Product-led growth · Freemium model
The freemium model: what to give away and what to charge for
The freemium model gives people a basic version of your product for free, for as long as they like, and charges for the better version. The venture capitalist Fred Wilson put a name to it in 2006. It works when the free part is useful and the paid part is clearly worth more.
How the freemium model works
Free gets people in
No card, no call. People start using it today.
Free shows the value
They get a real result from the free part. That builds trust.
Paid gives them more
More features, more use, or more help. The step up is easy to see.
Paid users fund the rest
Most free users never pay. The ones who do have to cover the cost of everyone.
Freemium vs a free trial
Freemium
Part of the product is free forever. Good when lots of people can use it and each free user costs you little.
Free trial
The full product is free for a short time. Good when the value is clear within days and each user costs you more.
Free first step
One useful piece is free, like a quiz, a plan or a score. Good for experts. It gives a taste of your method.
When freemium is a bad idea
Free users cost a lot
AI features cost money each time they run. A big free crowd can eat your margin.
Your market is small
Freemium needs lots of people at the top. A narrow market does better with a trial or a paid pilot.
Free does the whole job
If the free part solves the full problem, nobody has a reason to pay.
The freemium model for experts with a program
You don't need a free plan for the masses. You need a free taste that proves your method works, and a clear next step.
Give away the first win
Step one of your method, in software. A score, a plan or a quick fix.
Charge for the path
The full program, the tracking and the support sit behind the paid plan.
Cap the AI
Set a limit on free AI use, so your costs stay known.
How to set your free and paid line
- 01
Find the first win
What result can someone get in one sitting?
- 02
Make that free
Let people feel the method work.
- 03
Put the next result behind paid
The paid plan should lead to the bigger outcome they came for.
- 04
Check the sums
Work out what a free user costs you each month. Make sure paid users cover it.
Your next step
The Software Plan Workshop
We help you decide what's free, what's paid and what the first version needs.
- A written software plan
- A clickable prototype you can show people
- The first-version scope, ready to quote
- The $5,000 comes off the price of a build
- Price
- $5,000
- If you build with us
- Credited to the build
Fixed price. You know what to build and what it costs before you spend on a build.
★ Keep reading
More in the product-led growth guides
Product-led growth
The main guide: PLG for experts who sell a program.
Read more →Growth loops
How free users can bring in the next users.
Read more →SaaS metrics
The numbers that show if free is paying off.
Read more →Recurring revenue from your expertise
How to turn what you know into income that repeats.
Read more →Questions, answered
What is the freemium model?
The freemium model gives a basic version of a product away for free and charges for a better version. The name blends "free" and "premium". Fred Wilson, a venture capitalist, named the model on his blog in 2006.
How does a freemium business make money?
A share of free users move up to a paid plan for more features, more use or more help. Those paying users cover the cost of everyone, so the sums need care.
What is the difference between freemium and a free trial?
Freemium is free forever, but limited. A free trial gives you the full product for a short time, then you pay or leave. Freemium suits big markets. A trial suits products that show their value in days.
Is freemium right for a coaching or consulting business?
A full free plan often isn't. A free first step usually is. Give away one quick win from your method in software, then offer the full program to people who liked it.
What are the risks of the freemium model?
Free users cost money to serve, and most never pay. With AI features the cost grows with use. Set limits on the free plan and know your cost per free user.
What should I give away for free?
Give away the first win, not the whole answer. The free part should prove your method works. The paid part should take people the rest of the way.