Marketers fail with premium offers because they don't adjust pricing to match higher lead costs. If a premium lead costs 5-10x more than a free lead, the product price must be 5-10x higher to maintain profitability. Free and premium are entirely different, non-interchangeable acquisition models.

In a B2B context, the most effective freemium products don't just offer a limited tool. They act as a diagnostic, giving away value by clearly identifying a painful hole in the user's business—a hole your paid product is designed to fill.

Despite their power, premium offers are a poor starting point for new ventures without established credibility. Use free or discounted 'foot-in-the-door' offers to prove your value and build a reputation, then transition to a premium model. This approach de-risks customer acquisition when you're an unknown entity.

Your true cost to acquire a paid customer via freemium isn't zero. Calculate it with this formula: (monthly cost to service a single free user) divided by (free-to-paid conversion rate). This reveals the model's actual financial viability.

Split tests reveal that leads from free offers convert at the same rate and ticket size as those from paid offers. The primary difference is that free offers dramatically lower lead acquisition costs (by 5x or more), making them more profitable. The "freebie seeker" stereotype is largely a myth.

Counterintuitively, a high freemium conversion rate (e.g., 7%) isn't always positive. It may indicate the free plan is too restrictive, failing to build a wide user base that provides network effects, referrals, or a long-term upgrade pipeline. The goal is a broad top-of-funnel, not just quick conversions.