The Internet has led to the launch of a wide range of products and services that are pioneering in nature and scope. Consequently, a new category has emerged: The Experience Good - a service or a product that needs a period of use before the customer can determine the value they can derive from it.
Most Internet products or services fall into this category. People don't honestly know they need the product or service until they try it. And asking customers to pay for something they can't put a value on is a no-brainer. However, offer it to them either for a certain period or introduce a free offering that allows them to unlock its value and you're likely to find it easy to convince them to buy. As our research shows, your confidence in your product to be able to offer it for free, speaks volumes in its favor.
Pioneering products have to use a Freemium model if they want to achieve large volumes. Usage and experience is everything. The way to get a million people to pay is to get a billion people to begin using your product. Then, it's easy.
Since Free adds another conversion step to your revenue path, you need to create a bigger market to have enough people who will be paying you at the end of the day.
Evernote is a great example of a value-based product where the customers opt to get locked in as they unlock the value of the product in their lives. Most convert in order to use the service on multiple platforms and for other premium features.
Surprisingly, of those who tried the Freemium service, first-time users delivered a higher degree of conversion. This applies to almost all the categories covered under this research.
The difference between conversion rates for first-time users and respondents who had already experienced the service ranged from 20% for Productivity Tools to 10% for Security products and 9% for Cloud-based services. Back-up services saw up to a difference in conversion of 8%; Security experienced a difference of 10%; Image-sharing saw a difference of 5%.
New-age games saw more than a 100% increase in conversion for first-time users; Movie subscription services saw a rise of 8%; New concepts such genealogy services experienced an increase of 4% and VOIP services cranked up a higher conversion of 5%.
Currently Freemium products come in different shapes and sizes. Value-based Freemium products such as Dropbox allow customers to experience a free product and as they realise its advantages, they opt to pay for it with certain exclusive benefits added.
Characteristic-based Freemiums like LinkedIn and SlideShare offer an excellent restricted-features service for free and for high-end and intensive users, they offer a Pro version with advanced features and unrestricted access.
Free trial period based Freemiums such as CyberScrub demonstrate the powerful value of the offering through time-based trials and thus convert customers from free to paid. Cross-subsidies that offer a free product with other complementary paid-for products are yet another kind of Freemium.
An Experience Good needs the powerful persuasion of the Freemium model to convince customers and clinch the deal. No one can speak so eloquently for the product or service as the product or service itself.
In fields other than Tech Support, 'Free' is catching on. 40% respondents have already experienced Freemium one-on-one consultations with experts from diverse fields such as Energy Savings, Lasix Surgery, Nutrition and Fitness, and Career and Life Coaching.
It's only a matter of time before other one-on-one expertise and consultationbased products and services catch on to the great 'Freeway' that is opening up.
iYogi is the first time nearly 60% respondents have experienced this new kind of Freemium a one-on-one advice session with an expert. A clear indication that any pioneering service not only benefits from Freemium but needs it for customers to appreciate the nuances of the service. Also, the Freemium model indicates a huge self-confidence on part of the product or service that the customer is quick to latch on to. No one could survive if they gave away a substandard offering. And that's the catch.
The Freemium Hall of Fame is filled with exceptional products and services that genuinely offer superior value to the users. That's why they keep coming back and finally are happy to pay. Happy to pay! That's what makes Freemium much more than a marketing strategy it's a philosophy of confidence and self-belief.
Freemium has all the hallmarks of a new marketing religion - 'conversion' of customers into believers and a mystical doctrine that actually advocates giving away the product or service for free to see sales go through the roof and fill the pews to bursting!
Brands such as Dropbox, Evernote, Ancestry, SlideShare, CyberScrub and iYogi, among a host of others, actually re-invent the Freemium model by adapting it to the needs of their customers and to their industry, service and offering.
From online publishing to musical bands, different products and services have taken to Freemium and are experiencing its benefits.
Authors and gurus like Seth Godin and Paulo Coelho swear by 'Free' and bands like Nine Inch Nails have experienced its largesse, ensuring that it spreads across categories, to offline from online, and across media and geographies.
The rise of the Internet combined with pioneering technology innovations is bringing newer kinds of products and services into our lives. These are the kind of services that are difficult to appreciate without some degree of actual usage, in order to understand the value they are able to offer their users.
The more radical these goods and services are, the more they need to be experienced in order to be understood by users. Called Experience Goods, such goods and services have given rise to a new marketing pricing strategy called Freemium.
This iYogi Insights survey of Consumer Adoption of Freemium Goods and Services seeks to understand how the average American uses and relates to new-age technologies.
The survey was conducted on iYogi subscribers through an online form following their support sessions.
A total of 2002 respondents filled the online survey form consisting of 5 detailed questions regarding previousexperience of Freemium offers, usage of Freemium products/services under different categories, Freemium experience details and their choosing to opt for the paid version or not.
The data collected was then collated, analyzed and compared to identify, assess and quantify trends and patterns.
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