Intro

In our subscription-based reality, freemium business models prove effective in converting users into recurring paying customers, although each company leverages this model to different ends.

Spotify

Spotify’s free tier offers listening to music (with ads). Premium plans offer ad-free listening, offline listening, organizing listening queue, etc. In this way, Spotify encourages users to convert to a premium plan because the user’s ability to freely control their music listening is gated behind a paywall. This maximizes lifetime value because the free tier of Spotify is so annoying to use to the point where premium feels essential and users feel it is worth it.

Figma

Figma’s free tier lets individual users utilize Figma’s design tools. Premium plans unlock more collaborative features, which are useful for larger teams that need to work on projects simultaneously. In this way, Figma encourages users to add seats to their plan so that more members can utilize Figma together. This maximizes lifetime value because their powerful suite of features are indispensable for designers, meaning teams will be willing to pay subscriptions. Limiting larger teams’ ability to collaborate in the free tier pushes them towards premium plans, while not eliminating individual designers’ ability to use the tool.

NYT

NYT’s free tier lets users access some articles. Their paid plans allow users to choose which content they get access to, allowing users control over what they are paying for. In this way, NYT encourages users to subscribe to access the content they want to see. This maximizes lifetime value because users are only paying for what they want. Gating articles and other content behind paywalls pushes users towards premium plans, but their brand reputation as a news source keeps even non-paying users coming back.