Startup for Dummies // going freemium

Working at a startup sounds great. But it can get confusing, too, especially at the beginning. If you feel like at some times you don’t have a clue of what your colleagues are talking about; you’re not alone. From now on, don’t just nod friendly when terms like ‘unicorn’ or ‘disruptive technology’ come up. Every week we explain a common startup-expression in our Startup For Dummies. This week: Freemium.

Years ago we saw it happen with, among others, LinkedIn: you could use the social network page for free, but to add more options to your profile and to get in direct contact with other users you need to upgrade to a premium account. You don’t pay anything for the basic account. It’s called the Freemium technique, a contraction between the words ‘free’ and ‘premium’.

// how does this work?
Companies give their core product away for free and then try to upsell features to a (small) percentage of their customers. Internet startups and app developers all use it. Who hasn’t used tools like Dropbox, Skype, Flickr or Evernote on a daily basis? A free model of your product causes word of mouth and can help you grow your customer base in a relatively short time. Besides it can help you drive revenue and profit growth faster than a paid-only model.

// Spotify
All Spotify-users know it: the radio commercials you get between your tracks, while listening to your favourite music, are really annoying. If you upgrade to Spotify Premium you will no longer hear those commercials. Very smart, but it’s not the only advantage of the premium version. According to the music streaming service, the quality of the sound is better (HD) and you can download music to listen to offline. As a customer you can decide if these bells-and-whistles are for you or not.

‘Going freemium’ isn’t restricted to the music industry, though. According to other industries that have the most Freemium potential are the VoIP telephony, consulting companies, photography and news. If you would like to know if your business has Freemium potential you can read this article.

Want to read more startup for dummies?

// pitch deck
// vaporware
// disruptive technology
// pivot
// market penetration
// growth hacking
// HR Tech

Blog by: Alma