The Value of Free: An Insight into the Freemium Models' Impact on COnsumers' Purchasing Behaviour

Maria Holm Foldager & Louise Kongstad Wulff

Student thesis: Master thesis


The purpose of this thesis is to investigate how freemium models within three product categories (games, streaming & dating) affect consumer behaviour in the Danish market. Candy Crush, Spotify and Tinder, are chosen to represent the three product categories due to their popularity. Freemium is defined as: ―A business model that allows a consumer to receive basic services for free, but requires them to pay for any service deemed to be premium” (The Business Dictionary, 2017).The interest in freemium models arises from the popularity of digital business models, where freemium is a popular and dominating pricing strategy in the app market. This leads to a reflection on whether the freemium model can be evaluated as successful in the processes of nudging consumers towards a premium solution.In order to conduct the research, theories within behavioural economics, such as The Dual Process Theory and heuristics and biases are used to create assumptions about consumer behaviour in freemium apps. These assumptions are tested by performing a pilot study in two focus groups and further investigated by using the vignette technique.The findings suggest that consumers are likely to be anchored by the free option and therefore unlikely to buy premium content. Additionally, the primary data suggest that the psychological aspects likely to nudge consumers have little or no effect on consumer behaviour.The recommendations for companies interested in using the business model is to be aware that anchored consumers lead to revenue generation from a small group of premium users. Therefore, in order to create the best circumstances for generating profit, the company should use customer data to identify paying users and improve their customer experience by focusing on customer relationship management. Furthermore, the company should evaluate the purpose of using a freemium model. The freemium model has great potential to attract more users, which may include commercial benefits.In order to generate higher value for the consumer and the company in question, the premium solution should be designed to meet the consumer’s specific needs.

EducationsMSc in Psychology, (Graduate Programme) Final Thesis
Publication date2017
Number of pages175