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Are we evolved too much into a subscription-based society?
I had a friend who is going to launch a new app, and getting started with a subscription-based business model was a no brainer to him.
He told me about the benefits of monthly recurring revenue, the ability to continuously add value for the end-user, etc.
All fair points, but it seems that he is just following a trend without considering the other options.
He doesn’t launch a stock photo site where every month 100 images are added to the webpage or aren’t planning to launch a bunch of new features in the upcoming months. So why he wants to force his product into a subscription model?
Honestly, I get annoyed by all these regularly paying services which are draining my credit card every month.
Unfortunately, I couldn’t convince him to change his mind, and he will launch his “Saas” product within a few months. But I start talking to other people about it. What I noticed are the following preferences:
If I was buying a product I would prefer a one-time fee.
If I was selling a product I would prefer recurring revenue.
This dilemma keep brewing in my mind, and I begin to wonder about something:
What if we partner up every week with a new maker and convince Her/Him to offer their SaaS product as an exclusive lifetime license deal.
The deal is limited (one week) so it isn’t a replacement for your SaaS model, but more a temporary sales peak that will bring in some hard cash.
For the buyer, we offer a unique opportunity to get qualitative applications at a fair/flat fee.
For the maker, we will be faster at the break-even point and can use the fresh cash to invest in new features or products.
I’m getting excited about this idea, and I’m turning it into a new project. I am wondering what you guys are thinking about it. Are you waiting for this your whole life, or is it all cold to you?
Roast me plz!
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Top Hunter
@rrhoover it also depends on the market and customer needs and financial circumstances. I also think of rundles as being about creating a long term value-driven relationship. If you're not providing ongoing increasing value, then you probably shouldn't try a subscription model.
Amazon Prime is a good example of a service that increases in value over time; they constantly send me emails reminding me of all the benefits that I'm not taking advantage of!
Sketch is another, since you pay for a year of updates and then renew. So, you get good value and then the product continues to evolve/improve.
Rundles are also IQ tests (quoting Prof G): if you subscribe to a bundle of goods/services that are improving over time, then your activity/use of the service also drives the company's priorities compared with non-subscribers/one-time buyers.
@rrhoover There are some interesting industries beyond software that I think subscription could make a lot of sense and some interesting businesses are popping up to take advantage (clothes, shoes, subscription vacations, education ).
But, I do think there are some equity issues for some of life's bigger purchase that lead to generational wealth (ie, renting vs owning a house - building equity in something).
But for software, I 90% agree. I used to work at IBM, a company that still "sells" software. Companies pay a large sum upfront and then an annual fee for support and upgrades. The reason why that still exists is because of how money is allocated to IT departments... so sometimes it is outside of the control of the buyer and user to pay monthly or even annually. But, that is rapidly changing :).
Have you considered a monthly subscription model for founder's club? So many great deals and discounts, just a large upfront fee for a new startup.
@rrhoover @robert_thelen
Totally agree that there are many advantages to subscription-based models, especially in software.
But, I don't think we need to replace subscriptions with licenses, I see it more as an “and-and” story.
What I want to do is convince people with subscription software to offer an exclusive ‘lifetime access deal” for one week.
What I try to do is generate an additional revenue stream for smaller creators. I do see the benefits of a subscription model, but the biggest pain is that you need to wait a long time (months, sometimes years) until you earn enough money to cover your cost/time of development.
What you can do today is raising money and give away shares of your business. This way you gain fresh money to make your project grow, eg. invest in new features or hire a team, etc.
What I try to do is create an alternative way of raising money, not by giving away shares, or lending money from friends/bank, but by selling the product you already have. By offering lifetime access deals to your biggest fans/early adapters, you can receive money in advance.
Actually, these people tell you:
‘I like this project so much, I know I will be paying a subscription for the next years, so if you make me a nice deal (where I can have life time access to your app)
I have no problem with paying you in advance’
In this way, I see a huge win-win for both, developer and the buyer. Looking forward to hearing your feedback!
A quick google search reveals quite a lot of services like that. Largest https://appsumo.com/
@__heinrich__ I was gonna come and mention appsumo, although I've never gotten any deal I was really happy with from there.
@__heinrich__ @oleroux agreed - too many spam deals and little headspace to filter through - these platforms have somewhat pivoted towards relying on creators paying them for survival rather than user purchases.
@__heinrich__ thanks for the feedback! I totally agree with you that it has some overlap with AppSumo, but I think there is enough uniqueness to make this project stand out.
As @oleroux and @nitish_r_ already mentioned the quality of deals on AppSumo is quite bad. For me, the focus is not really on “offering as many apps as cheap as possible”. One of the principles is that only subscription-based applications are getting featured. By doing this I eliminate developers who just want to get rid of some old tools. It is not a “sales page”.
