Freemium

A free tier for most users that drives upgrades to paid plans.

Also known as: freemium, free tier, freemium model

Freemium gives the product away free to most users and charges a minority for premium features, limits or seats. The free tier is marketing that pays for itself in distribution: users arrive without sales effort, some convert, and the base generates referrals, feedback and network effects.

100k free users → 3% convert → 3k × $20/mo = $60k MRR (numbers vary wildly by product)

The math that matters is support cost per free user versus conversion rate. If free users cost real money (support, compute, storage) and convert at fractions of a percent, freemium is a charity. It works when marginal cost per free user is near zero and the upgrade trigger is a natural usage ceiling.

The classic mistakes:

Free tier too generous. Full product free with a decorative paid tier converts nobody. Gate the value that businesses (not hobbyists) need: seats, admin, integrations, limits.
Free tier too stingy. A crippled trial disguised as free teaches nothing and converts nobody either. The free experience must deliver real standalone value.
No upgrade path designed. Users happily free forever because nothing nudges them at the moment of need. Instrument usage ceilings and prompt upgrades contextually.
Support drowning in free. Free users filing tickets at paid-user rates sinks the team. Self-serve support for free, humans for paid — tier support with pricing.
Confusing signups with success. A million free users churning monthly is a cost center with good press. Track free-to-paid conversion and free-tier unit economics, not registrations.

Test it: free tier with a designed ceiling, conversion instrumentation from day one, and a support-cost budget per free user. See free trial for the time-boxed alternative and pricing tiers for structuring the paid side.