The mobile app market is booming, but developers are facing unprecedented challenges in acquiring and retaining users. For many businesses, the answer lies in adopting a freemium strategy – offering essential features for free while holding out premium upgrades as an incentive to convert users into paying customers. But what makes this approach truly powerful is the collateral benefits it brings along.
What Is A Freemium Strategy in Mobile Apps?
At its core, a freemium strategy is simple: mobile apps that adopt this model allow users to download and use the app for free, providing essential features upfront. The entry barrier is zero, luring millions of users in. The way to make money comes from presenting users with premium upgrades, such as exclusive features, no advertisements, or better services.
Two popular examples of freemium apps include Spotify, which streams music for free in exchange for watching commercials, and Duolingo, offering language courses for beginners but requiring a subscription for advanced methods. However, the real hidden advantage of freemium lies not just in turning free users into paying ones – it lies in the spillover effects created by this model.
Why Spillover Effects Matter
The freemium model has revolutionized the way consumers receive and use apps. By offering complimentary basic services but charging for advanced features, app-makers are no longer reliant on big upfront cash prizes. Their income comes from micropayments, allowing them to attract customers by providing free content and later make money by selling extras.
The registration process for most freemium trials is far simpler than that of typical products and services – often just involving filling in your email address. This makes it easy and quick to experience an app firsthand. The word “freemium” was coined to describe products whose basic model is free, but also indirectly generates revenue. Spillover effects occur when the impact of one group (say freemium users) positively influences another group (paying users or the app’s overall growth).
The Benefits of the Freemium Model in Mobile Apps
Spreading User Acquisition on a Large Scale
The freemium model drags down the bar so low and appeals to the mass audience at the same time. People are much more likely to give your app a try at no cost. Once you have attracted their attention, it is up to your app’s value proposition to make them stick and pay.
For example, TikTok began as a freemium app and leaned heavily on this approach to attract millions of users around the world. Now that TikTok has morphed into an ad-funded business model, the initial presence of strong traction in its user base was crucial for quick entry and rapid growth.
How to Generate Huge Quantities of Data
Freemium apps generate comprehensive user data, creating valuable insights into user behavior, preferences, and app usage trends. This data can be used to support data-backed decisions about the future development of an app, better premium feature design, and targeting campaign strategies for marketing.
One example is Duolingo, which offers a free version but analyzes user behavior to find pain points in learning and where users are likely to upgrade for assistance.
Creating Viral Growth Loops
People who enjoy the free version of a Game/App are more likely to tell other people about it, creating an unbroken growth cycle. Features like referral bonuses or social sharing options enhance this virality effect.
A good example is how Dropbox grew its user base early on by giving users who referred others extra storage. All this created a virtuous circle, which saw Dropbox closing in on 500 million users within 3 years.
Leverage Spillover Effects to Maximize Success of Freemium
Provide Real Value Boosting for The Free Version
The free version is often the user’s first impression of your app. If it doesn’t amaze them, you are unlikely to see any upgrades. Make sure that the free tier includes enough functionality and has an experience similar in quality to paid features so people stay engaged.
It adds a real premium feature value to the free version of the app if you offer users one or two limited-time INAL threePapa trials.
Keep Community Involvement High
Creative marketing can help you come up with ideas: sharing features on social media, inviting your friends to participate in something together or creating something that other people will want to share.
Pro Tip: Think about keeping it ‘gamified’ (Apps like Headspace and MyFitnessPal use progress tracking and achievements to give users conversation points they can share with friends).
Find Complementary And Partners
Work and work with advertisers and sponsors who best serve your target audience, place-related partners