How does Spotify's freemium model contribute to its customer acquisition strategy?

Spotify's freemium model plays a significant role in its customer acquisition strategy. The model allows users to access the service for free with ads. This approach attracts a large number of users who might not initially be willing to pay for the service. Once these users experience the value of Spotify, they are more likely to upgrade to a premium, ad-free subscription. In fact, as of March 2018, the freemium model accounted for 60% of Spotify's gross added premium subscribers. Furthermore, the ad-supported service acts as a subsidy program that offsets the costs of new subscriber acquisition, thereby increasing the company's customer lifetime value.

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In the case of Spotify, the company operates on a freemium model, where free access is available with ads. In March 2018, this freemium model accounted for 60% of its gross added premium subscribers. Three years later, the company doubled its customer lifetime value from a 1.5x customer acquisition cost in 2015 to 3x using the ad-supported service as a subsidy program that offset costs of new subscriber acquisition.

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Product Management Toolkit (Part 1)

Does your product management process feel like it's lagging behind with the wrong tools? Our Product Management Toolkit collection includes some of th...

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