Freemium Vs. Paid- Picking The Right User Acquisition Model

Acquiring new customers and keeping business costs down have an inverse relationship with each other. It isn’t easy to acquire more customers without spending enough money.

With customers becoming savvier, they like to know the value they’re getting before making a purchase decision. Thus, a business needs to educate and nurture their customers before convincing them to purchase from them. There are two forms of customer acquisition models that help acquire new customers, namely freemium and paid apps.

Freemium Apps

Freemium is a two-tiered model that engages its users through either a free tier or a premium tier, depending on if they want to pay for an account or not. Free users have access to limited features in these apps, while premium users have access to all the features.

The main goal of a freemium model is to decrease customer acquisition costs while enhancing user engagement. Eliminating the cost to sign up for your account lowers the entry bar for new users. This makes it easier for you to avoid overspending on traditional promotional channels to acquire new customers.

Paid Apps

We shall now address the benefits, risks associated, and ideal examples of the paid apps, drawing a comparison between freemium and subscription-based apps. Paid apps are often overlooked because they have an associated cost. With such high competition in the app store, users always tend to look for an alternative. Developers are thereby challenged with finding the right balance between putting a cost and providing the best user experience. During the last few years, the total revenue was doubled, from $7.1 billion in 2011 to $15.4 billion in 2012. From there, the revenue jumped multiple folds to more than $30 billion in 2019.

Read more about risks associated with freemium and paid user-acquisition models here. 4