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Lifecycle

Freemium

A permanently free tier with limits, intended to convert a small share of users to paid over time.

Freemium offers a free tier with no time limit and real constraints, on the theory that a share of users will hit those constraints and pay.

It differs from a trial in that the free state is the destination for most users, not a waiting room. That makes the limits the product decision: they have to be generous enough to demonstrate value and tight enough to create a reason to upgrade.

Free users are a cost, and the cost scales with usage. Freemium businesses need metering on the free tier just as much as on the paid one, or they cannot tell what serving it costs.

Related terms

  • Free trial A time-limited period of full or partial access before billing starts, with or without a payment method collected.
  • Entitlement What a customer is allowed to use because of the plan they are on: which features, and up to what limits.
  • Overage Usage beyond an included allowance or commitment, charged at a separate rate.