Freemium Services Research Articles

Converting free users to paying customers in freemium services: a SaaS success model

Converting free users to paying customers in freemium services: a SaaS success model

Advertising in Freemium Services: Lack of Control and Intrusion as the Price Consumers Pay

Freemium services such as music streaming, video sharing, and mobile games are often supported using advertisements, whereby consumer attention to these advertisements can be considered a proxy form of payment for using the service. The current research develops and empirically tests a conceptual model underpinned by cognitive appraisal theory, examining the influence of control features within freemium services, such as offering consumers choice over when to view advertisements and timing prompts (countdowns indicating length of advertisement). This research considers the influence of these control features on perceived advertising intrusiveness and psychological reactance, as well as the impacts on the advertising outcomes of brand recognition and attitudes toward the advertisement, toward the freemium platform, and toward the brand advertised. Three experimental studies (n = 178, n = 123, n = 224) showed control features significantly decrease perceived advertising intrusiveness. Results revealed that when control features are not provided, there is a significant indirect negative effect on advertising outcomes (recognition and attitude) via the mediators of advertising intrusiveness and psychological reactance. This research is one of the first studies to demonstrate both theoretical and empirical understanding of how control provided to consumers via choice and timing prompts can mitigate the negative effects of advertising within freemium services.

Impact of Television Advertising for Freemium Services on Consumer Purchases:

Impact of Television Advertising for Freemium Services on Consumer Purchases:

Motivations in the adoption and conversion of freemium services: insights for digital entrepreneurship

AbstractTechnological advancements have created opportunities for entrepreneurship and innovation and enabled the development of new products, services, platforms, and business models, including the freemium business model. The freemium business model is present in several digital services (e.g., music, social networking, and gaming), but, for businesses to succeed, it is of the utmost importance that users convert their subscriptions from free to premium. Previous research has endeavored to explain what motivations drive consumers to adopt different digital services and platforms and what motivations and user characteristics lead them to convert to the premium service, but little research has been dedicated to the motivations for consumers to distinguish between competing platforms. To enhance comprehension of these matters, this study analyzes a group of motivations and user characteristics as explanatory variables. Data was obtained via an online questionnaire, with a sample of 231 users of music streaming platforms. The main results suggest that satisfaction, perceived value, and ubiquity are statistically significant motivations that positively influence choosing a platform. Regarding subscribing to the premium service, the same motivations, as well as users’ age and occupation, present influential results, which are relevant from theoretical and managerial points of view, especially for entrepreneurs aiming to define the best strategy to successfully deploy their digital businesses.

The Associated of Perceived Service Quality to Customer Behaviour Towards Use and Purchase Intention in Freemium Services

The rise of the freemium business model has presented challenges for service developers in balancing service quality and generating demand for premium offerings. This study examines the relationship between perceived service quality, continued use of freemium services, and the decision to purchase premium content in the context of online events. The research focuses on LombaCademy, an educational platform who currently developing new online program names sharing sessions. Drawing on data collected from participants of LombaCademy's webinars (N = 220), this research utilized the PLS-SEM method through SmartPLS software. the objectives of the study are to examine the impact of service quality dimensions, including tangibility, reliability, responsiveness, assurance, and empathy, on continued use of free services and the decision to purchase premium products or features. The findings reveal significant positive relationships between empathy and tangibility to use intention. Moreover, use intention was found to have a significant direct and total effect on purchase intention, highlighting the importance of fostering use intention to drive purchase behaviour. Notably, reliability was identified as another significant predictor of purchase intention These findings provide valuable insights for LombaCademy's business strategies in the competitive landscape of freemium services, particularly in the education industry. However, it is important to note the limitations of this study. The findings are based on a specific time and a sample of participants who have attended LombaCademy's webinars, which may limit generalizability to other service contexts or industries. Future research could explore the moderating effects of contextual factors and examine the role of emerging technologies to further enhance service quality and consumer behaviour in online events.

From Growth to Monetization: Managing Freemium Services

From Growth to Monetization: Managing Freemium Services

What should be offered for free and what for premium in a freemium service? a two-stage approach of Kano & path analysis to the design of freemium services

ABSTRACT The freemium model, a business model that provides basic functions for free and makes a profit by providing advanced functions at a premium, has been widely adopted in various industries. To acquire enough customers and generate revenues from the freemium model, the proper allocation of free and premium functions is essential, but little research has been done in this direction. This study proposes a two-stage approach that combines the Kano model and the technology acceptance model (TAM) as a conceptual design method of freemium services. First, Kano analysis is performed to divide the functions of services into three types, must-be, one-dimensional, and attractive functions. The must-be functions are regarded as free functions, and low and high-level one-dimensional functions are classified as free and premium functions, respectively. Then, we perform path analysis based on TAM to identify additional premium functions that affect willingness to pay. We allocate free and premium functions of personal cloud service using the proposed approach and compare the results with the current functions of Dropbox, One Drive, and Google Drive. The proposed two-stage approach is expected to be practically used for designing service concepts based on the freemium business model in various industries.

