Freemium Business Model in SaaS Industry
SaaS – what does that mean?
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capacity-‐based freemium
: Customers are given a free version up to
a capacity, usage, or number of users threshold.
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Feature-‐based freemium
: Customers are allowed to use a free
version of the product which has certain key features locked until the
customer converts to a paid customer.
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Time-‐based freemium
: This is a typical free trial that expires after a
fixed period.
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Use-‐case freemium
: This is a less common model in which customers
can use the offering for free provided they fall under certain specified
categories (i.e. non-‐ commercial use, educational, non-‐profit, etc).
Pros and Cons
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Extended developer base embedded in local culture
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Open Source is a focus of many communities
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Peer advocacy
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Expanded early User feedback from more rapid uptake
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Network effect builds more rapidly – marginal benefit and tipping
point (virial adoption)
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Freemium adds another conversion step, so having a large market
is crucial for this model.
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May weaken competitive position
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Cost of servicing free users (don’t give them a phone number??)
Hmmm
Ever feel you have the wrong business model (404 message)
Framework for Business Model Analyses
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Description of the model –
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Overview
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Details and variants
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Examples of existing instantiations
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Pros and Cons
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Implementation Frameworks
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Obstacles to implementation
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Policy and Legal considerations
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Cases Studies
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How is sustainability addressed? Lifespan?
Freemium business model in the SaaS industry offers core services for free with the option to upgrade for advanced features. Various freemium models include capacity-based, feature-based, time-based, and use-case-based. Pros include extended developer base and early user feedback, while cons involve added conversion steps and servicing free users. Considerations and frameworks are vital for analyzing and implementing a successful business model.
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Presentation Transcript
SaaS what does that mean? freemium is a business model that offers core services or features for free and charges a premium for more sophisticated components. capacity- based freemium: Customers are given a free version up to a capacity, usage, or number of users threshold. Feature- based freemium: Customers are allowed to use a free version of the product which has certain key features locked until the customer converts to a paid customer. Time- based freemium: This is a typical free trial that expires after a fixed period. Use- case freemium: This is a less common model in which customers can use the offering for free provided they fall under certain specified categories (i.e. non- commercial use, educational, non- profit, etc).
Pros and Cons Pro Extended developer base embedded in local culture Open Source is a focus of many communities Peer advocacy Expanded early User feedback from more rapid uptake Network effect builds more rapidly marginal benefit and tipping point (virial adoption) Con Freemium adds another conversion step, so having a large market is crucial for this model. May weaken competitive position Cost of servicing free users (don t give them a phone number??)
Hmmm Ever feel you have the wrong business model (404 message)
Framework for Business Model Analyses Description of the model Overview Details and variants Examples of existing instantiations Pros and Cons Implementation Frameworks Obstacles to implementation Policy and Legal considerations Cases Studies How is sustainability addressed? Lifespan?
