A PROJECT REPORT ON

Emerging Marketing Trend (Freemium)

SUBMITTED TO Dr. vikas kumar singh

SUBMITTED BY subhash singh

ACKNOWLEDGEMENT

We are grateful to Dr. Shalini Nath Tripathi at Jaipuria Institute of Management, Lucknow for allowing us to make a project on Emerging Marketing Trends (Freemium). We pay our sincere gratitude for her continuous guidance and for guiding us at every step. Despite being busy in her work schedule she helped us throughout the project. We are very grateful to her for constant support and co-operation. Our special thanks to all for encouraging us to do very enlightening project. We take the opportunity to give to special thanks to our group for full co operation in the whole project and special thanks to parents, classmate, friends and well wishers for their moral support and encouragement.

INDEX
1. Emerging Marketing Trends Freemium4

2. OBJECTIVE OF THE PROJECT.7

3. METHODOLOGY
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 Genesis ..9 Research Design.10 Literature review11 4. CONCLUSION Findings..16 Discussions and Inferences.20 Future Implications of the Freemium.21

Emerging Marketing Trend

The word freemium is made up from the words free and premium.
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Freemium is a business model by which a product or service (typically a digital offering such as software, media, games or web services) is provided free of charge, but a premium is charged for advanced features, functionality, or related products and services. The word "freemium" is a portmanteau combining the two aspects of the business model: "free" and "premium" It describes a business model where you give a core product away for free and sell premium products; like the way Skype gives away free computer calls and sells voicemail, calls to landlines and other products. The internet phone service Skype is a prime example of the Freemium business model. The program that enables you to call between computers is offered free. If you want to call from a computer to a landline or have a voicemail associated with your Skype account you have to pay. The free program has hundreds of millions of users and only 10% of these free users are paying customers.

Technology is propagating new, equally powerful forms of multisided business models. In some information businesses, for example, data gathered from one set of users generate revenue when the business charges a separate set of customers for information services based on that data. Take Sermo, an online community of physicians who join (free of charge) to pose questions to other members, participate in discussion groups, and read medical articles. Third parties such as pharmaceutical companies, health care organizations,

financial institutions, and government bodies pay for access to the anonymous interactions and polls of Sermos members. As more people migrate to online activities, network effects can magnify the value of multisided business models. The freemium model is a case in point: a group of customers gets free services supported by those who pay a premium for special use. Flickr (online storage of photos), Pandora (online music), and Skype (online communication) not only use this kind of cross subsidization but also demonstrate the leveraging effect of networksthe greater the number of free users, the more valuable the service becomes for all customers. Pandora harnesses the massive amounts of data from its free users to refine its music recommendations. All Flickr users benefit from a larger photo-posting community, all Skype members from an expanded universe of people with whom to connect. Freemium can be seen from a different viewpoint i.e. a company gives some features free to generate the interest of users to its advance features and charge premium for the advanced features. This business model works by offering a basic service for free, while charging for a premium service with advanced features to paying members Example: - Free software or games.

Freemium can be also seen as follows: - The biggest challenge for businesses using the freemium model is figuring how much to give away for free so that users will still need and want to upgrade to a paying plan. If most users can get by with the basic free plan, they wont have a need to upgrade. For example, Ill probably never upgrade my LinkedIn account and because I dont shoot high definition videos, Ill never need a Premium Video account either.

OBJECTIVE
SOME FACTS ABOUT FB:-

Total active users of Facebook

August 26, 2008

100 (USERS IN MILLION)

178.38% (MONTHLY GROWTH RATE)

April 8, 2009

200

13.33%

September 15, 2009

300

9.38%

February 5, 2010

400

6.99%

July 21, 2010

500

4.52%

January 5, 2011

600

3.57%

May 30, 2011

700

3.45%

September 22, 2011

800

3.73%

Revenues
(estimated, in millions US$)

2006 (YEAR)

$52 (REVENUE)

(GROWTH)

2007

$150

188%

2008

$280

87%

2009

$775

177%

2010

$2,000

158%

2011

$4,270

114%

Hence, The purposes of conducting this research are as follows: To understand the reasons of popularity of Facebook and related organization. To understand various ways to increase revenue by providing free service. To understand the main reasons of freemium marketing. To understand the innovative strategies adopted by these firms to capture the developing nation market share. To understand the various models of Freemium Marketing.

