Free plus Premium is business model which is free of charge in one part, but is charged in premium (kind of paid upgrade). User can use it for free and then users
can buy a premium items or services. For example, LinkedIn or Skype are freemium,
but if you want to upgrade your profile, you have to paid for it.
The business model has probably been in use since the 1980s or free time or feature-limited (‘lite’) version software, given away on a floppy disk, to promote a paid for full version. Later, in 2006 venture capitalist Fred Wilson, summarized the Freemium model.
[box] Freemium model may be useful for many reasons:
Potential users love free stuff
Potential user are more relaxed and ready to experiment with free programs
When you give your service away for free, in some cases more users may try to use your services
The more customers you get, it may acquire a lot of customers through word of mouth
Once these users become familiar with your product, they may want to have full access to the product,and they may eventually make an investment[/box]
You have to keep in mind “Funnel system” and that there is only 1 to 2 percents of user, that will actually buy something. If you decide to use Freemium model, meaning it’s free for any user to download your product and your goal is to have one million of downloads application. How much money will “Freemium” give you? With funnel system, lets say that 1 percent of users who downloaded your freemium product will really buy it. Lets say that for instance price is 1 dollar. So at the end you will receive 10 000 USD. But, good thing about this model is that, little may be lost by giving it away for free.
Now, when Free part stops and Premium part begins: You can make your Freemium model with all kinds of limitations after which Premium starts. You can make it „Time limited“ – when some products are usable only for some period of time,„Capacity limited“ – when you can use only one part of the freemium product.
There are also Feature limited, Customer class limited…
There also may be one more limitation, that most likely your user, will buy it first time only.