For customers, there’s nothing more exciting than the word “free.” A free trial to experience the ins and outs of a service, a way to check out if the editing program is really what’s advertised—these no-cost entry points give us a no-strings-attached preview before we commit. Receiving free items capitalises on our natural human psychology to want to get something for nothing and often affects how we perceive the giver themselves. In this case, it’s the business.

While plenty of businesses occasionally host free giveaways or offer free samples, many opt for the freemium model, a more strategic approach. The model still offers a taste of their product and service with no upfront cost but encourages signing up for premium features or the full experience.

Giving away something for free could be just what your business needs to bolster its revenue.

What Is a Freemium Model?

The word “freemium” is a portmanteau of “free” and “premium,” combining the perks of free access and paid features. When it comes to the model itself, it’s a sound business strategy involving businesses offering basic access to a service or product, with the optional upgrade to the paid version for the complete experience. It essentially lets customers dive into action without any initial investment, such as first-time deposit bonuses in gambling apps or free skincare samples at a store.

The idea of freemium has been developing since the early days of buying and selling, with vendors offering the customer a taste of their product or a 10-minute trial of their service. It’s just enough of a window into what they’re selling to spark interest before requiring a full purchase. In the ‘80s and ‘90s, when digital products started to take off, some software was distributed with limited features and usage, and users could pay to unlock the full version.

Today, many companies use it as a major driver of customer acquisition. It’s evolved past a simple free trial format and is now a much more sophisticated strategy. The freemium tier is now part of a longer-term funnel that lets people enjoy a genuinely useful free experience while gradually revealing ongoing value. Eventually, customers feel that an upgrade is a natural next step. 

Why the Freemium Way Works

Customers rarely make impulsive purchasing decisions. Of course, there are spur-of-the-moment purchases like an extra screen protector at checkout or a discounted indie game, but products with long-term value often require more thought. The freemium model works because it aligns with how customers buy. It gives people the time and opportunity to explore, make comparisons, and build confidence in a product, service, or business before committing.

Almost all business strategies are grounded in psychology. And if we look deeper into the psychology behind the freemium model, we see that it taps into influential behavioural triggers like curiosity and commitment. Freemium lowers the barrier to entry, as it removes the often hefty financial commitment people need to make from the get-go. People are naturally loss-averse, meaning if they make a purchase and don’t enjoy the product, they’re left with something they won’t use and money they can’t get back.

Users can also become more comfortable and familiar with the product to some degree before fully committing. They instantly derive value and can determine whether the product or service is what they want. If not, they can move on. If so, they can go ahead and purchase the full thing.

What Businesses Are Doing Freemium Well? 

Various well-known tools and platforms do freemium exceptionally well, making it an integral part of their broader business strategy.

• • Spotify: Spotify’s free tier allows users to access a complete music library, but with ads every few songs and a skip limit of six tracks per hour on mobile. Users appreciate having all their music and curated playlists in one place and are inclined to upgrade to Premium for offline playback, ad-free listening, high audio quality, and more.

• Grammarly: The free version of Grammarly offers simple spelling and grammar checks for a quick proofread, while the premium version comes with advanced features like suggestions for style and readability. Professionals and writers logically find merit in the full-featured program.

• Apple iCloud: Every iPhone user is granted 5 GB of free iCloud space to store photos, videos, and other app content, but this limited amount typically isn’t enough to back up everything. Soon enough, users recognise the need for additional storage and opt for larger GB tiers.

These businesses do freemium well because they naturally create that sense of autonomy, all while getting users to trust their business and their offering. They gradually introduce value instead of pushing the hard sell, eliminating the pressure involved.

Tips to Get Freemium Right

Once you’re ready to launch your own freemium model, follow these tips to maximise its success:

• Make Upgrading Easy: The transition from free to premium should be a natural progression and not full of hurdles. Many companies integrate an upgrade button within the platform or app, instantly leading users to purchase and allowing them to pick up where they left off, only with more features.

• Provide Engagement and Real Value in the Free Version: The free version is your chance to make a good first impression. Users should already find value in the product or service, but your business should make it clear that the premium option has significant advantages. 

• Offer Incentives for Upgrading: Limited-time offers, discounts, and bonuses can motivate users even further to upgrade faster. Just make sure they don’t feel overly sales-driven or pushy.

Launch a winning freemium model, and you can build trust and make upgrading feel like a logical progression, without aggressive marketing tactics. After all, no customer wants to feel like they’re being cornered into a decision.