IDEAS home Printed from https://ideas.repec.org/a/spr/infsem/v23y2025i2d10.1007_s10257-024-00690-2.html
   My bibliography  Save this article

Converting free users to paying customers in freemium services: a SaaS success model

Author

Listed:
  • Pei-Fang Hsu

    (National Tsing Hua University)

  • Hsin-Ru Rebecca Yen

    (National Tsing Hua University)

  • Paul Jen-Hwa Hu

    (University of Utah)

  • Tuan Kellan Nguyen

    (University of Exeter)

Abstract

A freemium strategy represents a popular business model for cloud-empowered services, in which a vendor gives away basic services for free and seeks to monetize premium services. The economic viability of freemium models depends on the vendor’s ability to convert free service users into paying customers. Different from prior studies that mainly examine users’ intention to pay, this study examines both users’ intentions to pay and their actual purchase behaviors by extending the IS success model to propose a software as a service (SaaS) success model. Our proposed model emphasizes two freemium-specific, user-oriented factors: (1) the fit between perceived value of provided services and user needs of premium services as a contingent factor, and (2) price consciousness resulted from free-mentality of SaaS as a moderating factor to understand how individual evaluations of provided services might lead to purchases of premium services. We empirically examine the proposed SaaS success model with data from 638 active SaaS users. The results indicate that SaaS users’ intentions to pay and actual purchase behaviors are shaped by their perceived value of and satisfaction with the provided services, moderated by price consciousness. Furthermore, the fit between perceived value and user needs has an important, contingent role in influencing users’ intentions to pay and purchase behaviors.

