CFA Level I · CFA Level I Exam · Business Models
A software firm gives its basic product free of charge and earns revenue only from a small share of users who upgrade to paid premium features. This pricing approach is best described as a:
This is a freemium model. The basic product is free to attract a large user base, while revenue comes from a minority who pay for premium features. It differs from cost-plus pricing, which adds a markup to cost, and from razor and blade pricing, which relies on consumables.
- Afreemium modelCorrect
- Bcost-plus model
- Crazor and blade model
Explanation
Offering a free basic version and charging a subset of users for premium features is the freemium model. Cost-plus sets price as cost plus a markup, and razor and blade sells a base item cheaply to earn on repeat purchases of consumables.
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