MBA-302

CONTEMPORARY BUSINESS MODELS

Dr. M.Venkata Suryanarayana

M.Com., M.B.A., M.Phil., Ph.D., SET, EDP (IIM-K)
Assistant Professor

GITAM School of Business

Visakhapatnam

1
 UNIT-2

Freemium Economics:
• Freemium Business Model
• Analytics and Freemium Product
Development
• Freemium Metrics
• Lifetime Customer Value
• Freemium Monetization
• Virality and Growth.
 • Freemium Business Model
• Freemium is a business model in which
Freemium businesses provide their customers the
basic features of their product/services for
Economics free and additional/special features for a
premium. 

Free + Premium
Pros and Cons
•Advantages :
•Customers are attracted more towards apps and services that have something to offer
for free.
•The free accounts are monetized using advertisements.
•It helps companies grow their brand awareness fast and acquire an initial set of users,
some of which may convert to premium users.
•Disdvantages :
•Freemium is only effective as a market entry strategy since, in some cases, it can lead
to high costs of operations and negative positioning.
•In cases when companies cannot achieve a satisfactory conversion rate, the freemium
model might not work or stifle the business.
•If the conversion rate is low, it can lead to losses and, ultimately, failure.
•The company will also need to support too many free users, which will drive costs
higher and deplete its financial resources faster.
•The company will need to spend to convert free users into premium users.
Amazon Business Model Canvas [2022] (innovationtactics.com)
Freemium Business Model