Everyone loves free stuff. Taster samples at your local Checkers. Bundled accessories with your new phone. Someone else paying for your lunch.
But there’s something even better than free. Welcome to the world of freemium.
Freemium’s been around for a while now. From Spotify to Gmail to Candy Crush, it’s become such a ubiquitous part of our lives that even South Park has parodied it. And it’s still as powerful than ever.
Nowadays, snake-oil traders have plenty of options to make themselves look legit, from faked videos to armies of bots posting five-star reviews. Sometimes, they’re so convincing, they’re able to persuade seasoned investors to give them billions of dollars on technology that doesn’t work.
In a world where charlatans have gone digital, what better way to convince customers of your authenticity than giving them a fully viable product or service to use themselves? Showing is always better than telling.
When done right, freemium can turn a brand into a powerhouse. Last year, Candy Crush made a massive $930 million in revenue and Fortnite over $2 billion. In the enterprise space, Slack recently went public to the tune of $24 billion.
Less discussed is how well the freemium business model works in the developing world. But look at WhatsApp, whose decision to get rid of the annual subscription fee for its African and Indian users saw it become the biggest messaging app in the world.
It’s not just social platforms that are using freemium to attract customers in droves. In Ghana, BIMA and Tigo were able to attract one million first-time insurance subscribers by introducing a free basic family insurance product. Those users were then able to double their insurance cover for a fee — an offer that many took up.
Here at home, Siyavula, is taking on the problem of textbook shortages by offering free educational materials online, available to anyone with a feature phone. The company is able to generate revenue by charging for use of its cognitive learning software.
The beauty of freemium is how it benefits people who may not otherwise have the disposable income to try out new products and services, which makes it an excellent model for driving inclusive growth. With more banks following in TymeBank’s footsteps and now offering zero-fee accounts, the banking industry could finally uncover the secret to reaching SA’s large underbanked market.
The flipside of the freemium coin is that it’s a tricky business model to get right. It takes time, resources and a lot of trust to achieve the network effect and build a large enough network that can support itself. Then there’s the balancing act of providing just enough for free to build a customer base, while keeping enough back that you can monetise in the long-term.
There are three principles to getting it right:
Whichever industry you’re in, you should be thinking about how you can apply the principles of freemium to add value to your business. Because there’s a lot of money in mahala if you know how to sell it.