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Subject areaRevenue and sales

Also known asfreemium model

Freemium (a blend of free and premium) is the revenue model that gives away the basic version of a digital product and charges for advanced features, extra capacity or professional use.

The free tier attracts many users at an acquisition cost close to zero, because each extra user costs a software vendor very little; revenue comes from the share of users who upgrade to the paid plan. Chris Anderson laid its conceptual groundwork in the book "Free: The Future of a Radical Price" (2009), which sets out the different forms of free.

Freemium strategies are a powerful marketing and sales lever as long as the line between free and paid is drawn with care: too generous and nobody pays, too stingy and nobody tries. The flip side, inside companies, is Shadow AI: people adopt freemium AI tools on their own, often from their own smartphones and without knowing the risks for data.

An example

A chemical company finds out that its sales reps translate technical data sheets with a freemium tool installed on their phones: the free version is enough, but customer texts end up on servers IT knows nothing about, which is a case of Shadow AI.

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cc$BY-NCEnrico Giubertoni. Licensed under CC BY-NC 4.0: you may quote, translate and adapt this entry with the author’s name and a link, stating any changes. For commercial use, write to info@enricogiubertoni.com

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