The principle of freemium is to give away a quality free product and sell complimentary products. As previously mentioned this requires that you have a free product as well as complimentary products.

But then the question is – how much should be free?

Or how do you arrive at the quantity or amount that makes most financial sense

Freemium works by utilising the benefits of digital production, and on the fact that digital duplication is virtually free. According to this logic it makes sense to give away everything that can be duplicated digitally at practically no cost. (Non-scares products) and charging for the rest (scares products).

Yet this doesn’t work in all cases. Flikcr works on a freemium model. It is free to open a standard profile and upload pictures. If you want more features you have to pay for the premium version.

This premium version is not a scares product. If the company wanted to, they could release these features at little cost. Yet they need to make money somehow and in order to do this, they have drawn a scarcity line. A certain point from where they have created an artificial scarcity. To access features beyond this point the users will have to pay.

No matter what your freemium product is, you have to figure out where to draw the line between free and paid or The scarcity line.

Outside of IT, the use of freemium is still pretty rare. I have researched and interviewed a lot of the people that do use it. What I found out was that most of these draw the scarcity line at an arbitrary point – whatever feels right.

Yet if you want to have the maximum benefit of freemium it would be better to draw this line based on calculations and projections. See tool for drawing scarcity line (coming soon)

Photo: nexus6zora
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