Xian Gu

The Freemium Economy: How Companies Can Get You To Pay Up

What could be better than free? For companies with a freemium business model – Spotify, Dropbox, Hulu and The New York Times are notable examples – it’s a key question. Can a company increase its number of paying customers while offering free version of its products? And if so, how? Researchers at the University of Maryland’s Robert H. Smith School of Business say they have mapped a strategy. Working with the National Academies Press, an online bookseller, the researchers conducted a field experiment to determine how companies might improve their sales of premium products, even while offering free ones. "If the free version OK, how do you get the customer to justify paying for more?" asks Smith School marketing professor P.K. Kannan. That’s where the price strategy comes into play. Read more...

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