What I try to do is generate a new business model for smaller creators. I do see the benefits of a subscription model, but the biggest pain is that you need to wait a long time (months, sometimes years) until you earn enough money to cover your cost/time of development.
What you can do today is raising money and give away shares of your business. This way you gain fresh money to make your project grow, eg. invest in new features or hire a team, etc.
What I try to do is create an alternative way of raising money, not by giving away shares, or lending money from friends/bank, but by selling the product you already have. By offering lifetime access deals to your biggest fans/early adopters, you are able to receive money in advance.
Actually, these people tell you: ‘I like this project so much, I know I will be paying a subscription for the next years, so if you make me a nice deal where I can have lifetime access to your app, I have no problem with paying you in advance’
In this way, I see a huge win-win for both, developer and the buyer.
Looking forward to hearing your feedback!
I think, it depends on the need. Indian startups are more on a Sachetizing pricing models. I also tried this with my product https://hubbleform.com . It's a typeform alternative with pay per form model.
@advait_vaidya my journey from a non programmer to launching SAAS in 3 months - https://cutt.ly/jjrwdwW
@advait_vaidya Quickly read it, looks great, got any integrations planning? One with Zapier would be awesome.
@advait_vaidya Oh also, maybe it is just me, but I always like to test a product first before setting up an account. I believe you would convert more users if we had the ability to first create a form and play around with the builder. To publish it, we then have to create an account.
@advait_vaidya @oliviercoolen Right now, it's a free to use tool. Paywall will be put after the integrations. (max 2$ per form, cheapest out there 😃)
@advait_vaidya @oliviercoolen Oof did not know that! Will create an account right away! :)
Edit: Which language did you use to build this app?
I can't remember where but I read online about a company that did this strategy and it was a great success to them so I think it might be a good option for more makers to consider.
But although I agree with your point that there are a lot subscriptions business models out there I don't think it's a good idea to go out and *convince* these makers to make a certain business decision. As clients and outsiders to the company/product there are countless variables and conditions we are unaware about.
Writing and sharing about other viable business models and the benefits of one time purchases might be great for many people and the community as a whole but I don't think this approach of "offering a solution" is the way to go.
After all there's a reason SaaS and subscription-based models are so popular, they are working for many people, both for the clients and the companies involved. A good reason someone might choose a recurring revenue other than a one time transaction is if there's maintenance and usage costs involved.
So one possible answer to your comment "He doesn’t launch a stock photo site where every month 100 images are added to the webpage or aren’t planning to launch a bunch of new features in the upcoming months. So why he wants to force his product into a subscription model?" is if he's having to pay for servers or an api to deliver his product to his clients.
That's my two cents :)
@luis_martins If you or someone else remember the name of this case, feel free to share it with me ;)
Besides that, I totally agree with your vision. I don’t think we need to force people away from a subscription model. In a lot of cases, it does make sense!
I see it more as an “and-and” story. What I want to do is convince people with subscription software to offer an exclusive ‘lifetime access deal” for one week
What I try to do is generate a new business model for smaller creators. I do see the benefits of a subscription model, but the biggest pain is that you need to wait a long time (months, sometimes years) until you earn enough money to cover your cost/time of development.
What you can do today is raising money and give away shares of your business. This way you gain fresh money to make your project grow, eg. invest in new features or hire a team, etc.
What I try to do is create an alternative way of raising money, not by giving away shares, or lending money from friends/bank, but by selling the product you already have. By offering lifetime access deals to your biggest fans/early adapters, you can receive money in advance. Actually, these people tell you: ‘I like this project so much, I know I will be paying a subscription for the next years, so if you make me a nice deal where I can have life time access to your app, I have no problem with paying you in advance’
In this way, I see a huge win-win for both, developer and the buyer.
Looking forward to hearing your feedback!
I think the biggest problem is the price.
Let's say my product is 50$ per month and your users LTV is 1 year ($600).
It means I have to sell it at a one time deal of 600$, if not, I am losing money.
600$ looks like a scary price.
I started https://linvo.io two months ago with lifetime deals.
I think it's a great way to get tractions and users.
But it's really not profitable.
Soon I will change it to a normal subscription plan.
@nevo_david fair point! This might indeed a big hurdle to overcome. Do you have some people who (besides the high price) were willing to support you by paying $600 at once?
Depends on the Service/Product. There is no one-off. You can "hybrid" pending your customer needs.
User test customers, see how they feel about it.
Bust a move and keep it grooving.
If customers like subscription, cool do it. If not, then phase it out, sunset it or put it as part of an Enterprise offer.
But either way, ask customers. We are a community but we are competitors. Never forget! ;p
@joncreative1 I like the mindset! Do you have asked this question before to your customer base?
Agree with many points here. Adding one more -> Predictability is the key here.
Startups/founders and Team members need to have predictability for their families, for planning the roadmap, hiring, marketing etc etc.
