Does Less Mean More? A Large-Scale Randomized Field Experiment Investigating the Impact of Vip Label Absence on User Conversion in Freemium Platforms

In today’s highly competitive business landscape, businesses leverage innovative strategies such as the freemium model to attract and retain customers. The traditional feature-limited freemium models often labeled premium features distinctly with VIP signs, aiding user decision-making by clearly delineating the added value. However, new technologies have emerged, enabling preview functions, and hybrid freemium models have evolved to combine both feature- and time-limited aspects. As a result, the importance of VIP labels, which traditionally differentiate and provide exclusivity to premium features, may diminish and even deter users from making the conversion. This study posits a critical question: How does the absence of these VIP labels influence user conversion for freemium platforms? Collaborating with a globally recognized photo-editing platform, we conducted a large-scale randomized field experiment. Our findings show that removing the VIP label can increase user conversion by 7.5 percent, without leading to substantial adverse effects such as a decline in automatic billing, an increase in refund requests, or a decrease in long-term user engagement. Mechanism tests indicate that VIP label removal encourages users to explore more features, which subsequently increases the probability of conversion. Moreover, the impact of removing VIP labels varies across countries, with different cultural uncertainty avoidance levels and regions with varying GDP per capita, lending credence to the differentiation and exclusivity effects of VIP labels. These results underscore the necessity for platforms to adapt their designs to align with current business models and technological progress. Contributing to the literature on user conversion and VIP label design, this study provides practical implications for the design and management of VIP labels on platforms utilizing a hybrid freemium model