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What is the frontier between freemium and premium for internet startups ?


What is to be considered while building an free internet service and to determine when the premium can start ? Is there best practices in that field ?


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Opened by Antoine Fournier, Head of ECM, Input and Output management, Zurich Insurance
Jun 2, 2012.



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Stéphane Gasser Président, Prométhée
Jan 7, 2013

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There are several possibilities:
  • by setting a limited number of using a feature: e.g. free up to 1000 contacts, or up to 10 messages a day, or up to 100 searches...
  • by restricting the service: e.g. automation of tasks is not free, or choice of colors is restricted in freemium...
  • by making the service anonymous: e.g. freemium version adds a logo of the service when you send documents...
  • by adding support: e.g. freemium version comes without any documentation, or very restricted doc and no support...
Therefore, at first the freemium/premium model must be chosen, and then the limit must be set. Both steps are important.And to my opinion, the right way of chosing those is by testing (on a panel, or on the first users), so that :
  • the freemium version is useful (otherwise, the business model is not really freemium),
  • the freemium version is enough for a large fraction of users (so it becomes popular),
  • the freemium version is too restrictive for a specific target which is able to pay for premium (ex: corporate users).
A good way of testing is to allow the first users to use the premium version during a "beta" period (one year ?), to build statistics of usage, and then identify which features are important for everybody and which are important for specific groups possibly willing to pay for them.
SG
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