GETTING CONSUMERS TO PAY FOR CONTENT: THE ROLE OF VALUE DISCREPANCY IN FREEMIUM MODELS

Authors

Robert Rußell, LMU MunichFollow

Abstract

“Freemium” revenue models enable media companies to attract potential customers with restricted, but freely available, product versions while charging for premium versions. Whereas some companies have established viable businesses with this model, others, specifically news content providers, still struggle to convert free users into paying customers. The value discrepancy between the free and the premium versions is a major driver of users’ conversion decisions. Nevertheless, IS research lacks in understanding, how freemium design influences the value discrepancy when users are familiar with the product. News content providers create value discrepancy by means of digital paywalls, configuring quantity restriction, choice restriction, advertising, and price. In this study, we conduct a discrete choice experiment, in which consumers face decisions when comparing their status quo (a free version) with a subscription offer (a premium version). Our results reveal that decreasing the free version’s value and increasing the premium version’s value has a positive effect on conversion intentions. While restricting the quantity is only effective if more content is available, restricting the choice relatively increases in effectiveness if less content is available. Additionally, we find indications that combining a price of zero with a less severe quantity restriction could trigger an irrational zero-price effect.

Recommended Citation

Rußell, Robert, "GETTING CONSUMERS TO PAY FOR CONTENT: THE ROLE OF VALUE DISCREPANCY IN FREEMIUM MODELS" (2020). In Proceedings of the 28th European Conference on Information Systems (ECIS), An Online AIS Conference, June 15-17, 2020.
https://aisel.aisnet.org/ecis2020_rp/105