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A freemium strategy is a company’s policy when it provides some services for free, while for a premium version, customers have to pay. Freemium could be a successful strategy and bring high income. However, to benefit from it, a company has to meet certain requirements:
- a service should have a low-cost price;
- the potential audience of users should be wide;
- the product’s value does not decrease in time;
- the value of a product increases with customers’ audience increasing;
- a company’s product should attract and retain customers;
- a company should have an additional source of income.
Based on this information, two companies that successfully and unsuccessfully used a freemium marketing tool could be compared.
MailChamp Company is an email marketing service that allows sending emails to a list of customers. Ning is a company that provides an opportunity for other organizations or private users to create their own social networks. Both organizations tried to introduce a freemium marketing tool into the practice. The MailChimp Company was successful in it, while Ning failed.
Both companies business is based on internet technologies. Therefore, the approximate costs of their services should be similar and rather low. Both companies’ stuff number is also similar. It means that both organizations did not require additional costs for salary. The value of both products does not depend on the number of customers. Even in Ning’s case, the customers’ audience does not play a significant role because the company created “private” social networks, not global ones. Thus, in these points, MailChimp and Ning were similar. According to the additional sources of income, no information about companies’ positions is available.
It could be supposed that the difference in the potential customer’s audience exists. The product of the MailChimp Company is much more popular than the service of Ning. It results in a higher amount of free users: 85,000 of MailChimps users in comparison to 17,000 of Ning users. This factor might be crucial for the freemium strategy application. It was stated that for this management tool’s success, the audience should be high and better calculated in millions.
The service of MailChimp is in-demand, especially in the condition of e-mail marketing growing popularity. It could be claimed that this service would be used repeatedly. The value of this product does not decrease in time. On the other hand, the demand for private networks is not that high. After creating one network, a customer doubtfully will create another one or pay for additional services. Another possible Ning’s problem is the inability to distinguish free and paid services. MailChamp limited the number of e-mail receivers for free users. The company’s position is well-determined. However, it probably was not that easy to perform this division in social networks.
It could be concluded that the main difference between companies is the product’s characteristics. Initially, MailChimp provided more demanded service. The company had a higher amount of current and potential users before the freemium service introduction. Besides, the value of the MailChamp product could be considered to be higher. Thus, the company freemium approach was successful. On the contrary, the audience of Ning was and remains smaller, and the product value is lower. For this company, the strategy of charges after the free trial period is more appropriate.
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