Fostering the conversion of free users to premium subscribers and retaining those premium users are critical objectives for freemium service providers. In our recent study with Najmul Islam and Izak Benbasat, published in Information Systems Journal we build on consumer value theory and examine the differences between basic and premium users. Our study focuses on the emotional, functional, social, epistemic, and economic values driving basic users’ decisions to upgrade to premium subscriptions and premium users’ decisions to retain their paid subscriptions. We employ enjoyment, intrusiveness of advertising in the free subscription, ubiquity, social connectivity, discovery of new content, and the price value of the premium subscription as drivers of intentions. We test our model using data from a leading digital content service that employs the freemium model.
The results show that enjoyment and price value of the premium subscription predict the intention to upgrade to premium. The intention to retain the premium subscription is in turn driven by ubiquity and the discovery of new content. Interestingly, social connectivity has no effect on the intention to upgrade. However, it does have a small negative effect on the intention to retain the premium subscription. Contrary to our expectations, intrusiveness of advertising in the free subscription had a negative effect on the price value of the premium subscription.
In a bit more theoretical terms, the results imply that the intention to retain the premium subscription is influenced by attribute-level value perceptions such as ubiquity, the discovery of new content, and social connectivity. The intention to upgrade is in turn driven by benefits, i.e., enjoyment and price value of the premium subscription.
Find the full paper here.
Mäntymäki, M., Islam, A.K.M.N. & Benbasat, I. (2019) “What drives subscribing to premium in freemium services? A consumer value‐based view of differences between upgrading to and staying with premium”. Information Systems Journal, 2019, pp. 1–39