Genesis of the Freemium

The business model has probably been in use for software since the 1980s, particularly in the form of a free time- or feature-limited ('lite') version, often given
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away on a floppy disk or CD-ROM, to promote a paid-for full version. The model is particularly suited to software as the manufacturing cost is negligible, so as long as significant cannibalization is avoided little is lost by giving it away for free. However, this term for the model appears to have been created only much later, in response to a 2006 blog post by venture capitalist Fred Wilson summarizing the model. Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium priced value added services or an enhanced version of your service to your customer base. Jarid Lukin of Alacra then suggested the term "freemium" for this model. The term has since appeared in Wired magazine and Business 2.0, which has since been used by bloggers such as Chris Anderson and Tom Evslin. In 2009, Anderson published the book Free, which examines the popularity of this business model. As well as for traditional software and services, it is now also often used by Web 2.0 and open source companies. As explained by several of the references cited above, freemium is closely related to tiered services. It has become a highly popular model, with notable success, such as quite prominently in LinkedIn, and in the form of a "soft" pay wall, such as those launched by The New York Times, and by Press+. Alternative models for monetizing digital offerings, noted in "See also", include Pay what you want, which also loosens conventional pricing constraints. Badoo is an international dating and discovery site that also uses the model

Research Design

This Project is in the category of Descriptive Research. The information sources are basically based upon secondary sources of Data like Internet, Newspaper, Magazine, and my mentors knowledge and experience. This project will be done within a time frame of 30 days. Information is taken from THE ECONOMICS TIMES Lucknow EditionFEB 2, 2012.

FREEMIUM
To understand freemium, we must first look at it in relation to the Internet, how it is used, and its position in the very competitive online market. As there has been
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little research on freemium thus far, I introduce the term based on non-academic work.

FREE & INTERNET The concept of giving something away in order to entice customers is not new. Similar terms include shareware and freeware, but these are defined specifically for software. Freemium on the other hand is about services. To exemplify this distinction, we can look at the music streaming service Spotify. It is not the downloadable software that matters, but the music the service. Other than that, the rationale is similarenticing customers to buy the premium version. According to the Copenhagen Institute for Futures Studies we are witnessing a pronounced flourishing of free content and services on the internet. They argue that this implies all things digital and mass produced will become free, while unique products and experiences will be worth more. Thus, all companies that have digitized products will be accepted. One example of this is how Wikipedia disrupted the historically lucrative encyclopedia business. Bill Gates, founder and former CEO of Microsoft have said that the Internet helps achieve a friction-free capitalism as buyers and sellers are put in direct contact with each other, and where the cost of manufacturing and distribution approaches zero. At the same time as the Internet is changing the economy by pressuring the price downwards, it enables new possibilities, e.g. such as making it easier to price discriminate between customer segments, easier to reach a far bigger market at a cheaper price than for physical products, and providing opportunities for making money in entirely new ways, one of which is freemium. Anderson claims that people are making lots of money and charging nothing.

WHAT FREEMIUM IS AND IS NOT?

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As the definition of freemium is equivocal as to specifically what it is and is not, and therefore who are using freemium and who are not, a clarification is needed. A company is said to be using freemium if at least one of their products is based on giving away a free version for some users into perpetuity, while others must pay for a premium version. In this project premium is defined as advanced features, functionality, or related products and services. From this we see that freemium can be both related to one specific product or to a companys suite of products. Defining specifically when a company is using freemium and when it is not is inherently difficult because of the potential complexities which can be introduced when a product or service is digitized. However, it is outside the scope of this project to look closer at classifying specifically when a company is using freemium and when it is not.

