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"Why pay premium in freemium services?" A study on perceived value, continued use and purchase intentions in free-to-play games

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  • Hamari, Juho
  • Hanner, Nicolai
  • Koivisto, Jonna

Abstract

Freemium has become de facto business model for games and many other online services. We investigate how consumers' perceived value is associated with their intention to use freemium services and to purchase premium content. We employ data gathered through an online survey (N=869) among players of freemium/free-to-play games. Firstly, we find support for the "Demand Through Inconvenience" -hypothesis proposed in this study, indicating that the higher the enjoyment of the freemium service, the lower the intentions to purchase premium content but higher intention to use the service overall. Secondly, social value is found to positively affect freemium use and premium purchases. Thirdly, the quality of the freemium service does not seem to be associated with premium purchases although it has a positive association with freemium use. Fourthly, the economic value of freemium services is positively associated with freemium service use and via increased use also has a positive effect on premium purchases. The findings of the present study highlight the peculiarity of the freemium business model: increasing perceived value of the freemium service (i.e. enjoyment) may both add to and retract from future profitability via increased retention on one hand, reduced monetization on the other.

Suggested Citation

  • Hamari, Juho & Hanner, Nicolai & Koivisto, Jonna, 2020. ""Why pay premium in freemium services?" A study on perceived value, continued use and purchase intentions in free-to-play games," International Journal of Information Management, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:ininma:v:51:y:2020:i:c:s0268401218311812
    DOI: 10.1016/j.ijinfomgt.2019.102040
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    Cited by:

    1. Hollebeek, Linda D. & Abbasi, Amir Zaib & Schultz, Carsten D. & Ting, Ding Hooi & Sigurdsson, Valdimar, 2022. "Hedonic consumption experience in videogaming: A multidimensional perspective," Journal of Retailing and Consumer Services, Elsevier, vol. 65(C).
    2. Enache, Andreea & Friberg, Richard & Wiklander, Magnus, 2023. "Demand for in-app purchases in mobile apps—A difference-in-difference approach," International Journal of Industrial Organization, Elsevier, vol. 88(C).
    3. Hussain, Ali & Abid, Muhammad Farrukh & Shamim, Amjad & Ting, Ding Hooi & Toha, Md Abu, 2023. "Videogames-as-a-service: How does in-game value co-creation enhance premium gaming co-creation experience for players?," Journal of Retailing and Consumer Services, Elsevier, vol. 70(C).
    4. Philipp Brüggemann & Nina Lehmann-Zschunke, 2023. "How to reduce termination on freemium platforms—literature review and empirical analysis," Journal of Marketing Analytics, Palgrave Macmillan, vol. 11(4), pages 707-721, December.
    5. Biraglia, Alessandro & Bowen, Karen T. & Gerrath, Maximilian H.E.E. & Musarra, Giuseppe, 2022. "How need for closure and deal proneness shape consumers’ freemium versus premium price choices," Journal of Business Research, Elsevier, vol. 143(C), pages 157-170.
    6. Mattinen, Topias & Macey, Joseph & Hamari, Juho, 2023. "A Ruse by Any Other Name: Comparing Loot Boxes and Collectible Card Games Using Magic Arena," OSF Preprints s9xqt, Center for Open Science.
    7. Qian, Tyreal Yizhou & Matz, Robbie & Luo, Lei & Xu, Chenglong, 2022. "Gamification for value creation and viewer engagement in gamified livestreaming services: The moderating role of gender in esports," Journal of Business Research, Elsevier, vol. 145(C), pages 482-494.

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