The basic idea behind a freemium is for a business to give customers access to a product or service for free with some kind of limitation. In order to take advantage of the more advanced features, customers are asked to contribute some amount of money. This is a way to monetize things that has been extensively used in the software and online arenas, but it can also have applications for other kinds of businesses.
Most experts agree that there are a few keys to a successful freemium strategy. It's usually very important for businesses to make sure the free part of the service is impressive and useful to people. If people don't enjoy the initial product, they won't usually be encouraged to spend more money on any other product offered by the company.
It's also considered important to leave something out. If the user gets everything he or she needs for free, then purchase is usually much less likely. Finding the right balance between impressing people with the free product and simultaneously making people want the more expensive options is often the most difficult part of successfully employing the freemium strategy.
Online companies with freemium business models operate in a few different ways. These features could be an extension of the free service or something totally different. For example, an online email site could offer free email accounts and charge a small fee for extra storage on their servers. One example would be to offer a website that has some useful advantages for people free of charge.
Another common model for freemiums that works a little differently is used in some online games. The game may be designed so that anybody can play, but users are expected to pay some amount of money to get access to things that give them special advantages or open up more game experiences. This fee may often be very small in order to generate more impulse purchases. Ideally, customers will buy more than once and eventually become hooked on the idea of buying in-game content.
The freemium model can also be implemented in situations beyond the Internet and computers. For example, a gym might offer free time to anybody for one day a week, but require a monthly membership fee for access on any other day. The free day gives people a chance to see the advantages of the gym so that they're more likely to purchase a membership eventually.