The super engagers of freemium gamified services: using multimethod approach to examine why highly interactive consumers become paying consumers

PurposeOnline services are increasingly utilizing gamification techniques to encourage consumer loyalty and engagement. However, the majority of the gamified services fail to be financially sustainable. Existing freemium and gamified services literature provides scant knowledge on behavioral predictors of in-app purchases in freemium gamified services. The research examines highly interactive consumers' in-app behaviors using competition-based motivational affordances, daily usage behavior and social competition motivation that convert them into super engagers.Design/methodology/approachThe authors applied a multimethod approach by using Multivariate Logistic Regression (n = 685) to analyze in-app behavioral data and Qualitative Comparative Analysis (n = 94) to examine survey and in-app behavioral data of highly interactive consumers of a freemium gamified service to explain paying behaviors.FindingsResults reveal highly interactive consumers that elicit heavy daily usage of the application or excel at in-app challenges are less likely to convert to super engagers. Among super engagers, some are socially competitive, and their inability to advance in the leaderboard corresponds to in-app purchases, while non-socially competitive consumers make purchases to collect extrinsic rewards. Additionally, highly interactive consumers who possess more knowledge about the gamified service become super engagers to increase their chances to be socially competitive.Originality/valueThis research examines in-app behaviors of highly interactive consumers of a freemium gamified service that lead to in-app purchases following varying levels of daily usage behavior and social competition motivation. The authors contribute to the previous literature by defining and examining a new consumer segment – super engagers – that is financially beneficial for freemium services because of their in-app purchases. The authors provide insight on in-app behaviors that convert highly interactive consumers to super engagers and demonstrate that the reason for highly interactive consumers to make in-app purchases is a function of acquiring specific internal and external rewards based on their level of social competition.

The Twofold Effect of Customer Retention in Freemium Settings

The main tradeoff in designing freemium services is how much of the product to offer for free. At the heart of such a tradeoff is the balancing act of providing a valuable free product in order to acquire and engage consumers, while making the free product limited enough to entice some consumers to pay for the service. We argue that customer retention plays an important role in balancing this tradeoff, due to customer retention’s twofold effect in freemium services—it not only generates additional revenues from the advertising side but can also increase user’s monetization in the future—firms are often myopic in their retention efforts by not recognizing that by limiting the free product, the firm is not only risking monetary losses from the advertising side but is also suffering monetary losses from the premium side. We leverage a large-scale field experiment run in a mobile game context, where game difficulty was exogenously manipulated among customers at risk of churning. As expected, giving customers an easier game significantly decreases purchases in the specific round played. However, lowering the game difficulty not only increases short-term play and subsequent retention, but also increases customer spending from premium services both in the short- and in the long-run. We find substantial heterogeneity in the effect of reducing game difficulty, where customers who are more prone to making progress in the games exhibit stronger effects and customers who previously spent money on the game exhibit the strongest effect on in-app purchases. We leverage these insights to recommend personalized freemium product design strategies and show how the focal firm can further increase revenues from both advertising and premium services.

Blackmarket-Driven Collusion Among Retweeters–Analysis, Detection, and Characterization

The growth of online social media has led to a huge increase in the number of users who want to share and publicize various kinds of information. Twitter, the most popular micro-blogging platform, has become a hotbed for users who are involved in different activities such as news publishing, job hunting, recruiting, advertising and publicity. Retweeting a tweet is a major action to broadcast a user’s message out to millions of users. Retweet action has two major advantages: (i) gaining quick exposure to the content, and (ii) increasing likelihood of gaining new Twitter followers in return. The organic way of gaining a larger number of retweets is a time consuming process, which leads to the creation of unfair methods to gain retweets. Thus, Twitter users often approach various blackmarket services to gain retweets inorganically in a short duration. Blackmarkets spread their collusive ecosystem in such a way that Twitter is unable to detect them even after devoting significant effort to purge the platform off bots, trolls, and fake accounts. One major reason behind the evasion is that the collusive users involved in blackmarket services exhibit a mix of organic and inorganic behavior – they organically reweet some genuine tweets; at the same time, they inorganically retweet tweets submitted to blackmarket services. This paper is the first attempt to provide a thorough study of the collusive users involved in two types of blackmarket services – Premium and Freemium. We collect a novel dataset of collusive users comprising of users from both types of blackmarket services. We provide network-centric, profile-centric, timeline-centric and retweet-centric characteristics of these users and show how users involved in premium blackmarket services exhibit diverse behavior as compared to those involved in freemium services. We further employ human annotators to label collusive users into three types: bots, promotional customers, and normal customers. We then curate 63 novel features to run state-of-the-art classifiers in two settings – binary classification (collusive vs. genuine) and multi-class classification (bot, promotional customers, normal customers, and genuine users). Bagging achieves the best accuracy (macro F1-score of 0.892) in the former setting, whereas Random Forest outperforms others (macro F1-score of 0.791) in the latter setting. We also develop a chrome extension, SCoRe++ which can detect collusive retweeters in real time.

