Dual offering
- Users get access to core features at no cost (free tier).
- More advanced features, enhanced usage, or exclusive content are available for a fee (premium tier).
Freemium is a business model in which a company offers basic products or services to users free of charge, while charging a premium for advanced features, functionality, or additional content. The term combines “free” and “premium,” and is widely used in software, apps, online services, and digital media to attract a large user base and convert a portion of them into paying customers.
Success depends on designing compelling premium features and practical strategies to encourage upgrades.
Offering something valuable for free lets companies rapidly attract users, boost brand awareness, and gather data—all while keeping acquisition costs low. The free tier builds trust by letting customers try products risk-free and drives engagement. It also gives businesses the flexibility to test premium features, pricing, and upgrade strategies for effective monetisation.
Provide essential features or limited access at no cost.
Identify advanced tools, expanded capacity, or exclusive content that justifies an upgrade.
Utilise the free tier to establish a substantial, engaged user base.
Employ marketing, in-app prompts, and feature limitations to encourage users to upgrade to the premium tier.
Continuously analyse user behaviour to improve conversion rates and premium offerings.
Rapid expansion through free access.
Relies on a small percentage of users upgrading to premium.
Free access fosters engagement and long-term relationships.
User feedback from the free tier guides improvements and new features.
Case study: Spotify
Spotify offers free users ad-supported music streaming, albeit with some limitations, including lower audio quality and shuffle-only playback on mobile devices. Premium subscribers enjoy an upgraded experience, featuring ad-free listening, offline downloads, higher audio quality, and full control over their song selection. This freemium model helps Spotify attract a massive audience while providing a clear incentive to upgrade for a better music experience.