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.
This is a preview of subscription content, access via your institution.
Buy single article
Instant access to the full article PDF.
Tax calculation will be finalised during checkout.
Subscribe to journal
Immediate online access to all issues from 2019. Subscription will auto renew annually.
Tax calculation will be finalised during checkout.
Anderson, C. (2009). Free—the future of a radical price. London: Random House.
Armstrong, J. S., & Overton, T. S. (1977). Estimating nonresponse bias in mail surveys. Journal of Marketing Research, 14(3), 396–402.
Bourreau, M., & Lethiais, V. (2007). Pricing information goods: Free vs. Pay content. In E. Brousseau & N. Curien (Eds.), Internet and digital economics (pp. 345–367). Cambridge: Cambridge University Press.
Brown, S. P., & Stayman, D. M. (1992). Antecedents and consequences of attitude toward the ad: a meta-analysis. The Journal of Consumer Research, 19(1), 34–51.
Buxmann, P., Strube, J., & Pohl, G. (2007). Cooperative pricing in digital value chains—the case of online music. Journal of Electronic Commerce Research, 8(1), 32–40.
Cheng, H. K., & Tang, Q. C. (2010). Free trial or no free trial: optimal software product design with network effects. European Journal of Operational Research, 205(2), 437–447.
Chin, W. W. (1998). The partial least squares approach to structural equation modelling. In G. A. Marcoulides (Ed.), Modern methods for business research (pp. 295–336). Hillsdale: Lawrence Erlbaum Associates.
Cohen, J. (1988). Statistical power analysis for the behavioral sciences (2nd ed.). Hillsdale: Lawrence Erlbaum Associates.
Coulter, K. S., & Punj, G. (1999). Influence of viewing context on the determinants of attitude toward the ad and the brand. Journal of Business Research, 45(1), 47–58.
d’Astous, A., & Landreville, V. (2003). An experimental investigation of factors affecting consumers’ perceptions of sales promotions. European Journal of Marketing, 37(11–12), 1746–1761.
Dodds, W. B., Monroe, K. B., & Grewal, D. (1991). Effects of price, brand, and store information on buyers’ product evaluations. Journal of Marketing Research, 28(3), 307–319.
Dörr, J., Benlian, A., Vetter, J., & Hess, T. (2010, August 12–15). Pricing of content services - an empirical investigation of music as a service. Paper presented at the Proceedings of the sixteenth Americas Conference on Information Systems, Lima, Peru.
Dörr, J., Wagner, T. M., Benlian, A., & Hess, T. (2013). Music as a service: an alternative to music piracy? An empirical investigation of the intention to use music streaming services. Business & Information Systems Engineering, 5(6), 383–396.
Fornell, C., & Bookstein, F. L. (1982). Two structural equation models: Lisrel and pls applied to consumer exit-voice theory. Journal of Marketing Research, 19(4), 440–452.
Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39–50.
Hair, J. F., Anderson, R. E., Tatham, R. L., & Black, W. C. (1998). Multivariate data analyses with readings. Englewood Cliffs: Prentice Hall.
Helm, R., Mark, A., & Bley, S. (2009). The effect of free product premiums on attitudes and buying intention for durable goods: moderating effects of value and product premium fit in the dual mediation model. European Retail Research, 23(1), 21–45.
Homer, P. M. (1990). The mediating role of attitude toward the ad: some additional evidence. Journal of Marketing Research, 27(1), 78–86.
Hung, J. (2010). Economic essentials of online publishing with associated trends and patterns. Publishing Research Quarterly, 26(2), 79–95.
IFPI. (2012). Digital music report 2012—expanding choice. Going global. London: IFPI Communications.
Karson, E. J., & Fisher, R. J. (2005a). Predicting intentions to return to the web site: extending the dual mediation hypothesis. Journal of Interactive Marketing, 19(3), 2–14.
Karson, E. J., & Fisher, R. J. (2005b). Reexamining and extending the dual mediation hypothesis in an on-line advertising context. Psychology & Marketing, 22(4), 333–351.
Lambert, D. M., & Harrington, T. C. (1990). Measuring nonresponse bias in customer service mail surveys. Journal of Business Logistics, 11(2), 5–25.
Liu, C. Z., Au, Y. A., & Choi, H. S. (2012, December 16–19). An empirical study of the freemium strategy for mobile apps: Evidence from the google play market. Paper presented at the Proceedings of the thirty third International Conference on Information Systems, Orlando, FL, USA.
