Whether it's a mobile app subscription or an Amazon Prime trial, the freemium business model is used for all manner of products and services. Yet when it comes to transitioning customers from freemium to premium/payment, is the customer experience always destined to be a bad one?
Consumers are flooded with opportunities to experience services and digital products for free. The assumption is that after experiencing the benefits of the product they will upgrade to the full version.
This ‘try before you buy' model has made lots of sense in the past for companies. Now digital products have been able to maximise the model, commonly called Freemium.
Start-ups particularly rely on the freemium model to build their user base, keen to get an active audience before looking to monetise.
The issue? Consumers can become pretty comfortable living with freemium. Bouncing from one freemium product into another; experiencing an advanced digital lifestyle, across a multitude of free products available on the web.
Some pretty big businesses now seem trapped in their freemium model, unable to shift their user base towards paying. Very few businesses can go down the Facebook and Google route, where consumers pay them with their data and eyeballs on adverts.
Lingering on freemium
Investors feel the frustration, witnessing their investments ebb away as the backed founders grapple with monetising. Failing to achieve the right customer leverage and shift users to a pay model can only lengthen that pain.
The problem does not lay with product quality, price point or features. The problem is how it ends. The way freemium ends and transitions to Premium needs to change if businesses are going to be monetised at a time that suits both the business and the customer.
Consumers can become pretty comfortable living with freemium. Bouncing from one freemium product into another; experiencing an advanced digital lifestyle, across a multitude of free products available on the web.
There are seven types of endings consumers experience across products and services: Time Out, Credit Out, Task Completion, Withdrawal, Lingering, Proximity, and Style. Each has different characteristics and emerges in different contexts.
Broadly, Freemium uses three of these endings:
- Time Out - limits the user to a time period of free access. For example, after three months of free access, the consumer has to upgrade or access is halted.
- Credit Out - provides access to a service through events of usage. Once you have had five free events you will need to upgrade to the paid version.
- Proximity - allows the user limited access to the product, restricting the best features and placing them out of reach from the proximity of the Freemium account. For example, you can only save files locally until you upgrade to a paid version.
Sometimes these are combined. For example – ‘Proximity for three months’. And some models hide the switch to payment after a period of freemium by asking the consumer to put in credit card details at the beginning of Freemium.
Unfortunately, this is a rather dark pattern and not a healthy base for the provider-consumer relationship.
Freemium to premium
How can it be improved? Consider the experience of the user in the freemium model. The end of that 'three months free' freemium offer has been agreed at sign-up. It is a predictable experience. The user knows when and how it will end, placing little cognitive interest in the conclusion to that freemium offer.
Stability like this is what you want to offer your premium paying customers.
If you're really interested in shifting your users your freemium model should be unstable at the end. It should create risk for the user. Meaning the end should not be as predictable but feel imminent and unpredictable. The consumer should feel it might be ended at any point.
Using a different ending for the freemium model encourages emotional discussion between the user and the provider. It increases the perceived value of the product, giving it increased emotional currency.
Most Freemium models fail to engage with the consumer at the end of the offer. Not through inspiring marketing about product benefits - God knows the consumer is only too aware of that. But it fails because the freemium ending is passive. There is not a negotiable end with a Time Out, Credit Out or Proximity type of ending. These ends have been agreed and prepared already. What is there to talk about? There is no ambiguity.
What end should a freemium model have?
Freemium model should have a short stable period followed by an unpredictable ‘Withdrawal’ type of ending. This would initially create stability to experience the benefits of the product. Then expose the consumer to the risk which in turn creates a discussion about value with the provider.
I would not recommend an ending like this at the completion of a standard consumer lifecycle. But the freemium model is not a standard experience. It is free. So, the rules are different, even at the end. And currently, most Freemium endings are being used in the wrong way. They are undermining the value of the product.
Imagine two versions of a freemium offer.
- The consumer has signed up for free service and is told that it will last three months with limited features.
- The consumer has signed up for free service and told it will last two weeks and then it might be withdrawn at any minute after that. Not that it is withdrawn after 2 weeks, but that it might be.
The first option has stability for the consumer. It has a clear time-based relationship. But it is passive.
The second option creates ambiguity. The relationship moves to emotional engagement based on value. The consumer is kept wondering.
Another way of doing this would be reducing access to features gradually. Instead of a clear proximity type of ending – the freemium service reduces in features. Providers should limit features progressively. Reducing stability of the freemium relationship and increasing the perceived value of features in the Premium product.
Still further an approach with a Credit Out ending could be that stability is available for at least three events, but could be as much as 10 events.
Treat freemium differently
Endings need to increase engagement at the point of off-boarding. In normal relationships, this helps the consumer depart smoothly, with cleared data and good brand perception of the provider.
But endings in freemium are not the same. The aims are switched. The intention is for a transition from freemium to premium. To do this the benefits and value of the product needs to be clear. By having stable endings businesses are reducing the opportunities for consumers to reflect on product value. And in turn, keeping them comfortable with freemium.
If you want to shift your users to Premium start with a more considered ending.