The Freemium Flaw: The Challenges Faced By Digital Business’ Default Model

The concept of freemiums has been a prominent business model for decades and its origins date back to the early 80s, where games and software applications of that time offered their products for free for people to try. An alternative version called Trial Versions were rolled out by such businesses for users to get a glimpse of their products.

Usually, these trial versions had time restrictions or tools restrictions. Some products were available for use for only 14 days from the date of installation and some products restricted major features of the app.

When users found that the application was inevitable, they were asked to buy or upgrade to a paid model.

After being in the market for over two decades, the word freemium was only coined in 2005, on a blog article.

Freemiums are one of the best ways to get the conversation around your app started. They call it buzz in marketing, where you try to find your space in the clutter and stand out with some amazing features and processes you have incorporated into your app.

Because your business is not credible, users would hesitate to spend on buying and using your app. But if it’s free, users have nothing to lose. When they like it, they would be ready to pay for added benefits as well.

Some of the most advantageous aspects of freemiums include –

Despite the advantages, freemiums are some of the hardest models to monetize. Challenges are aplenty in this business model and let’s look at them one by one.

Feature Inclusion/Exclusion : where business owners often get confused in selecting what feature to offer to users for free and what to retain for paid versions. A small miscalculation could bring in a consequence that users would never want to upgrade because they are getting most things done.

Real-world Scenario : When you offer a host of options/features such as third-party integrations, unlimited links, unlimited users and more (depending on your app and business), you need to be careful in selecting what should go as free and what should be priced. Your free plan should be just a glimpse of the potential of your app and not the other way around.

Expensive In the longer run : if you don’t find an ideal way to monetize your app. Having thousands of users who pay nothing to use your app will eventually lead to losses as supporting the existence of your app and its functioning costs you money.

Real-world Scenario : you have a freemium photo editor app that people love. They use some basic features and they don’t see a need to upgrade. Such users are only pulling your business down and you need to look for other avenues to monetize your app.

Offering Support : this is crucial as your users are bound to have questions and queries about your app/service. This increases when a payment gateway is involved. You need to be able to support a strong support team to retain your customers.

Real-world Scenario :when your app/product/service is free, the amount of money it fetches in return is initially very less. This lets you compromise on other aspects like the lack of a solid support team, customer relationships and more, making you run a bootstrapped, minimal-people business. When users don’t find optimum support for a product they use, they are bound to abandon it.

Scaling Pricing Models : your business can only scale up when your pricing models are right. So, you need to make a wise decision on whether you intend to offer subscription services, in-app purchases, pay-per-use or more to charge your users.

Real-world Scenario : there are several pricing models and an ideal one depends on what your business is. A wrongly implemented pricing model can break your business and the rapport you have with your users. You cannot expect people to pay annually for a photo editing app unless the features are for pro photographers.

Upselling becomes difficult : as users need to really find features that are brilliant and add value to their diverse needs and purposes. If their cap of 10 posters a month (a free poster-maker app for instance) is enough, there is no valid reason why they would pay for additional features.

Real-world Scenario : upselling is like making a cold call in the freemium business model. Most people don’t need it. But if you mix and match your offerings in your pricing plan, they would have no choice but to pay for your app/service. For instance, they can import multiple image formats but cannot resize them for different purposes. Such show-and-hide approach works generally well.

Yes, there are several ways to overcome the challenges associated with freemiums. Let’s look at them now.

A Comprehensive Solution : which is your mobile app or a website. Both your products should be solid so your users don’t have restrictions arising out of screen sizes or devices for them to use your service. A hybrid app is even more ideal as it allows you to cut down on your development costs as well.

Dynamic control over free and premium features : where you have one holistic view of all the services or features you offer and the complete control to modify them according to your product or service’s usage and demands.

Personalized and Interactive Marketing : is the most creative way to monetize your product. When you take a personalized approach, your users feel more connected to your app and a sense of belonging to your community kicks in. And when you are interactive, they have an immersive experience which is unique only to your brand, letting them pay to stick to your business.

Promotions and offers : based on the data and inference from the business intelligence tool in your app/website. The more data about customer behavior you have in terms of touchpoints, heat maps, cart abandonment and more, the better you could run promotions and deals.

PlantSnap is an interesting app that allows you to get information on any plant type on earth. It is a fun and an insightful way to connect with nature and allows enthusiasts to know their plants better. But initially, PlantSnap found it difficult to get a strong hold of the market because they were offering a paid app.

PlantSnap was difficult to be found because of this and it kept decreasing in terms of online visibility. But in 2019, the app switched to a freemium model and within four weeks, the company hit a download count of 500,000. Now it deploys tons of interactive features to maintain a retention rate of 39%.

Freemiums are becoming classics in the contemporary economy. They are serving like business cards for app and software development companies, who flaunt their latest features and functionalities in solving a specific concern.

This industry is evolving at rapid rates and will soon embrace AI-based personalization. This will allow businesses to study user behavior in detail and roll out pricing plans accordingly. SaaS companies are doing this already. With more interactive elements through machine learning, analytics and deep learning integrations, this sector will further bridge the gap between paid and free services in the near future.

If you are someone looking to develop a business based on a freemium model, we would say that it is the best choice. The time is just right to venture into this. However, to overcome all the challenges we mentioned and to incorporate the solutions we saw (and more), we recommend getting in touch with veterans like us.

We will help you roll out an ideal freemium product or service that fetches you only profit in the longer run.

Reach out to us today.