Weave a “Freemium” Business Model Element Into Your Consumer Product Marketing Strategy

by: Geoff Ficke

Weave a “Freemium” Business Model Element Into Your
Consumer Product Marketing Strategy

A 21st century term applied to a decades old Marketing Concept, Freemium has become one of the most popular vehicles for Consumer Product entrepreneurs, Software designers and Marketers to utilize for increasing sales and distribution of their products. The concept in its most modern form is a spin on the Gift-with-Purchase promotion designed by Estee Lauder Cosmetics in the 1960’s and King Gillette with this safety razor and blade refill strategy first used in the late 19th century.

The word “freemium” is a portmanteau, combining the two aspects of the Business Model, free and premium. The idea is to offer a hook, a free good or service to the consumer, with the Sales Strategy being to up-sell the recipient of the free offer to a premium product or service. This concept is powerful, simple to execute and provides excellent results.

The most compelling word in Consumer Product Marketing is “free”. Who doesn’t want to receive something for nothing? Watch retail store traffic when samples or tastings are being provided. Customers flock to the in-store demonstrator providing the free samples. Politicians make their careers by providing seemingly free benefits to constituents.

The word “premium” is evocative of a better lifestyle, luxury product or enhanced version of a staple product. Most people aspire to add luxury to their environment. A bigger flat screen television, a finer French Perfume, imported rare Extra Virgin Olive Oil or Italian-made shoes are basic examples of the types of products that consumers trend toward as incomes expand. People drive a small Kia automobile for transportation. They drive a Jaguar because they want the premium Features and Benefits that Jaguar Marketing details in its Advertising.

Recently we had a client who was attempting to Market a web-service to the portion of the population who were nearing retirement. Our Product Development team collaborated with software designers to create a free “Club Feature” to entice visitors to the web-site to join instantly. We waived the annual $95 Membership charge. Once aboard, Members were offered a menu of Premium Services, also at Club Member Discounts. The result was an amortization of costs against a broad field of income generators. The site was profitable almost from the date it went on-line.

The Estee Lauder inspired Gift-with-Purchase transformed the Department Store luxury Cosmetic industry. Competitors quickly jumped on this creative Sales Promotion bandwagon. However, Estee Lauder enjoyed the most important element in Consumer Product Marketing and Sales; a first mover advantage. The GWP concept launched the Brand into an orbit that has never been lost.

The Gift-with-Purchase (GWP) Promotional Strategy was followed by the Purchase-with-Purchase (PWP). The GWP offers a free sampler of an assortment of complimentary products. The premium is the minimum purchase required to obtain the GWP. If you do not believe that this technique works, just stand in a Department Store Cosmetic department anywhere in the world when a Beauty Product of Fragrance vendor is offering their GWP.

AOL used a “Freemium” program for years to launch and expand their dial-up internet service. Displays offering free software containing AOL set-up data were ubiquitous in stores and supermarkets. The “freemium” was typically a 90 day no cost teaser trial with a fixed monthly service rate kicking in automatically after the gratis period ended. This model worked magnificently for AOL for a number of years and made the Company the “alpha” service provider that most internet customers initially utilized.

Variants of a “freemium” Marketing Strategy are constantly being utilized. Wellness products, Weight Loss Products, Cosmetics, Food and Drink Products, and a wide range of Consumer Services employ some form of a “freemium” in their Brand building Marketing Campaigns. Infomercials often offer a free trail size of the product with the client paying only shipping and handling. Of course, these offers are almost always accompanied with a Negative Option Feature that kicks on automatically unless you remember to opt out.

Free offers work, but in order to provide goods and services there must be an income stream generated by the give-away. Smart Consumer Product Marketers and Services Providers have learned to craft Marketing Programs that include a free offer with a premium up-sell link. Freemium’s have been around for decades, only the word is new.