Freemium is a marketing tactic businesses use to engage customers by offering basic features or services for free.
Giving away products, features, or services for free might seem contradictory to a business’s goal of making money. But the freemium model actually encourages consumers to purchase more items, benefiting the business on the total sale.
In a freemium business model, the business offers some lower-priced or basic features of a product — such as a trial for a streaming service or a software upgrade — for free. In many cases, the customer has to purchase the full package or premium item to get the full value of the connected products. In this way, the freemium model increases the customer’s perceived value of the products, while incentivizing them to buy more.
Freemium models build customer trust, but they also risk losing customers who only want the free feature. A customer could use a streaming service’s free trial and then cancel. Most freemium models, however, grow customer bases and develop loyalty.