Following the phenomenal growth of Dropbox and Evernote, many companies are now trying to figure out whether to implement the freemium business model and if so, how to do it successfully.
After studying this topic thoroughly and talking to many entrepreneurs, I found that there were two questions that people kept struggling with: What happens to the customer acquisition cost in freemium?
What is the right free/premium segmentation?
Figuring out how much to charge for an app is not easy. It’s all about finding the right balance between what it costs to produce and maintain the application, and how much users are willing to pay for it. Other factors to take into account are revenue from in-app purchases and in-app advertising.
These handy-dandy equations give you a ballpark estimate of how much to spend on acquiring a new customer. But they don't tell you how to spend that money -- and that's where things get interesting.
The idea of offering your product or a version of it for free has been a source of much debate.
Pricing is always tricky. Unfortunately, many entrepreneurs don’t give it enough thought. They will often copy the pricing strategy of similar products, base their decisions on pompous statements made by “experts” or rely on broken rationale (we worked hard so we should charge $X).
Most entrepreneurs think that risk is just an “occupational hazard” that can be minimized or eliminated by a smart businessman. That way of thinking is simplistic and wrong. In reality, some risks are good and should be embraced for growth and a competitive edge, while others are bad and should be avoided completely.
Gamification: How Competition Is Reinventing Business, Marketing & Everyday Life
As startups seek to gain an edge in today’s economic climate, the freemium business model has been gaining strength. Certainly it makes sense to to charge for your premium offerings, but the true success of a business often lies in how many customers it can convert from free to paid users.
Typically, the conversion rate of a company ranges from 2 – 3 percent. It’s possible to goose that number a bit higher though. Here are a few ways to do that:
Social Gaming and Gamification Innovation Briefing
This 80+ slide presentation was delivered at an Econsultancy trends briefing during June 2011.
Inside, it explores social gaming, gamification and the associated innovation, trends, strategies and future possibilities to help understand and leverage this popular, but complex, area through 2011 and beyond.