The breakthrough of the SaaS (Software as a service) has led to the withdrawal of the traditional software pricing strategies and forced software vendors to change their established business practices.

This literature review introduces the main features of the freemium pricing strategy and handles the opportunities and challenges of this strategy from the point of view of the SaaS vendor.

The results of the Tanja Turunen’s  study show that the freemium pricing strategy is a very powerful marketing tool. It can be used to attract attention of the audience and achieve a considerable market share. In addition to that, the freemium pricing strategy effectively improves diffusion to the markets and it is proven that company can benefit from the network effects of the software markets by using freemium.

The main challenges of the freemium pricing strategy are the suspicious attitude towards free products, the decrease of the appreciation of the product and the difficulty of achieving a considerable market share. Further, the success in versioning of the product and the conversion rate from users to customers are emphasized. Study shows that at the moment there is considerably little research about the challenges of freemium model.

Tanja Turunen (University of Jyväskylä): Freemium pricing strategy: Opportunities and challenges from the point of view of SaaS vendors

https://www.cloudsoftwareprogram.org/theses-and-articles/i/27790/1570/bachelor-s-thesis-freemium-pricing-strategy-opportunities-and-challenges-from-the-point-of-view-of-saas-vendors

Cloud Software Finland is Tivit's four-year (2010-2014) program which focuses on developing different areas of cloud services. The program is sponsored by Tekes.

Cloud Software Finland Program: https://www.cloudsoftwareprogram.org/