What is Freemium?
Definition
A pricing model that offers basic features for free while charging for premium features, storage, or usage beyond free tier limits.
Understanding Freemium
Freemium combines 'free' and 'premium' into a business model where the basic product is free but advanced features require payment. Examples include Spotify (free with ads, paid without), Dropbox (free 2GB, paid for more), and Slack (free with limits, paid for full history). This model lowers the barrier to entry and lets users experience value before paying.
Companies typically convert 2-5% of free users to paid plans. The key is making the free tier useful enough to attract users but limited enough to incentivize upgrading.
Related Terms
Free Trial
A limited-time period where users can access a subscription service at no cost before committing to a paid plan.
Subscription
A recurring payment arrangement where a customer pays at regular intervals to access a product or service.
Tiered Pricing
A pricing strategy where a service offers multiple plan levels with different feature sets and price points to serve different customer segments.
Upsell
A sales technique where a subscription service encourages existing users to upgrade to a higher-priced plan with more features.