Still scratching your head about freemium? I liked Joel’s post on Strategy Letter V on the idea. Joel’s basic point —- to understand freemium, you need to understand the idea of complementary products. Products are complementary when the use of one means you need more of the other. For example, when I buy a computer, I am likely also to buy software. When I buy a car, sooner or later I will be buying car repair. Joel shows how freemium pricing often opens the door for increased demand for complementary products. Here is the link.
BTW, the grand daddy of all complementarity pricing strategies came from McDonald’s. When you eat a hamburger, you are likely to buy a soft drink to wash it down. So the McDonald’s brothers sold its burgers at cost and made a fortune on soft drink sales. Ray Krock then turned the idea into a franchise.