FREE VERSUS PAID According to Rekhi (2010), a San Francisco based entrepreneur and former Entrepreneur in Residence at early stage VC Trinity Ventures, choosing where to divide the free and paid plans is the essential critical question when using freemium. Several practitioners have proposed typologies for freemium to better analyze this chasm. Anderson (2009) suggests five ways to differentiate free and paid: The free version can have less functionality than the paid version; less capacity, e.g. the number of megabytes of pictures; be limited to a number of people; be free for some, e.g. for non-commercial use, while others must pay, e.g. for commercial usei.e. differentiating by customer class; and lastly it can be a limited amount of time on the full featured product, often called a trial.

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Another suggestion is differentiating on quantity, features, or distribution. Differentiating by quantity can e.g. be limiting on time, as also mentioned by Anderson; by maturity, e.g. giving a subset of the user base the program for free while it is still under development and not ready for general consumption; or by letting paying customers get a time advantage over free users by letting them buy the time-sensitive information before it is provided free of charge at a later time. What terms distribution is similar to what Anderson terms customer class. Thus, we see that these typologies are similar, but Pujol (2010) has a far more inclusive quantity category, and therefore a less specific differentiation that the one presented by Anderson. Both typologies mentioned see trials as a form of freemium, many practitioners, however, dont, and discusses it as a distinct concept different from freemium. Including trials lead to products such as Microsoft Office 10 and Adobe Photoshop CS 5 using freemium, something many disapprove. In this project trials are not seen as freemium, and will therefore not be discussed further. Not mentioned in the typologies we have examined, is what Murphy (2010) terms alternative product. He defines this as a very simple, single-purpose [product or service] that solves an immediate, specific and highly targeted need, but which promotes significant network effect and ecosystem opportunities well beyond that application. The primary differentiator to what the typologies discuss, is that this product is stand-alone and only an addition to the flagship product, which is not using freemium. To distinguish between who should pay and who can use a product or service for free, Chen (2009) suggests that the key is to create the right mix of features to segment out the people who are willing to pay, but without alienating the users who make up your free audience. And this is exactly what Hudson (2009) sees

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as a problem, stating that It is very difficult to properly segment users and features such that you provide enough value to both paid and free audiences.

SO, WHAT DO USERS PAY? In their report on freemium, the consultancy Sixteen Ventures claims that when using freemium the majority of users likely have no intention of ever becoming a customer. In a regular non-free purchase of a product there is a quid pro quo money in exchange for the productwhich is not as clearly eminent in freemium, as most customers might never pay for using the product or service. Is there then a quid pro quo for freemium, and if so, what is it? According to Sixteen Ventures themselves the quid pro quo is about getting the users attention and utilizing this attention to make moneyit only makes sense to seek ways to benefit from and monetize their usage of the system. With a somewhat different view, Pujol terms the quid pro quo as mind share, and defines it as the development of awareness for the providers brand and the consideration for purchase of future commercial products and service. In the former view the focus is on utilizing what the company can learn from users, while the latter focus on marketing aspects of freemium. Without taking any stands between these two positions, we see that there is still a quid pro quo; it is, however, different from the classical money in exchange for product.

RESEARCHING FREEMIUM Currently a third of the top grossing iPhone apps use a freemium model. Freemium is also heavily used in Facebook applications, with the most famous actor, Zynga, now valued at $5.5 billion USD. In addition to the examples we have
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seen earlier, we see that freemium is used by several prominent actors. However, at the same time there are considerable uncertainties as many companies are experiencing considerable problems. Rekhi claims: I believe we are still early in our understanding of [freemium] and to date most of the available analysis has been limited to anecdotal evidence, one-off case studies, tips & tricks, and a few early overviews of whats been tried. Tongue-in-cheek we can say that generally the Yiddish proverb For example is not proof seems appropriate, and clearly research on freemium is highly needed.