Suggested Citation

  • Pei-Fang Hsu & Hsin-Ru Rebecca Yen & Paul Jen-Hwa Hu & Tuan Kellan Nguyen, 2025. "Converting free users to paying customers in freemium services: a SaaS success model," Information Systems and e-Business Management, Springer, vol. 23(2), pages 355-390, June.
    • Handle: RePEc:spr:infsem:v:23:y:2025:i:2:d:10.1007_s10257-024-00690-2
    DOI: 10.1007/s10257-024-00690-2
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10257-024-00690-2
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10257-024-00690-2?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Andrew Burton-Jones & Detmar W. Straub, 2006. "Reconceptualizing System Usage: An Approach and Empirical Test," Information Systems Research, INFORMS, vol. 17(3), pages 228-246, September.
    2. Hua (Jonathan) Ye, 2018. "Encouraging Innovations of Quality from User Innovators: An Empirical Study of Mobile Data Services," Service Science, INFORMS, vol. 10(4), pages 423-441, December.
    3. Benlian, Alexander & Koufaris, M. & Hess, Thomas, 2011. "Service quality in Software-As-A-Service: Developing the SaaS-QUAL measure and examining its role in usage continuance," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 58027, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    4. Roland S. Padilla & Simon K. Milton & Lester W. Johnson & Munyaradzi W. Nyadzayo, 2017. "Impact of Service Value on Satisfaction and Repurchase Intentions in Business-to-Business Cloud Computing," Service Science, INFORMS, vol. 9(1), pages 5-13, March.
    5. Wagner, T. & Benlian, Alexander & Hess, Thomas, 2014. "Converting freemium customers from free to premium - The role of the perceived premium fit in the case of music as a service," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 66722, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    6. 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.
    7. Le Wang & Paul Benjamin Lowry & Xin (Robert) Luo & Han Li, 2023. "Moving Consumers from Free to Fee in Platform-Based Markets: An Empirical Study of Multiplayer Online Battle Arena Games," Information Systems Research, INFORMS, vol. 34(1), pages 275-296, March.
    8. Mª Victoria Bordonaba-Juste & Laura Lucia-Palacios & Raúl Pérez-López, 2020. "Generational differences in valuing usefulness, privacy and security negative experiences for paying for cloud services," Information Systems and e-Business Management, Springer, vol. 18(1), pages 35-60, March.
    9. Hamari, Juho & Hanner, Nicolai & Koivisto, Jonna, 2017. "Service quality explains why people use freemium services but not if they go premium: An empirical study in free-to-play games," International Journal of Information Management, Elsevier, vol. 37(1), pages 1449-1459.
    10. Florian Johannsen & Martin Knipp & Thomas Loy & Milad Mirbabaie & Nicholas R. J. Möllmann & Johannes Voshaar & Jochen Zimmermann, 2023. "What impacts learning effectiveness of a mobile learning app focused on first-year students?," Information Systems and e-Business Management, Springer, vol. 21(3), pages 629-673, September.
    11. Dou, Wenyu, 2004. "Will Internet Users Pay for Online Content?," Journal of Advertising Research, Cambridge University Press, vol. 44(4), pages 349-359, December.
    12. Sheth, Jagdish N. & Newman, Bruce I. & Gross, Barbara L., 1991. "Why we buy what we buy: A theory of consumption values," Journal of Business Research, Elsevier, vol. 22(2), pages 159-170, March.
    13. Wagner, C. & Benlian, Alexander & Hess, Thomas, 2014. "Converting freemium customers from free to premium - The role of the perceived premium fit in the case of music as a service," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 63495, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    14. Mi Jin Noh & Kyung Tag Lee, 2016. "An analysis of the relationship between quality and user acceptance in smartphone apps," Information Systems and e-Business Management, Springer, vol. 14(2), pages 273-291, May.
    15. Wagner, T. & Benlian, Alexander & Hess, Thomas, 2014. "Converting freemium customers from free to premium - The role of the perceived premium fit in the case of music as a service," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 69900, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    16. Urvashi Tandon & Ravi Kiran & Ash N. Sah, 2017. "Customer Satisfaction as Mediator Between Website Service Quality and Repurchase Intention: An Emerging Economy Case," Service Science, INFORMS, vol. 9(2), pages 106-120, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. João Martins & Ricardo Rodrigues, 2025. "Motivations in the adoption and conversion of freemium services: insights for digital entrepreneurship," Review of Managerial Science, Springer, vol. 19(7), pages 2127-2148, July.
    3. Mª Victoria Bordonaba-Juste & Laura Lucia-Palacios & Raúl Pérez-López, 2020. "Generational differences in valuing usefulness, privacy and security negative experiences for paying for cloud services," Information Systems and e-Business Management, Springer, vol. 18(1), pages 35-60, March.
    4. Le Wang & Paul Benjamin Lowry & Xin (Robert) Luo & Han Li, 2023. "Moving Consumers from Free to Fee in Platform-Based Markets: An Empirical Study of Multiplayer Online Battle Arena Games," Information Systems Research, INFORMS, vol. 34(1), pages 275-296, March.
    5. 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.
    6. Manuel Trenz & Jan Huntgeburth & Daniel Veit, 2019. "How to Succeed with Cloud Services?," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 61(2), pages 181-194, April.
    7. Wann-Yih Wu & Quyen Phu Thi Phan & Adriana A. Amaya Rivas, 2018. "Correction to: How e-servicescapes affect customer online shopping intention: the moderating effects of gender and online purchasing experience," Information Systems and e-Business Management, Springer, vol. 16(2), pages 477-477, May.
    8. Numminen, Emil & Sällberg, Henrik & Wang, Shujun, 2022. "The impact of app revenue model choices for app revenues: A study of apps since their initial App Store launch," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 325-336.
    9. Florian Wiesböck & Thomas Hess, 2020. "Digital innovations," Electronic Markets, Springer;IIM University of St. Gallen, vol. 30(1), pages 75-86, March.
    10. Xiaoyan Chen & Wei Geng, 2022. "Enroll now, pay later: optimal pricing and nudge efforts for massive-online-open-courses providers," Electronic Markets, Springer;IIM University of St. Gallen, vol. 32(2), pages 1003-1018, June.
    11. Tang, Hua & Chen, Jing & Ai, Xingzheng & Li, Xiaojing & He, Haojia, 2023. "First-party content decision under competitive hardware/software platforms: Free vs. charge," European Journal of Operational Research, Elsevier, vol. 311(3), pages 1068-1083.
    12. Martin Adam & Konstantin Roethke & Alexander Benlian, 2022. "Gamblified digital product offerings: an experimental study of loot box menu designs," Electronic Markets, Springer;IIM University of St. Gallen, vol. 32(2), pages 971-986, June.
    13. Hamari, Juho & Hanner, Nicolai & Koivisto, Jonna, 2017. "Service quality explains why people use freemium services but not if they go premium: An empirical study in free-to-play games," International Journal of Information Management, Elsevier, vol. 37(1), pages 1449-1459.
    14. Falko Lucht, 2019. "The Success of the Freemium Business Model. How Riot Games flourishes with a free to play game," Manager Journal, Faculty of Business and Administration, University of Bucharest, vol. 29(1), pages 114-124, December.
    15. Roll, Oliver & Loh, Patrick, 2020. "Der Einfluss der Digitalisierung auf das Preismanagement – Ansatzpunkte, Modelle und Methoden," Die Unternehmung - Swiss Journal of Business Research and Practice, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 74(4), pages 334-348.
    16. Zijun (June) Shi & Kaifu Zhang & Kannan Srinivasan, 2019. "Freemium as an Optimal Strategy for Market Dominant Firms," Marketing Science, INFORMS, vol. 38(1), pages 150-169, January.
    17. Hongshuang (Alice) Li, 2022. "Converting free users to paid subscribers in the SaaS context: The impact of marketing touchpoints, message content, and usage," Production and Operations Management, Production and Operations Management Society, vol. 31(5), pages 2185-2203, May.
    18. Tamilmani, Kuttimani & Rana, Nripendra P. & Prakasam, Naveena & Dwivedi, Yogesh K., 2019. "The battle of Brain vs. Heart: A literature review and meta-analysis of “hedonic motivation” use in UTAUT2," International Journal of Information Management, Elsevier, vol. 46(C), pages 222-235.
    19. Li, Jingyan & Wu, Jie & Zhang, Juzhi & Ji, Xiang, 2024. "Freemium design: Optimal tier differentiation models for content platforms," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 188(C).
    20. Oliver Francis Koch & Alexander Benlian, 2017. "The effect of free sampling strategies on freemium conversion rates," Electronic Markets, Springer;IIM University of St. Gallen, vol. 27(1), pages 67-76, February.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:infsem:v:23:y:2025:i:2:d:10.1007_s10257-024-00690-2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.