The appeal of free offers is almost certain to drive growing adoption of “freemium” tactics by local marketers – but hidden costs could be attached for both consumers and brands.
Freemium (a portmanteau of “free” and “premium”) refers to the practice of making a core offering available for free, but charging a premium for extras once consumers make further use of the underlying product or service.
The tactic is widely used overseas, notably in the US computer games market where many games are downloadable for free, says Aki Kalliatakis, managing partner of Leadership LaunchPad.
The “pester-power” of child gamers ensures pressure is kept on parents to pay for the extras or children “borrow” credit cards to make purchase extra features.
“For today’s hard-pressed consumers, the word ‘free’ is extremely powerful,” says Kalliatakis. “At the same time, some marketers are desperate to boost sales in a tight market and will be well aware that ‘free’ offers can build a huge base of new product users at minimal marketing cost.
“But my advice is to be wary of blindly adopting the freemium model. If consumers feel cheated or manipulated, trust in the brand can be quickly eroded.”
Those who adopted the freemium model should be honest and not attempt to disguise that second-tier costs would apply once the free element of the offer had been taken up.
“A free offer can end up costing both the consumer and the brand,” he notes. “The consumer might be out of pocket for a month or so, but the cost to brand reputation could last for years. So be careful before playing with the freemium model.”
The tactic is widely used overseas, notably in the US computer games market where many games are downloadable for free, says Aki Kalliatakis, managing partner of Leadership LaunchPad.
The “pester-power” of child gamers ensures pressure is kept on parents to pay for the extras or children “borrow” credit cards to make purchase extra features.
“For today’s hard-pressed consumers, the word ‘free’ is extremely powerful,” says Kalliatakis. “At the same time, some marketers are desperate to boost sales in a tight market and will be well aware that ‘free’ offers can build a huge base of new product users at minimal marketing cost.
“But my advice is to be wary of blindly adopting the freemium model. If consumers feel cheated or manipulated, trust in the brand can be quickly eroded.”
Those who adopted the freemium model should be honest and not attempt to disguise that second-tier costs would apply once the free element of the offer had been taken up.
“A free offer can end up costing both the consumer and the brand,” he notes. “The consumer might be out of pocket for a month or so, but the cost to brand reputation could last for years. So be careful before playing with the freemium model.”