Freemium model is used as an effective go-to market strategy among Software-as-a-Service (SaaS) vendors. This is a marketing tactic where the vendor has both free and premium version of their product. The ultimate goal of the vendor is to convert the non-paying customers to paying customers.
Many startups founders especially with a technology background consider this as best model to enter the market. Of course the psychology of free among the users helps company to build substantial traction. The product or service will have more signups and get mentioned in blogosphere and social media. Everything looks great for few days from launch. However, at times the things may go wrong!
Freemium has significant risk associated with it. If not managed wisely; it may lead to increase in overhead, negative product positioning and finally lead to overall failure. This blog helps to understand risk factors of “Freemium Model” in SaaS Software.