Thursday, July 11, 2013's Freemium Strategy

The mobile/FB game Candy Crush Saga is exhibit one in making freemium pricing pay off. Freemium is a pricing technique in which customers get the basic offering for free with the option of paying for upgrades or additional functionality. Most apps are freemium-priced, and many mobile games.

The UK game company is targeting women in the age group of 25 to 55 for Candy Crush, although others outside that demographic play, as well. You start by downloading the free version to see if you like it . . . and once you gain proficiency, you might want to pay a little for extra elements that will help you reach higher levels. The game itself is fun and deceptively easy, and the payments are small. 

This "sweet" game is played far and wide--about 600 million times every day, on iPhones or Android phones or Facebook. Nearly three-quarters of Candy Crush players use the free version. That means fewer than 30% pay to play--but those small payments add up.  Candy Crush reportedly earns about half a million pounds ($750,000) every day. The profit margin is extremely healthy, needless to say.

Not everyone admires freemium pricing. Some people raise concerns about the effect on usage of more traditional digital games that must be purchased to be played. They also wonder whether game marketers are tweaking games to improve the odds that players will pay up. "Coercive monetization" is the term one economist applies to freemium pricing.

Yet the high-profile success of some app marketers makes a compelling case for investigating whether freemium can be used for other goods and services.

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