Definition

A technique where a business offers a free basic product, giving the customer an option to use an advanced version for a premium cost.


Information

Freemium works by initially offering a basic product, and then the user will be offered a premium service that comes with a fee. This way, sales can be made without having to be excessively pushy. AVG anti-virus software, Yahoo! Mail, and most online games fall under this category.

The Freemium system also allows more effective crowdsourcing, which is important especially for software programs that are being tested for bugs. Because the product or service is used by more people, then design flaws can more easily be detected.

see also: Digital Marketing Tools

Related Terms

view all terms in the Business and eBusiness glossary or all terms in the Digital Marketing glossary

Sites

Freemium.org

Articles

Explainer: What is the Fremium Business Model
Business Insider (April 8, 2011)

Going Freemium: One Year Later
MailChimp Blog (September 27, 2010)

How to Create a Profitable Freemium Startup
Andrew Chen Blog (September 27, 2010)

Freemium Isn’t A Business Model, It’s A Marketing And Trust Strategy
What’s In Peter’s Head (October 17, 2008)

My Favorite Business Model
AVC (March 23, 2006)