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 it before buying it’ 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 user audience before monetising. Some pretty big businesses now seem trapped in their freemium model. Unable to shift their user base towards paying.
Consumers can become pretty comfortable living with freemium. Bouncing from one freemium offer to another. Experiencing an advanced digital lifestyle, across a multitude of free products available on the web.
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 monetise on time.
There are 7 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 emerge in different contexts. You can read more about them here on the Ends blog >
Broadly, Freemium uses 3 types of ending - Time Out, Credit Out or Proximity.
Freemium ending types
A Time Out type of ending limits the user to a time period of free access. For example, after 3 months of free access, the consumer has to upgrade or access is halted.
A Credit Out type of ending provides access to a service through events of usage. Once you have had 5 free events you will need to upgrade to the paid version.
A Proximity type of ending allows the user limited access to the product. Restricting the best features. Placing them out of reach. Outside 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 3 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. I think this is a rather dark pattern and not a healthy base for the provider-consumer relationship.
Oh, by the way. Freemium is not what Facebook and Google use, you are paying them in data and eyeballs on ads. Just wanted to clear that up.
Freemium to Premium
How should it be improved? Consider the experience of the user in the Freemium model. The end of that '3 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. And so will want to move to a stable situation - the Premium service.
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. And in turn, leverage to upgrade.
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 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 and force a discussion on 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 the ending. 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.
1. The consumer has signed up for free service and is told that it will last 3 months with limited features.
2. The consumer has signed up for free service and told it will last 2 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. 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 - freemium service reduced 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 3 events, but could be as much as 10 events.
Endings need to increase engagement at 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 start with a better ending.