The rush to adopt the subscription model to all kinds of businesses has become a frenzy. After all, what business wouldn’t want to make its revenue more dependable and automatic? But the subscription model needs to be fully understood and properly executed to reap its benefits. Let me explain.
When I recently made the move from a PC to a Mac, I knew I would have to buy some software over again. I dutifully went to the Adobe site to get the Mac version of Adobe Acrobat. Imagine my surprise when I discovered Adobe only sells software by subscription, in this case $12.99 per month, forever. Sorry, I just don’t make that many PDFs. Perhaps Adobe made a conscious decision to lose some of its customers as it shifted itself to a recurring revenue model, but forcing your customer base to buy on a subscription basis is a risky one.
Another company I looked at has a neat online product where you input raw data and it makes very impressive, high-end charts that you can download. I felt I could make regular use of this product, and was willing to pay some modest amount per month for it. But the company only offered three subscription options: a “free” plan that was so limited it wasn’t much more than a product demo; $14.99 per month for a “pro” version that still had annoying limitations (for example, the company’s name would appear in every slide), and an “organization” version for $1,000 per month – finally, all the features, but at a heady price. In short, these plans provided no option for a serious by low-volume commercial user. Sorry, no sale.
Poorly conceived subscription plans are everywhere. Here are four things to consider as you plan your subscription packages:
- Free plans are meant to build loyalty and usage among low-volume users, some of whom will eventually move up to a paid plan with you. If you cripple your free offering to the point where nobody can get any real value out of it, you’ve shot yourself in the foot. A free plan is not the same as a product demo. It’s used to attract users and grow them over time into customers.
- To maximize revenue, design a plan for serious but low-volume users. There are lots of people who want access to all your product features but won’t use your product every day. A plan that offers a low monthly fee but only offers half your features is not the same thing.
- Limiting features in your mid-priced subscription plans in order to “force” users to buy your premium plan often will backfire. If I am a single user, I will never by a 5-user plan for a lot more money to get the features I want
- Carefully consider price differentials between plans. I have seen products that offered three price points: free with limited functionality, $999 per year and $10,000 per year. Three sizes will rarely fit all user profiles.
The subscription model is a great model. But its success lies in how you choose to implement it.