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used to describe a business model in which the basic product is free, but customers pay for extra features
a free product or service which is used as a marketing tool to encourage people to buy additional products or services
'Glu has been quicker to transition its business model from pay-to-play to a so-called 'freemium' business model – where games are downloaded free, but can be monetized via advertising or charging gamers for additional features.'Reuters 6th June 2011
'A freemium is a little something extra in a direct mail package. Its purpose, of course, is to lift response. It does this by involving the reader or giving the reader guilt. … Fund raisers are the biggest users of freemiums, but some for-profit mailers also have found including a freebie to be an effective response booster.'Target Marketing April 1998
In English, there's a well-known saying that "there's no such thing as a free lunch", which basically means that, though it looks as if you've been given something purely out of the goodness of someone's heart, they usually expect you to do something for them in return. It's this principle which is the essential ingredient of a popular business model now widely described by the term freemium.
the freemium approach to selling is particularly popular in relation to computer software, specifically gaming
A freemium business model works by offering a product or service free of charge with the idea that once a customer uses the free product or service, they'll be sufficiently interested in it to be prepared to pay for extra features. Predictably, the freemium approach to selling is particularly popular in relation to computer software, specifically gaming. The typical scenario is for the user to be provided with a basic version of the software as a 'freebie', and then required to pay if they want the full-blown version incorporating advanced features. Alternatively, the freemium product is a complete version but its use is time-limited, or is restricted to an individual or particular type of user.
The freemium approach to marketing is not exclusive to computer software however. Other typical areas of use include magazine publishing, where an edition is distributed free with the aim of tempting readers into paying a fee or subscription for further issues, or cable television, where a company might offer a free period of use for services such as home box office, but then require customers to pay for movies designated as 'premium'.
The term freemium is a blend of the words free and premium, in the latter's adjectival sense of 'more expensive or of higher quality than other similar things'. Though contemporary use of the word freemium is mainly to modify nouns (e.g. a freemium game/magazine/service/product/business model, etc), it is also used as a countable noun to refer to the actual product or service which is offered for free. This use of freemium dates back as far as the late eighties, when in the domain of direct mail (advertising posted directly to people's homes) it became adopted to refer to a sample of a company's product (e.g. a small box of detergent, cereal etc) sent out with advertising literature. Charitable organizations have also been associated with the use of freemiums (ever received a pack of Christmas cards sent 'with compliments' but for which the charity invites you to make a donation?).
Despite the fact that the word freemium has been in existence for some time, it still has very limited coverage in established dictionaries, though it does appear in the online version of the Macmillan English Dictionary.
A related neologism in the same domain is freeconomics, a term used to refer to a marketing strategy where goods and services are given away for free in order to gain a wider audience who might subsequently be persuaded to pay for related products or services. A typical example is in mobile phone marketing, where handsets are 'free' if the customer takes up a service contract.
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This article was first published on 20th September 2011.
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