The American consumer is bombarded with TV, internet and print advertisements extolling the features of thousands of products ranging from motor vehicles to smartphones. Today’s marketing practices focus on the most distinct features of each product and barely mention that many of these features can only be acquired if the consumer selects the most expensive version of the product. In marketing parlance some have referred to this as the “freemium” business model (a combination of “free” and “premium,” Kumar, V., “Making ‘Freemium’ Work”, Harvard Business Review, May 2014). Sellers manufacture a base product and then offer add-ons or optional features that jack-up the purchase price by a significant margin. Here is one such example taken from Subaru’s current website: “‘EyesSight’ is an extra set of eyes on the road, and if need be, an extra foot on the brake when you drive. When equipped with Subaru EyeSight, the Forester, Impreza, Legacy, Outback, Crosstrek and WRX received the highest rating … “
The base price of the Legacy is $21,745, but it does not come with EyeSight. To acquire a Legacy with EyeSight the purchaser has to buy the Legacy 36R Limited model at a base price of $29,945, and then purchase the EyeSight option, which adds $3,090. Thus, the total price for a Legacy with EyeSight is $33,830—$12,000 more than the base price. Or, alternatively, some products like protective helmets (e.g., motorcycle, bicycle, football, etc.) are marketed in multiple versions and, unbeknownst to most consumers, the more expensive models are designed so that they provide increased protection. Now, that’s “freemium” marketing in practice.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