One time is always an ongoing battle to find net new people. Selling to net new people will always be costly It is difficult to build big companies that way. If the company isn't big, then despite the product being great, the value will be limited to the few customers it is is serving.
Over a period of time, founders will lose their drive, might get burned out. Not saying it is absolutely not possible, but subscription just makes so much more sense for founders, team, and to @rrhoover 's point, for customers too.
@rarjunpillai Predictability is indeed a huge benefit of subscription models. Do you think a limited period of offering life-time access licenses would be a big threat to your future monthly revenue?
Would it speak to the same people, or would you attract a new type of customer with it?
@rarjunpillai @glenn_v I don't think it is a big threat. It is true that we need to think about predictability, scale, future etc. But Startups also need to survive today.
In case of a SaaS business, these one time life time access licenses are usually given early in the startup story (or too late before shut down). If this helps some cash flow to live/fight for another day, do it by all means :)
The idea of a lifetime deal has been around for some years now. Appsumo is a famous example.
As a SaaS founder, I've thought about offering a lifetime deal and have also approached by a few different lifetime deal brokers to offer such a deal.
Ultimately I didn't do it because I find that lifetime deal customers typically (not always) complain and demand a lot while paying the bare minimum. I'd rather get less sales but attract higher quality recurring customers who appreciate what we do. We can then also provide better customer service to them.
I think the recurring infrastructure costs to run an online software business demands a recurring subscription model. If the infrastructure (AWS, Google Cloud, heroku) is billed monthly it's hard not to pass that model to our customers.
Our app is serverless, so we're able to offer something for free due to the low infrastructure and scaling costs. We're starting to look at pricing models now and whilst SaaS seems like the obvious and lucrative model, I'm for sure going to explore more traditional models as well.
@sam_ternent Great insight! thanks for the feedback & to keep exploring other models in the near future 👊
First off, I'm so glad @glenn_v that you brought this up as I too am getting annoyed with SaaS models. I did a lot of thinking on it and came to a conclusion, at least for myself, regarding when I like and dislike SaaS models, at least as a buyer. Bear with me as I walk through three examples.
TLDR: If a product feels like it's supposed to be SaaS, make is SaaS. If it doesn't, and if you are 100% reliant on the subscription to use a product that should be usable without a subscription, then don't do it or please allow the product to be used in limited capacity without it.
Use Case 1 (Fitness): I'm looking at a rowing machine, I see a couple high priced ones (Ergatta, Hydrow, Concept2, Waterrower). Ergatta and Hydrow are like $30 a month + 2k for the unit. I don't feel like paying a gym membership just to be able to use a workout machine I already paid 2k to own, and I don't think the application will be worth the price. If I want an add-on sub for more functionality sure, but if I'm locked in to a SaaS model just to use a product I already paid 2k+ for I'm probably out.
Peloton has a whole thing going, for whatever reason I think I'd be ok with it since I like the non-bike classes I've taken (I don't own the bike, paid for the sub anyway). End result, I'm buying a Concept2 rower instead (no SaaS).
Use Case 2 (Music Instruments): Roland Cloud. Virtual Instruments of a ton of Roland Products, $19.99 a month. I hate not feeling like I "own" the instruments. What if I don't have an internet connection and am jamming with someone, or want to "disconnect"? What if they drop a product or patch or I have an iOS update that kills all of it? Enjoyment squashed. Tried it, decided to buy the instruments (and spend thousands instead) to avoid the annoyance.
Use Case 3 (Full online service): HomeCourt (basketball training), Bear (Notes), Apple News, (Random stuff for my kids), YouTube TV etc., all built for SaaS, no issues. Love the products
I think offering a "supporter" lifetime option or something is a great idea if you need a cash boost and have a solid number of excited early adopters. Great post
@glenn_v @marketshot thanks for letting us run through your mind! Some really interesting cases you talked about, couldn't agree more... this is indeed the problem where I'm struggling with as well...
Unfortunately, we can't fix all, but hopefully, a project as the "supporter" lifetime option, will help founders to remember that there are more options than only sell SaaS!
@luis_martins makes a good point. Recurrent costs we have to pay will factor into our pricing model. OP raised two negatives about subscription-based business models
- it's adopted without much consideration if it is the best business model --> Solution: Spent time researching and evaluating options
- "It's draining my credit card" --> Solution: Make it easier for users to evaluate the usefulness/value of your product/service before or after subscribing. If it's "draining" your credit card, then there is no (low) value in the product/service.
@katerinabohlec Totally agree that recurrent costs force a lot of startups into a subscription model! That's why it will be really hard to totally step away from recurring payment plans.
However, there might be an opportunity to combine your subscription plan with limited exclusive life-time access deals. Really curious to hear if this is something makers & buyers are waiting for...
