Wednesday, December 23, 2009

Is a Freemium Membership in Your Future?

Posted by Princess Eva Angelica at 2:06 PM
Does it make sense to have a free introductory membership to capture a larger share of your market and then work on moving these members up to a paying level of membership?

Clearly the Freemium concept is one that is growing and can make sense depending on your situation. The concept is based on the economics of abundance. Here is a video that outlines this economic concept.

The Freemium Blog lists four characteristics that would indicate if an organization could successfully use the Freemium model.

1. You have to have a quality, free product that people would want.

2. Your product should have little or no marginal cost. For example, offering online only membership might be done with very little marginal cost.

3. You need a big potential audience. Only a percentage of those who take the free offer will convert to a paid membership, so you need to be sure the economics work for you.

4. You have to have premium membership or additional products to upgrade the member to from the free membership.

Here is another article that I thought you might find of interest on calculating the economics behind various types of membership/customer relationships. It is presented from a for profit, web membership perspective.

The article, Using the Freemium Model of Membership Marketing for Business Success, looks at the economics of four types of relationship with a customer.

Traditional Product Sales – Offering a single transaction to a customer without an ongoing relationship.
Recurring Membership – Offering a monthly membership fee tied to a purchase.
Single Payment Membership – Offering an annual membership fee tied to a purchase.
Freemium Membership – Offering a free initial membership with an option to upgrade to a paid membership.

I am not necessarily recommending any of the strategies above. Although I think that de-bundling from a membership approach to a transactional approach would be unwise. But my thinking in sharing these is to remind us to step back and look at our membership product to see if it still makes sense the way it is configured. Are there other ways of going to market that should be explored?

Feel free to share any of these that you have tried by posting your thoughts here.


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