, they need to purchase a paid version.

Time: short-term free, long-term charges

Free products or services provided by the company are only valid for a period of time, and consumers pay for long-term use. For example, Rising will issue a half-year free version of Rising Anti-Virus to the whole society. All users can obtain the installation package through Rising official website and major download websites. In another example, the Flickr website provides a certain number of free photo services to netizens every month, and large-capacity and long-term services are subject to payment.

Scope: Partially free, overall charge

Companies provide local products or services for free, and consumers pay for a complete product or service. For example, most software will be given a trial version when the new version is released, allowing users to experience some of the features of the product for free and charge for the full version. Another example is that publishers publish some sections of the book for free on the Internet. If readers need to read the full text, they will have to pay for books.
Set up a stage to sing, there are ways to follow

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