Locander, W. B., & Hermann, P. W. (1979). The effect of self-confidence and anxiety on information seeking in consumer risk reduction. Journal of Marketing Research, 16(2), 268–274.
López, I., & Ruiz, S. (2011). Explaining website effectiveness: the hedonic-utilitarian dual mediation hypothesis. Electronic Commerce Research and Applications, 10(1), 49–58.
Lyons, K., Messinger, P., Niu, R., & Stroulia, E. (2012). A tale of two pricing systems for services. Information Systems and e-Business Management, 10(1), 19–42.
MacKenzie, S. B., Lutz, R. J., & Belch, G. E. (1986). The role of attitude toward the ad as a mediator of advertising effectiveness: a test of competing explanations. Journal of Marketing Research, 23(2), 130–143.
Meuter, M. L., Bitner, M. J., Ostrom, A. L., & Brown, S. W. (2005). Choosing among alternative service delivery modes: an investigation of customer trial of self-service technologies. Journal of Marketing, 69(2), 61–83.
Murray, K. B. (1991). A test of services marketing theory: consumer information acquisition activities. Journal of Marketing, 55(1), 10–25.
Oestreicher-Singer, G., & Zalmanson, L. (2013). Content or community? A digital business strategy for content providers in the social age. MIS Quarterly, 37(2), 591–616.
Pavlou, P. A., & Fygenson, M. (2006). Understanding and prediction electronic commerce adoption: an extension of the theory of planned behavior. MIS Quarterly, 30(1), 115–143.
Petty, R. E., & Cacioppo, J. T. (1981). Attitudes and persuasion: Classic and contemporary approaches. Dubuque: Wm. C. Brown.
Pujol, N. (2010). Freemium: Attributes of an emerging business model (working paper). Available at SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1718663.
Ringle, C. M., Wende, S., & Will, S. (2005). Hamburg. http://www.smartpls.de.
Rogers, E. M. (1995). Diffusion of innovations. New York: Free Press.
Semenzin, D., Meulendijks, E., Seele, W., Wagner, C., & Brinkkemper, S. (2012). Differentiation in freemium: Where does the line lie? Paper presented at the Proceedings of the third International Conference on Software Business, Cambridge, MA, USA.
Shapiro, C., & Varian, H. R. (1998a). Information rules: A strategic guide to the network economy. Boston: Harvard Business School Press.
Shapiro, C., & Varian, H. R. (1998b). Versioning: the smart way to sell information. Harvard Business Review, 76(6), 106–115.
Stone, M. (1974). Cross-validatory choice and assessment of statistical predictions. Journal of the Royal Statistical Society. Series B (Methodological), 36(2), 111–147.
Teece, D. J. (2010). Business models, business strategy and innovation. Long Range Planning, 43(2–3), 172–194.
Tellis, G. J. (1997). Advertising and sales promotion strategy. Reading: Addison-Wesley.
Teng, L., & Laroche, M. (2007). Building and testing models of consumer purchase intention in competitive and multicultural environments. Journal of Business Research, 60(3), 260–268.
Veit, D., Clemons, E., Benlian, A., Buxmann, P., Hess, T., Kundisch, D., Leimeister, J., Loos, P., & Spann, M. (2014). Business models. Business & Information Systems Engineering, 6(1), 45–53.
Venkatesh, V., Thong, J. Y. L., & Xu, X. (2012). Consumer acceptance and use of information technology: extending the unified theory of acceptance and use of technology. MIS Quarterly, 36(1), 157–178.
Wagner, T. M., Benlian, A., & Hess, T. (2013). The Advertising Effect of Free – Do Free Basic Versions Promote Premium Versions within the Freemium Business Model of Music Services? Proceedings of the forty sixth Hawaii International Conference on System Sciences, Maui, HI, USA, pp. 1–10.
Wilson, F. (2006, 03-24-2012). A freemium business model. Retrieved from http://www.avc.com/a_vc/2006/03/the_freemium_bu.html
Zeithaml, V. A. (1988). Consumer perceptions of price, quality, and value: a means-end model and synthesis of evidence. Journal of Marketing, 52(3), 2–22.
Responsible Editors: Jan Marco Leimeister and Hubert Österle
About this article
Cite this article
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
- Feature limitations
- Dual mediation hypothesis