freemium is more successful than 30-day free trials or other limited-term offers, because customers have become wary of cumbersome cancellation processes and find indefinite free access more compelling.

Recall that one of the chief purposes of freemium is to attract new users. If you’re not succeeding with that goal, it probably means that your free offerings are not compelling enough and you need to provide more or better features free.

If you’re generating lots of traffic but few people are paying to upgrade, you may have the opposite problem: Your free offerings are too rich, and it’s time to cut back.

The best long-term strategy is generally to aim for a moderate conversion rate (in my research, I’ve found that most companies’ range from 2% to 5%) coupled with a high volume of traffic. If you’re targeting a small market, you should aim for a higher rate.

Early adopters are less price-sensitive than others, so they are more likely to upgrade. And often they are people for whom the value proposition is unusually compelling.

In our HBS working paper and in ongoing research, we have found that a free user is typically worth 15% to 25% as much as a premium subscriber, with significant value stemming from referrals.

If you’re considering a freemium model, pay close attention to why and how satisfied users might help your product go viral.

Users who join late are typically harder to convert; therefore, in order to keep increasing upgrades, you’ll need to keep increasing the value of your premium services. Smart companies view freemium not only as a revenue model but also as a commitment to innovation.