It comes down to the customer and if it's worth paying for the subscription - regular updates, support, etc.
I certainly have wayyyy too many business subscriptions, it's getting crazy. I had a clear-out of my biz credit card over Christmas and removed £600+/month worth of subscriptions I wasn't using. Subscriptions for work seem different to personal ones (Netflix, Prime etc) which I use without thinking about it. Tools and SaaS products I use for work seem to get lost in the mix somewhere.
Years ago I had a spreadsheet, but that was too static, and didn't send me reminders, so I started building a tool to keep track of all these Subscriptions so I don't get in that situation again!
We're just signing up Beta users at the moment, launching in Jan!
https://subtrac.io
Will do a full PH launch once we're live.
Also happy to offer a lifetime deal, so it's not just another subscription!
@maxkruger Amazing product, I really love it!
This will save me a lot of money in the future
just signed up for the beta
I think the SaaS model is the closest to survival of the fittest evolutionary model. And at the end of the day that's what we know best.
@gabriela_trueba1 interesting theory! I was wondering if it doesn't make it hard to earn enough money in the first stage of your project.
If you want to grow (or evolute), you often need money to make this work. However, with a subscription model, this money is only getting to you in little (monthly) pieces.
That makes me wonder if some start-ups maybe fail/run out of money due to the SaaS model, instead of helping them to survive.
It depends on the nature of the product.
Do you have significant onboarding costs?
Do you have significant recurring costs with each customer?
How integral is it to the customer?
If you have significant costs, store large amounts of data, or are integral to a business etc then a significant subscription are probably the right way to go.
On the other hand if you have significant onboarding but low ongoing costs, maybe there is a hybrid approach that people could take. Like a $50 initial with a $5 recurring.
There is a 3rd way, that I think will play a role in the future. Charging for itemized usage.
As a quick example: If you have a spreadsheet app, charging $0.25 to create a new spreadsheet. (I know, nobody is doing spreadsheets, it's just easy to understand the idea)
Charges could be anywhere from $0.01 to $1.00, depending on what they are using. You can either roll it up at the end of the month or use a micropayment service to charge immediately. You just have to be careful with the roll-up because people who get a "surprise, you used a lot" bill are going to throw a fit. You can combine that with an "all you can eat" subscription for heavy users.
Having a $50 or even $10 recurring subscription isn't going to appeal to people who only need 1 feature or want to use the product casually. That is money left on the table. That is why I think this will become a part of revenue models.
There are more possibilities than just a one time payment or a subscription. There are hybrid approaches and alternative approaches and hybrid alternative approaches.
It all comes back to the nature of the product though. What does it do? What value does it provide? Who will be using it? How integral is it? Probably most importantly, how will it be used (hardcore, casual, both)?
@centipenny great approach, like the way how you link pricing with the nature of a product. A lot more business owners should think about it that way!
@gopikl Totally agree that there are a lot of similarities with apps like AppSumo.
However, as @oleroux and @nitish_r_ already mentioned the quality of deals on AppSumo is quite bad. For me, the focus is not really on “offering as many apps as cheap as possible”. One of the principles is that only subscription-based applications are getting featured. By doing this I eliminate developers who just want to get rid of some old tools. It is not a “sales page”.
What I try to do is generate a new business model for smaller creators. I do see the benefits of a subscription model, but the biggest pain is that you need to wait a long time (months, sometimes years) until you earn enough money to cover your cost/time of development.
What you can do today is raising money and give away shares of your business. This way you gain fresh money to make your project grow, eg. invest in new features or hire a team, etc.
What I try to do is create an alternative way of raising money, not by giving away shares, or lending money from friends/bank, but by selling the product you already have. By offering lifetime access deals to your biggest fans/early adopters, you are able to receive money in advance.
Actually, these people tell you: ‘I like this project so much, I know I will be paying a subscription for the next years, so if you make me a nice deal where I can have lifetime access to your app, I have no problem with paying you in advance’
In this way, I see a huge win-win for both, developer and the buyer.
Looking forward to hearing your feedback!
Yes, and that is why I invented Adnoto Expense Manager 5 years ago, taking my experience from the financial market data world that invented the online subscription model. The app didn’t work out, too soon, not enough AI (reading email receipts to auto populate the app) but I saw where the world was going.
You’ve just invented appsumo 😉 Joke aside I agree that subscription is not always the best choice. It must be carefully thought and tested before going in full growth mode
I think it really depends... Some software need SaaS model to survive and cover their expenses (and expansion). Others don't really need it but they're still applying it because it's trendy and easier for them to forecast the cashflow.
I've seen some tools with little infrastructure (most of the logic is executed locally) charging 20€/month because they call themselves the "superhuman" of this and that... And I think it's BS...
Your idea is good... But already exists. Appsumo is doing it for years and many newcomers are here and it will be difficult to compete and attract quality softwares.
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