Some people are confusing services featuring a free trial from true Freemium models.
A free trial demonstrates value to a user for a limited duration. The idea is to convince a user that the service has enough value to justify the paid subscription. While the user experiences real value in the trial, the limited duration virtually requires payment to experience the full value.
Freemium models feature both paid subscription models and free services in which there is real, but limited value over an infinately long duration. You can continue to use the free version of the product without ever paying, and should get real, ongoing value.
There are many examples of winners using each model.
Free trial: Netflix, Quickbooks Online, Napster
Freemium: SurveyMonkey, Skype, LInkedIn
It's important to understand which is right for your business. It is rare to see examples where both are being employed concurrently.
Free trial works best when the user is likely to want to use the service for a long time if the service meets expectations. Free trials are especially effective when trying the product requires some level of investment, for example entering a lot of data, or spending a lot of time on setup.
A free trial with a credit card required up front is a good option when the company needs to weed out the non-serious prospects from the real ones, for example, when the company incurs variable expenses in delivering the service, because it limits the company's exposure while giving prospects a chance to taste the product.
Freemium is a good option when variable costs approach zero, and when the premium features are likely to increase in perceived value after someone has experience with the product. For example, when the premium product enables more storage, users or accounts, it makes sense to give away the smaller quantity for free and "get the user hooked". Another time Freemium works well is when the product is used both personally and professionally. If the personal product is free, it is likely that a large number of people will get exposed to the product, and a small percentage of that group will realize the product would be useful in a professional setting.
Each model has implications in terms of conversion rates, metrics and acquisition strategies, so it is important to consider up front which method works best for a specific product offering and business model.
