{"id":109519,"date":"2024-10-14T00:30:17","date_gmt":"2024-10-14T07:30:17","guid":{"rendered":"https:\/\/thegood.com\/?post_type=insights&p=109519"},"modified":"2025-05-15T11:51:27","modified_gmt":"2025-05-15T18:51:27","slug":"freemium-pricing","status":"publish","type":"insights","link":"https:\/\/thegood.com\/insights\/freemium-pricing\/","title":{"rendered":"How To Use Freemium Pricing To Drive User Acquisition and Adoption"},"content":{"rendered":"\n

It may seem counterintuitive, but giving away your product for free might be the best way to acquire new paying customers.
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Well, you shouldn\u2019t give away your entire <\/em>product. It\u2019s a strategic balance between unlocking features to engage new users and gating high-value features that warrant a paid subscription (we\u2019ll get into how to decide what to keep in each tier later on).<\/p>\n\n\n\n

This strategy is called freemium pricing, and it\u2019s the source of growth for countless digital brands across the software industry. These brands attract millions of users with some free access and then charge for advanced features or uncapped limits.<\/p>\n\n\n\n

Is the freemium pricing strategy right for your digital product? Let\u2019s explore this technique to help you decide.<\/p>\n\n\n\n

What is Freemium Pricing?<\/h2>\n\n\n\n

Freemium – a mix of the words \u201cfree\u201d and \u201cpremium\u201d – is a business model that offers basic features of a product or service for free but places richer or supplemental features behind a paywall. The fee is typically a subscription.<\/p>\n\n\n\n

The free tier is usually a stripped-down version of the product, limited to only the basic functionality that users need to get a taste of the product without making a financial commitment. In some cases, upgrading from the base product to a premium version removes an unpleasant obstruction (e.g., paid Spotify accounts are ad-free).<\/p>\n\n\n\n

Dropbox<\/a> is a traditional example of a successful freemium model. Users can store up to 2GB of files for free, but if you need more space, you have to upgrade to a paid tier.<\/p>\n\n\n\n

The goal of the freemium approach is to attract a large number of users who are happy to use a free product but unwilling to pay for something unfamiliar. Over time, some of those users decide to pay for the additional features.<\/p>\n\n\n\n

The term “freemium” was coined in the early 2000s, but the concept originates with the freeware and shareware distribution models of the 1980s and 1990s that only charged users after they received some value from the product.<\/p>\n\n\n\n

Examples of Freemium Pricing<\/h2>\n\n\n\n

The best way to understand freemium pricing is to look at some notable examples. These familiar companies are leveraging the freemium model well.<\/p>\n\n\n\n

1. LinkedIn: Freemium + Free Trial<\/h3>\n\n\n\n
\"A<\/figure>\n\n\n\n

Most of us are familiar with LinkedIn\u2019s free social networking platform with basic features, but you can also upgrade to a premium tier to get useful additional features, such as more direct messages, better searching, and insights about people and companies. The premium tier also offers a one-month free trial.<\/p>\n\n\n\n

2. Google Workspace<\/h3>\n\n\n\n
\"An<\/figure>\n\n\n\n

Like most people, you probably use one or several of Google\u2019s free products. But you can get advanced features – especially for businesses – by upgrading to one of their paid tiers. Premium plans offer higher usage limits, enhanced features, and additional services.<\/p>\n\n\n\n

3. Zoom<\/h3>\n\n\n\n
\"An<\/figure>\n\n\n\n

Zoom exploded during the pandemic<\/a>, largely due to its free tier that lets anyone try the basic product for free for an unlimited period of time. However, once you start using it regularly, the paid features will start to look very attractive.<\/p>\n\n\n\n

4. Zapier<\/h3>\n\n\n\n
\"The<\/figure>\n\n\n\n

Zapier users are limited on the type and number of \u201czaps\u201d they can run each month. Once you have a workflow setup, it\u2019s easy to decide to pay to keep things working smoothly.<\/p>\n\n\n\n

Which Features Should Be Free?<\/h2>\n\n\n\n

Now that you understand how the freemium pricing model works, let’s talk about your product.<\/p>\n\n\n\n

Which features should be free, and which should require payment?<\/p>\n\n\n\n

Before deciding which features to gate or keep free, it can be helpful to conduct a verb scoring exercise<\/a>.<\/p>\n\n\n\n

Verb scoring is the act of evaluating actions that users can take in your and your competitor\u2019s products and then scoring them based on the level user of entitlements (or the amount of friction) required to perform the action.<\/p>\n\n\n\n

Verbs are the core features of your product broken down into discrete actions, such as creating a ticket, editing a transcript, or sharing a document with a friend. For instance, if users can create and resize a document, create and resize are verbs.<\/p>\n\n\n\n

Once you understand all your product\u2019s verbs and how they affect the user experience, you can tweak your product strategy to optimize for user acquisition and conversion to paid accounts.<\/p>\n\n\n\n

\"A<\/figure>\n\n\n\n

Learn more here: 9 Use Cases For Verb Scoring To Support A Successful Product Strategy<\/a><\/p>\n\n\n\n

Once you understand the current state of both your and your competitors’ verbs, you can move on with adjusting to a freemium strategy.<\/p>\n\n\n\n

Free Features<\/h3>\n\n\n\n

The free version of your product should include the core value features that a majority of your users care about the most. These are the features that solve their basic problems and help them realize the purpose of your product.<\/p>\n\n\n\n

How do you determine which features users care about the most?<\/p>\n\n\n\n

In some cases it will be obvious, but in most, It\u2019s a strategic process that will depend on your product. Elena Verna, Head of Growth at Dropbox, has a decision tree<\/a> to help leaders answer what should be free vs paid.<\/p>\n\n\n\n

\"Elena<\/a>
Source<\/a><\/em><\/figcaption><\/figure>\n\n\n\n

Paid Features<\/h3>\n\n\n\n

Once you know which features are part of your product\u2019s core value and should be free, everything else should go into the premium tiers.<\/p>\n\n\n\n

There are three ways to add gates to your product for upgrading:<\/p>\n\n\n\n