"Why pay premium in freemium services?" A study on perceived value, continued use and purchase intentions in free-to-play games

Freemium has become de facto business model for games and many other online services. We investigate how consumers' perceived value is associated with their intention to use freemium services and to purchase premium content. We employ data gathered through an online survey (N=869) among players of freemium/free-to-play games. Firstly, we find support for the "Demand Through Inconvenience" -hypothesis proposed in this study, indicating that the higher the enjoyment of the freemium service, the lower the intentions to purchase premium content but higher intention to use the service overall. Secondly, social value is found to positively affect freemium use and premium purchases. Thirdly, the quality of the freemium service does not seem to be associated with premium purchases although it has a positive association with freemium use. Fourthly, the economic value of freemium services is positively associated with freemium service use and via increased use also has a positive effect on premium purchases. The findings of the present study highlight the peculiarity of the freemium business model: increasing perceived value of the freemium service (i.e. enjoyment) may both add to and retract from future profitability via increased retention on one hand, reduced monetization on the other.

What drives subscribing to premium in freemium services? A consumer value‐based view of differences between upgrading to and staying with premium

AbstractFostering the conversion of free users to premium subscribers and retaining those premium users are critical objectives for freemium service providers. Building on consumer value theory, we empirically examine the differences between basic and premium users in terms of the emotional, functional, social, epistemic, and economic values driving basic users' decisions to upgrade to premium subscriptions and premium users' decisions to retain their paid subscriptions. We employ enjoyment, intrusiveness of advertising in the free subscription, ubiquity, social connectivity, the discovery of new content, and the price value of the premium subscription as drivers of intentions and test our model using data from a leading digital content service that employs the freemium model. Our results show that enjoyment and price value of the premium subscription predict the intention to upgrade to premium, whereas the intention to retain the premium subscription is driven by ubiquity and the discovery of new content. Interestingly, social connectivity has no effect on the intention to upgrade but does have a small negative effect on the intention to retain the premium subscription. Contrary to our expectations, intrusiveness of advertising in the free subscription had a negative effect on the price value of the premium subscription. Collectively, our results imply that the intention to retain the premium subscription is influenced by attribute‐level value perceptions such as ubiquity, the discovery of new content, and social connectivity whereas the intention to upgrade is driven by benefits, ie, enjoyment and price value of the premium subscription.

Hazards regression for freemium products and services: a competing risks approach

ABSTRACTWe propose a competing risks approach to analyse customer behaviours in freemium products and services. The event of interest is when a customer starts to pay for additional features or functionalities. The observation of such an event may be preempted by an event where the customer quits using the product before paying and consuming the additional features or functionalities. One such freemium service is the online game category. The Fine-Gray regression model was implemented for an online game player activity data to study how covariates affect the paying hazard. Some covariates are hypothesized to have different discrete effects at multiple change points. We extend the model to allow for possible change points in the analysis.

Service quality explains why people use freemium services but not if they go premium: An empirical study in free-to-play games

During the last decade, the “freemium” business model has spread into a variety of services especially online. However, service developers have faced a dilemma of balancing between making the service as high quality as possible but at the same time creating demand for the premium products that augment the core free service. If the service is of enough high quality, augmenting premium products might not offer significant added value over the otherwise free service. In this study we investigate how perceived service quality predicts customers’ willingness to continue using the freemium services and to purchase premium content. User responses were gathered from freemium services (free-to-play games) (N=869). The results indicate that while expectedly the different dimensions of service quality (assurance, empathy, reliability and responsiveness) positively predict the intentions to continue using the freemium service, they do directly predict why people would be willing to spend more money on premium, i.e. the effect of perceived quality of a freemium service on premium purchases is mediated by use of freemium. These findings indicate that increasing the quality of a freemium service has surprisingly little effect on the demand for additional premium services directly.

Study of monetization as a way of motivating freemium service users

The paper describes user behavior as a result of introducing monetization in the freemium educational online platform. Monetization resulted in alternative system growth mechanisms causing viral increase in the number of users. System metrics in terms of the K-factor was utilized as an indicator of the system user base growth. The weekly K-factor doubled as a result of monetization introduction.

Converting freemium customers from free to premium—the role of the perceived premium fit in the case of music as a service

Freemium seems to be a promising solution for content providers to earn money now that Web 2.0 users feel entitled to free services and content services like Spotify generally accept this concept. Providers using freemium offer their service in free basic and paid premium versions. To prompt users to pay, a free version has fewer functions. However, no studies have yet investigated whether limiting features is the best strategy for converting users into paying customers, and, if so, how many functional differences there should be between free and premium versions. Therefore, our study aims to measure whether a free service’s limitations impact the evaluation of free and premium versions. Drawing on the Dual Mediation Hypothesis and the Elaboration Likelihood Model, we examined 317 freemium users’ survey responses. Our results indicate that companies providing freemium services can increase the probability of user conversion by providing a strong functional fit between their free and premium services.