Toward Sustainable Freemium Software: The Roles of User Satisfaction and Use Context

Abstract

Freemium software provides basic features free of charge and premium features for additional payment. It is a prevailing business model in the software industry. The model could be a long-awaited solution for software providers suffering from sustainability and retention problems. However, software providers are still experiencing low conversion rates from free users to paid users. Satisfactory services do not guarantee additional spending by free users for services. User satisfaction with core services has been considered a key component of user loyalty. However, this belief is being challenged. This study investigates the effect of satisfaction on loyalty intentions (continuance intention and intention to purchase) of freemium software. The study develops a research model based upon the use context framework including user characteristics, relational characteristics, and marketplace characteristics. The results from a series of regressions show that satisfaction affects continuance intention but does not influence purchase intention although it indirectly affects purchase intention by interacting with various characteristics. The results suggest several strategies that freemium software providers can pursue according to their objectives. Rather than satisfactory services, interactions among users or carefully designed additional features can lead to sustainable profitability.