Freemium
Also known as: free tier
A pricing model where the base version of the product is permanently free: used by PLG companies to drive viral adoption before monetizing through upgrade features.
Freemium is a pricing strategy where a functional base version of the product is always free. Monetization comes from users upgrading to paid tiers for more seats, higher limits, advanced features, or compliance controls. Classic examples: Slack, Notion, Figma, Loom, Linear.
Freemium only works for products with fast time-to-value, viral spread, and a clear upgrade driver. It is not an acquisition tactic but a GTM strategy: the free tier IS your marketing and sales channel. Free-to-paid conversion rates at good PLG companies sit between 2% and 8%, depending on segment.
The biggest pitfall is a too-generous free tier with no reason to upgrade. The second pitfall is a too-stingy tier where users never experience value. Finding the right line requires continuous A/B testing on feature limits.