“Previum” the evolution of Freemium
When I was selling shrink-wrapped product to Best Buy, we showed the buyer testimonials from our alpha and beta users to convince him that the product would live up to our promise and walked him through a demo. He was not convinced and we were stuck at maybe. Then we gave him the full product on a development X-box. He took it home to his wife and teenage daughters so they could preview the game. They loved it in the console environment and we closed the sale.
This is an example of previum.
In a previum model, the customer gets the full experience for free in a limited way. In the freemium model they get a limited experience for free in an unlimited way. Both models leverage the power of free for customer acquisition. The critical difference is the previum model forces the user to cross back over the penny gap and become a customer or accept a tangibly limited experience. The freemium model is less effective because it asks the consumer to adopt a limited version of a product and then encourages them to cross back over the penny gap with the promise of a better experience.
Sony has filed for a patent in the video game space that includes a great graphic to illustrate this point. Ask yourself which is more convincing — the Freemium Model:
[caption id=”attachment_545" align=”aligncenter” width=”580" caption=”Freemium: Pay me and I promise to give you a bigger sword. Did I mention, it is WAY bigger!?!”]
or the Previum Model where you get to experience the big sword and see how much better it can be:
[caption id=”attachment_546" align=”aligncenter” width=”580" caption=”Previum: What’s wrong, want the big powerful sword back? You can have it for the low price of…”]
In the previum model, the consumer gets to see everything you have to offer and to experience it in full, for free. After some period of time or number of uses, you ask them to pay for the services they are enjoying.
The hardest thing you can do in any business is close a sale. You basically have two dials you can turn to get someone to pay:
increasing the perceived value of the product (marketing)
decreasing the cost or of the product (pricing)
In the digital world we have taken this to the extreme with freemium and decreased the consumer cost of the initial offering to zero. The penny gap helps you acquire users, but when potential consumers experience your limited offering at no cost the power of free may work against you.
Consumers are educated by the tangible thing they experience as they engage with your service and it gets harder and harder to convince a consumer to cross back over the penny gap with the promise of value added services. Eventually, the free product defines your business and 90% of your consumers decide the free version is good enough without ever experiencing the full product.
In the non-digital world companies have used previum models to acquire customers for a long time. Auto-dealers will let you take a car home for the weekend and gas stations offer a free car wash with the purchase of a full tank of gas. Restaurants give away food at happy hour and at physical retail you can try an item on before purchase. In each example, the perceived value of the service you are buying is higher because you get the full experience before you buy.
I think more digital products/services should be sold with the previum model and hope to discuss it further in the comments.