Freemium marketing: use of demand-side research in market segmentation strategy

Abstract

Freemium business models are widely used, including by major companies such as Spotify, Pandora, SurveyMonkey, Dropbox and by many start-ups. They are very common in industry segments such as mobile gaming, music, personal productivity, and office collaboration. This marketing management research study uses a case study of a freemium product offering from a major global computer firm to examine the demand side of freemium pricing. The consumer user base for this product is approximately 30 million persons worldwide. This study uses a large-scale (over 5,000) survey of these users to examine consumer response and segmentation. It illustrates how market segmentation can be used to select and optimize offerings to generate additional revenue streams. The authors show how a freemium offering may best be implemented for differential market segments.

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