Freemium
A distribution model in which a basic version of a product is offered free of charge and advanced features are available on a paid subscription. The objective is to acquire a large base of free users and convert a fraction into paying customers.
In practice
Freemium works when the marginal cost of serving a free user is near zero — software, digital media — and when the paid version delivers clearly superior value. Spotify converts approximately 25 percent of its free users to paid subscribers, an exceptional rate driven by deliberate limitations on the free experience. A freemium-to-paid conversion rate below 2 percent signals either an insufficiently compelling paid offer or a poorly matched target audience.