FINDINGS:-

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From our project, we founded 4 basic models of Freemium marketing adopted by the marketers. 1. FREE 1 2. FREE 2 3. FREE 3 4. FREE 4

DETAILS OF EACH MODEL:Here in figure:-

1. FREE 1

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 (Direct cross-subsidy; get one thing free, pay for another) The producer offers one product absolutely free to the consumer but charges for the other product from the same consumer. This helps marketer to create awareness from one product and encash from another product. There are two components i.e. Producer and Consumer. Therefore one product subsidizes another product for the producer.

2. FREE 2

(Ad-supported; third party subsidizes second party). There are 3 components i.e. Producer, Consumer and Advertiser. The Producer gives a product (1) for free to the Consumer. The Producer Charges fee for another product (2) i.e. Ad space to the Advertiser. In this way, Producer generates revenue from the Advertiser.
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 The Advertiser gets response in form of sales of their products which they advertised. The consumer become aware about the various products through ads and this generate profits to Advertiser as well as to Producer. Hence third party (Advertiser) subsidizes second party (Producer).

3. FREE 3

("Freemium; a few people subsidized everyone else) There are 2 components Producer and Consumer. The Producer offers one product free to many consumer and charges for another product to some consumer. In this way few people subsidize everyone.

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4. FREE 4

(Gift economy; people give away things for non-monetary rewards). There are 2 components i.e. Producer and Consumer. Producer gives product free to consumer. The producer doesnt get anything monetary in return but gets non-monetary rewards. Non-monetary rewards can be attention, reputation etc.

DISCUSSIONS AND INTERFRENCE:-

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 A company is said to be using freemium if at least one of their products is based on giving away a free version for some users into perpetuity, while others must pay for a premium version. Premium is defined as advanced features, functionality, or related products and services. Freemium can be both related to one specific product or to a companys suite of products. When a company is using freemium and when it is not is inherently difficult. Choosing where to divide the free and paid plans is the essential critical question when using freemium. The free version can have less functionality than the paid version; less capacity. It can be a limited amount of time on the full featured product, often called a trial. When using freemium the majority of users likely have no intention of ever becoming a customer. Getting the users attention and utilizing this attention to make money, it only makes sense to seek ways to benefit from and monetize their usage of the system. The development of awareness for the providers brand and the consideration for purchase of future commercial products and service. The Freemium model doesnt guarantee the success of the marketing firm. It is very critical to analyze about what to give free and on whom premium is to be charged. Since, no business can be run without profit in long run and it is the lifeline for any business.

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 Business is not a charity and each firm have to accurately predict when it is using Freemium.

FUTURE IMPLICATION:-

Freemium is an emerging trend. Freemium companies will attempt to stem the tidal wave of free content sweeping across various sectors - as they bid, as it were, to halt the obliteration of price - to consider whether the tactics being employed online have relevance in other retail contexts. And at a wider level, what light can the Freemium debate shed on the question of what customers in the 10s are willing to pay for? Will millions of consumers simply want something for nothing? There will be a specific focus on Freemiums impact on, and relevance to, three of the themes that we can monitor within Vision Considered Consumption, The Responsible Consumer and The Networked Society. Through using Freemium marketing, Marketer can create awareness speedy and quickly. Freemium marketing can also be used as a major method of Publicity. It can also be used by the tool for Market Penetration. Through Freemium Marketing marketers will try to gain the perceived mind share about the offering by the company.

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 Every customer want genuine product that have some significance to him and Freemium marketing can provide that platform to the customer by the way initial free offering that the customer feel accustomed to that offering and it will enhance customer faith in that offering which ultimately bring more revenue to the marketers in so called competitive market scenario.

THANK YOU

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