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Converting freemium customers from free to premium—the role of the perceived premium fit in the case of music as a service

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Abstract

Freemium seems to be a promising solution for content providers to earn money now that Web 2.0 users feel entitled to free services and content services like Spotify generally accept this concept. Providers using freemium offer their service in free basic and paid premium versions. To prompt users to pay, a free version has fewer functions. However, no studies have yet investigated whether limiting features is the best strategy for converting users into paying customers, and, if so, how many functional differences there should be between free and premium versions. Therefore, our study aims to measure whether a free service’s limitations impact the evaluation of free and premium versions. Drawing on the Dual Mediation Hypothesis and the Elaboration Likelihood Model, we examined 317 freemium users’ survey responses. Our results indicate that companies providing freemium services can increase the probability of user conversion by providing a strong functional fit between their free and premium services.

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Authors and Affiliations

  1. Ludwigstr. 28, 80539, Munich, Germany

    Thomas M. Wagner

  2. Information Systems & E-Services, Technische Universität Darmstadt, Hochschulstraße 1, 64289, Darmstadt, Germany

    Alexander Benlian

  3. Institute for Information Systems and New Media, University of Munich, Ludwigstr. 28, 80539, Munich, Germany

    Thomas Hess

Authors
  1. Thomas M. Wagner
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  2. Alexander Benlian
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  3. Thomas Hess
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Correspondence to Thomas M. Wagner.

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Responsible Editors: Jan Marco Leimeister and Hubert Österle

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Wagner, T.M., Benlian, A. & Hess, T. Converting freemium customers from free to premium—the role of the perceived premium fit in the case of music as a service. Electron Markets 24, 259–268 (2014). https://doi.org/10.1007/s12525-014-0168-4

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  • DOI: https://doi.org/10.1007/s12525-014-0168-4

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