"Freemium" vs Subscription: Which is Right for Your Startup?

Term freemium, a combination of free + premium, is a popular business model that combines free and paid concepts. Thesis freemium gives customers free access to basic features and provides more features for those who are willing to pay.

On the other hand, there are also services that do not provide free launchh, although they usually still offer a free trial concept. Subscription concept (or subscription), paying a fixed fee per month or per year, is a business choice to gain income.

DailySocial trying to find out if the schema freemium or a subscription scheme can be the right business model for your startup.

Freemium and business growth

Platforms targeting the retail (B2C) market, such as Linkedin, Spotify, or YouTube, tend to offer schemes freemium for consumers. Customers who are reluctant to subscribe to premium will be shown brief advertisements or have reduced features when they access the service. This is considered a solution win-win for all parties.

According to CEO target Yopie Suryadi, service freemium popularly applied by companies that focus on B2C. Draft freemium considered capable of improvement stickiness users to then convert as paid users.

"At Mtarget itself we apply [business model] freemium and also subscription. Thus free users can use all our features but their quota is limited. After time free ends, our team will create flow and strategies for turning them into paid customers, said Yopie.

He continued, "[Application of the concept] Freemium success requires market research and quite a large investment. But this will be very promising from the side growth. Strategy freemium really depends on the character of the user, application, and market region each platform."

Choice freemium There are also many social game applications to choose from. This kind of platform is a perfect example of implementing this model.

They generally feature virtual currency that players can use to make progress through various levels in the game. A player will be given free currency at the start of the game and can increase their coin balance by completing assigned tasks or simply by logging in every day.

If you want to get virtual coins more quickly or make progress, consumers can pay the fees presented.

According to CEO Playing game Anton Soeharyo, strategy freemium "successfully" winning customers across a variety of industries, including how para game publishers looking for the best business model for its consumers.

"Market Gaming in Indonesia it reached $701 million. They [consumers] willing to pay to play and gain experience in the game," said Anton.

Anton said, for simple games, usually based on HTML5 to pass the time and maybe get prizes, a subscription scheme is the right choice. As for RPG games and the like, then freemium could be an option.

"I see this because after players get a 'feel' and 'experience' in the game, they are inclined to make a purchase and then switch to premium," said Anton.

Subscription scheme for business consumers

In contrast to the freemium scheme, subscription options are more commonly offered by those targeting business consumers (B2B). The subscription scheme provides freedom of use and customization options tailored to business needs, for example SaaS-based solutions.

According to CEO Prasetya Dwidharma Arya Setiadharma, freemium and subscriptions are just a way for companies to capture more demand. This can be applied to various user segments. An interesting aspect of companies selling software products (for mobile devices to report the) is the marginal cost of an additional customer sometimes approaching zero. Marginal costs are different from the costs of acquiring a particular customer. This cost is similar to the company's Cost of Goods Sold (COGS). brick and mortar.

"In software companies, the most common cost associated with this marginal cost is server costs and unless it is company Artificial Intelligence (AI), these costs are negligible. If a startup has these advantages, it can implement the model freemium where they can offer the most products basic for free. "This is in line with the marketing concept of bringing products into the hands of customers," said Arya.

Of course, the concept of subscriptions is not exclusive to business consumers.

"According to me subscription this is not limited to B2B [consumers] but almost all will fall into this area. As CEO Zuora said, we are entering the era subscription economy, said Yopie.

Anton expressed the same thing. He saw that cable TV providers that target individual consumers also apply a subscription model to their customers. Set-up box offered in addition to the package subscription price channel TV and a menu is also available inside video on demand.

In the end, according to Arya, each customer has their own perception of the value of the product. Free user experience is also valuable for encouraging startups to develop their business models.

"A great example of this is LinkedIn. LinkedIn offers LinkedIn Premium to capture users who are willing to pay for more perks, privacy and status. However, LinkedIn also monetizes free users by offering recruiting tools to companies," said Arya.

As an investor, Arya sees that in the future it will not be a problem whether the startup applies the model freemium or subscribe. What matters is the startup's ability to retain its customers (at a certain rate churn low) to grow sustainably and gain added value from customers.