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Also known as: freemium model

Freemium

FoundationalProductStrategies

Definition

Freemium: Freemium is a business model offering a free version of the product with limited features, alongside paid tiers with additional capabilities. The goal is to acquire users at low cost and convert them to paying customers once they experience value.

Example Usage

“Our freemium model has 500K free users, with 5% converting to paid plans generating $2M ARR.”

Common Misconceptions

Freemium means giving away everything. The free tier should be limited but valuable.
High free-to-paid conversion is expected. 2-5% conversion is common for freemium.
Freemium works for all products. It requires large markets and low marginal costs.

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