The concept of “freemium” has seen explosive growth in the realm of digital products. To attract customers, this model provides a free base version of the product while also allowing them to purchase a more advanced one. Sales and price promotions have traditionally played a significant role in traditional marketing in order to increase sales and revenue. However, how exactly does this tactic function in the context of freemium digital products? Recently, Julian Runge, Jonathan Levav, and Harikesh Nair collaborated with a big gaming firm to do research into this puzzle and offer useful takeaways for businesses. According to the research, the gaming firm was able to attract a large number of users by giving away a free version of their game.
Findings of the study
Over the course of six months, the study’s 160,000 participants used the freemium version of a popular game and were split into three groups: those who got promotions, those who did not get promotions, and those who received alternative promos. Remarkably, the results showed that promotions had no negative impact on conversion rates or income. This demonstrates that, even in the realm of freemium digital products, promotions can be an effective tool for driving sales and generating revenue for businesses.
Debate about the impact of promotions
Promotional pricing and its effect on freemium digital products is a topic of some dispute. While some executives insist that sales are a necessary evil for expanding their client base and increasing income, others worry that discounting customers at the expense of long-term sales is a bad idea. According to the standard marketing tenet, consumers’ perception of a product’s worth might drop if the company offers discounts.
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However, the researchers concluded that this strategy probably wouldn’t pan out for freemium digital products. The study’s authors uncovered various arguments suggesting digital companies should not worry about advertisements. For starters, in the virtual world, lowering the price of a product has no effect on production costs, thus any savings are pure profit. Second, the digital realm removes many of the barriers to purchasing physical products. Obtaining virtual items, for instance, is typically quite simple under freemium models. The storage requirements of conventional items are eliminated here.
Considerations for Businesses
While the study does shed light on how promotions affect freemium digital goods, firms should still consider their unique situation and audience before rolling out any promotional techniques. It’s important to think about the kind of advertising and who you’re trying to reach. It’s possible that a free trial of a premium feature might be more beneficial than a discount on the same feature. However, companies also need to think about how often promotions are offered and how that could influence consumer habits.
Benefits of Promotions
There are several advantages to running promotions besides just generating more money in the bank, including drawing in new customers, raising brand recognition, and learning more about consumers’ habits and preferences. As this research illustrates, promotions may have a significant, positive impact on the success of freemium digital products. Businesses that use the freemium model might benefit from running sales and discount campaigns.
The research presents substantial evidence for the usefulness of promotions in this industry, lending credence to the view that they might be useful in boosting sales and bringing in money. In order to ensure the success of a marketing campaign, firms must first take into account the unique characteristics of their product and the demographics of their target audience. The results of this study could help businesses make more money by promoting free digital items on the market.
