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How to use Freemium Model to Unlocks Value.

How to use Freemium Model to Unlock Value.

Your money is in the hands of the people you meet daily, both online and offline. The business legend continued, how will you get this money from them? I pondered on these words. He said value is good but business models are better. That is how entrepreneurs get money from people.

So, it was nightfall, I was going home from my office. I stopped by to buy Suya (Nigeria roasted meat) from a Suyaman (Suya Seller). The first thing the seller did was to cut a piece of the roasted meat for me to taste. The meat was very inviting. I took it from the seller and ate it in order to test how delicious it is. Guess what happens after that, I bought more than I wanted to buy.

While I reasoned the business application of this experience, I discovered that this is simply a freemium model. So, you can unlock value in your business after going through and digesting this article. But, how? See how.

The Two Components of Freemium Business Model:

According to Harvard Business Publishing freemium model is a business model that combines free services and premium services. The Entrepreneur has explained that Freemium business model works in two ways;

  1. If it’s combined with the launch of your company, because being “new'' will bring some intrigue, and a free introductory version reduces barriers to entry.
  2. If your product or service is established and so loved by users that they’ll pay for something before losing access to it.

So, the two components of freemium business model are;

  1. Free Component:

The business gives perfectly free services to the customers and the customers derive huge value from these services. I will explain how this works in the next section of this article.

2. Revenue Model:

The business offers higher services to the same users that they will pay for. This is how the companies that operate on the Freemium model make money.

How Three Modern Companies Apply this Freemium Model Effectively?

We shall be considering how three leading companies in tech adopt the freemium model and these businesses are growing in the now and will continue to thrive. Here are the insights;

Google Search Freemium.

Google is a business under Alphabet Inc. I will analyse these businesses under the free Service component and revenue models headings.

  • Google Search Free Services:

Google provides the world’s information and makes it universally accessible and useful. This information can be accessed by anyone across the globe without having to pay for making a search query. You will agree with me that the information on Google is very useful to your day to day activities. The value of Google Search free service is enormous. I feel you can testify to that.

  • Google Search Revenue model:

While you search for information on Google Search, they mine your data. They use this data to provide advertising services to other companies in the form of Google Ads, display adverts etc. For you to advertise your business on Google you’ve to pay to rank for relevant keywords. This is how Google makes money.

Youtube Freemium:

YouTube is Google Search engine for virtually any form of video contents. The platform has created great value. How does its freemium model work?

  • Youtube Free Services:

You can watch videos free of charge. All you may need is your smartphone or device and data subscription. Many people have become professionals and experts in different things by watching free video tutorials on Youtube. What a great value!

  • Youtube Revenue Model:

Youtube revenue model is similar to that of google search. It uses the activities of users to provide advertising services to companies and individuals that need marketing.

Linkedin Freemium

Have you been charged since you started using the Linkedin platform for networking? Have you seen great value in a platform that is for professional connection? You see the caliber of people you’ve met, how grateful are you for that? This is how the Linkedin freemium's free component works;

  • Linkedin Free Service:

In the book “3S RulesReid Hoffman has a principle which states that humans are social animals that they find fulfillment connecting with other human beings. So, on Linkedin you get access to great experts and professionals that you could network with without payment for the value. You can join great groups, write and connect with people and organizations

  • LinkedIn Revenue Model:

Linkedin offers other services that are only accessible to people that subscribe to premium services. Some of the examples are; learning on Linkedin, having access to people that view your profile etc. They also advertise using your activities on the platform. This is how they make money.

Freemium model can be a business model to a certain business and can also be used as a marketing strategy by other businesses. But the goal is that users or people graduate from the free services to premium just like the Suyaman's example or find a way to monetise their activities as Google and Youtube are doing.

What do you think about this interesting business subject? Do you plan to adopt this business model? Comment below.

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