Stick to Free or Pay for More? A Marketing-Technology Perspective on Upgrade Intentions in Freemium AI-Powered EdTech Tools

Abstract

Introduction: Freemium, in this study, is understood as a concept that offers basic services for free while reserving other advanced features for paying or premium users. For several EdTech companies, it has become an effective business model in order to acquire and retain users. Given that these providers strategically strive to make users of free features be converted into paying subscribers, the understanding on how to drive them into upgrading has become increasingly essential.

Objectives: The study aims to: 1) determine the effect of perceived usefulness of premium features on upgrade intention; 2) examine the influence of perceived value on upgrade intention; and 3) investigate whether perceived value mediates the relationship between perceived usefulness and upgrade intention in the context of freemium AI-powered EdTech tools.

Methods: A Quantitative research design was employed in this study using the Partial Least Squares Structural Equation Modelling (PLS-SEM) technique, as the research tries to examine the relationship between perceived usefulness of premium features, perceived value, and upgrade intention. Data were collected from students enrolled both in undergraduate and graduate programs who actively use freemium AI-powered EdTech tools. A 15-item researcher-made survey instrument using a 7-point Likert scale was used, and path analysis was conducted to test the hypotheses.

Results: These findings suggest that users do not upgrade based solely on the usefulness of premium features. Rather, it is their perceived overall value that significantly drives upgrade intention. This reinforces the marketing principle that value perception is more compelling than features alone, especially in AI-enhanced platforms where utility can be abstract or complex.

Conclusions: This study concludes that perceived value is the primary driver of upgrade intentions in freemium AI-powered EdTech tools. While premium features may offer advanced functionalities, they do not directly influence a user's willingness to pay unless they are perceived as valuable. For EdTech providers, this highlights the importance of strategic value communication, not just feature promotion, to convert free users into paying subscribers.