Willingness to pay for freemium services: Addressing the differences between monetization strategies

Abstract

Freemium business models are a potential monetization strategy wherein companies can persuade consumers to buy premium services by offering a free version with limited functionalities and then benefitting by selling a premium version of the online service. Our empirical investigation followed a mixed-method approach and used meta-analytical data from 55 studies and 15 qualitative interviews. Based on these studies and interviews, we identify key factors influencing consumers’ willingness to pay for freemium services. Additionally, we test moderating effects across different monetization strategies (limited features vs. selling virtual items). The results reveal that the dimensions of perceived value (i.e., functional, hedonic, social, and price value), based on a free version of the service, serve as predictors for willingness to pay for freemium services. Trust in the service provider mediates the effects of dimensions of perceived value on willingness to pay for freemium services. The results also show that these relationships are influenced by the monetization strategy. This study contributes to existing literature by consolidating empirical evidence and offering valuable insights regarding willingness to pay for freemium services. The findings have implications for managers, helping them tailor their monetization strategies based on the type of freemium service.