Freemium – business model

The Buddha shared his knowledge for free, you know these universities charge so much for the degrees!

One argument could be – 1. That time was different. 2. The Buddha asked for bigger fee – leave all material possession, family, even ‘self’. What fee are you talking about? But yes, what the Buddha taught was priceless and of course for free.

The second is – Well you have a MOOC (Massive Open Online Courses) – Coursera, EdX etc. These MOOC are based on a freemium Business Model.

“Freemium” is a coined word; it is made using two words – free and premium. A business model which is based on this term “freemium” offers products/services free as well as paid. What is so great about it? Well, in this business approach few basic functionality of product/service are free and advanced features are premium. An example is LinkedIn. This business model is possible in cases where marginal cost of distribution and production are low – most commonly internet and software businesses. Advantage? It can offer huge scale for premium access. How? Once responded to free and limited period premium content business can expect to convert higher % of free users to premium users. LinkedIn has been doing this successfully.

I liked this idea. It relates to offering your services – though limited – to everyone. Here everyone means – meaningful target audience which needs it. The business offering such service is not creating a complete monopoly – by asking users to first PAY and then USE. It gels with the concept of Business and the Buddha as well.

Well, a word of caution – fremium can be wicked as well – when pricing is done to squeeze “consumer surplus”#. That is where it may not be what “Business to the Buddha” would apply. At the end of the day – there is no limit to squeezing the consumer, isnt it?

An interesting business concept I have seen in Singapore [searched on net they are in India too!]. There is a restaurant near China Town MRT station – Annalaxmi. There you can have lunch and pay as much as you want, Sing $ 0 or even 100. There is no cashier. The amount such collected goes in running this not for profit restaurant and rest is utilized in organizing cultural activities.

Whatever said, freemium seems to (should) be the way to go!

Image source – Consumer surplus – Wikipedia

Consumer surplus – it is a term used in microeconomics in demand and supply analysis. Though the author is not a PhD in economics, still in his simple words – consumer surplus is what a few consumer “can” pay to avail the service but would not pay as company selling the offer keeps the price lower so that the company can reach scale.