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25 Comments

Activation fees: clever or unethical?

One of two business models are generally used in my industry (graphics for sale): one-time payments and subscriptions for access to large collections. I feel stuck in the middle with my products for a few reasons:

  1. One-time payments don't consider that a user may access my product hosted on my website forever (My product UI allows users to customize and export graphics quickly.)
  2. Subscriptions work best with a generous library, which I don't have (yet).

What I was thinking of doing is charging one-time payments for my products, but to keep access to the UI, a purchase must be made within the last year. I almost like it, but it feels like a watered down, yearly subscription... and might just confuse and anger customers.

Activation fees: clever or unethical?
  1. Clever
  2. Unethical
  3. Just sell using one-time payments
  4. Just sell using subscriptions
Vote
  1. 3

    I would keep it simple and start by selling lifetime access. Once you have a larger library, you can introduce subscriptions.

    ---

    Another interesting concept is JetBrains' perpetual fallback license:

    https://sales.jetbrains.com/hc/en-gb/articles/207240845-What-is-a-perpetual-fallback-license-

    It basically works like this: You pay a monthly subscription. As soon as you have paid for 12 consecutive months after a specific version of their software was released, you can use that (12 months old) version forever.

    It works very well for them because they release new versions every few months and never have I ever wanted to use an outdated one. However, you still get that feeling of "I have bought this forever."

    If you keep track of when you release new graphics into your library, this concept might also work for you.

    1. 2

      I like the first option because it also values early adopters. Whoever bought the product before a certain moment in time has full access to it without any further costs, no matter how the product changes its business model.

      1. 1

        Definitely!

        That said, it's not the only option. As far as I know, @Kevcon80 built softwareideas.io with subscriptions from the beginning. Kevin, have you ever offered a lifetime option?

        1. 2

          There is currently one person who has a lifetime subscription to Software Ideas, who really wanted one and was willing to pay a generous amount for it! But I don't offer a lifetime option at all besides that.

          I currently offer quarterly subscriptions, which I think works well with the lifecycle of finding a new idea. Some people will come up with an idea they like during that period and won't need the newsletter anymore, while others will actually use that quarter to find an idea, try it, and by the end they decide that they'd like to try a different idea instead.

          I found that monthly was a bit too short, because it encouraged people to find an idea too quickly, and that incentivized people to go with ideas before they had time to vet them fully.

          Long-term, I am looking into Annual plans, and while I'm not thinking about lifetime plans at all right now, it's something I potentially could do in the future.

          As far as I know, @Kevcon80 built softwareideas.io with subscriptions from the beginning.

          Yep, when I was pre-selling Software Ideas, I charged $19 for one-month of weekly newsletters. Once I knew that $19 was a price that people would pay even without a backlog of issues, I went with that!

          I actually am considering raising prices soon now that the backlog has grown substantially! My recommendation to OP - find out what price people will pay for your current library size, and if the price makes sense then go for it!

          1. 1

            Wow, @Kevcon80. Thank you so much for the valuable insights! :)

            I hope @opauloantonio sees it, too.

            1. 2

              Indeed some very good advice! Thanks for the mention @nikwen :)

              I'm working on an app that I'm not sure how to monetize so reading how others have done is very beneficial to me!

    2. 2

      Damn, that's an interesting concept, but might be a bit complex. I'm going to sit on it and see if it makes any sense with the products I have in my pipeline. Thanks for sharing Niklas!

      1. 4

        You're welcome. Sharing is what we're all here for, aren't we? ;)

  2. 2

    I have been a customer of products like this where I paid a one time fee to buy a set of graphics.

    I can only speak as a customer, if I lost access after a year, I wouldn’t be happy. I expect this to function like istock, things that I buy go into my downloads section and they just stay there forever.

    I’m not sure what you mean by customization but if your downloads allow for some kind of customization and you want to capture the value users are getting from that, why not only allow a limited number of customizations? Then I know exactly what I’m getting. Eg I can customize 10 times and then after that I have to add on a customization pack or something.

    1. 1

      You can see what I mean by customizations at one of my free products: Visiwig.com/patterns

      The equivalent to iStock photos would be a zip download of the patterns (SVGs). As a designer, I've always found ZIPs clunky... shuffling through folders of assets, then firing up design software to manipulate and get it prepped to throw on a website. My UI combats this with visual organization, easy customizations, and fast deploy into websites.

      Purchasing a number of customizations is an interesting setup. This thread has given me a lot to think about. Thanks for the idea.

  3. 2

    Sounds like you should just do one time payments for now and not really worry about the server burden / concern of them coming back in 3 years to download something they paid for already. Not really a big deal.

    Then once you get a bigger library you can offer subscription options.

    If you know you'll be adding packs regularly over the years and you want an early influx of cash you could do the really expensive, one time, life time option to everything forever. ;) Knowing only a small percentage of people will buy it, it also provides a price anchor.

    1. 1

      After the discussion so far, it's likely that I'm going to do exactly that: one-time payments now, not fret the server burden, and work to get to the subscription model. What I have not really considered is the the life-time subscription offer for everything. It's something I need to consider, but for now, just getting my shop running and full of products is my priority. Thanks for the input Ryan!

  4. 2

    Seems like your business model might be close to https://cruip.com/
    They charge a 1 time fee, and that also include access to future resources they put up.

    I bought their product, and if they were a subscription, I would have just cancelled after getting the code for their templates, but it wouldn't have stopped me from buying their product.

    1. 1

      Interesting, and I guess that's going to be me in the early stages. Though I'm leaning on selling access via 1 year subscriptions after I have a bigger base of products. I really like how LS.graphics pulls this off. They sell one-time payment products, but have a huge collection of quality products, where you can subscribe for a year to access everything within a given category.

  5. 2

    I think I agree with the "confuse and anger customers", like I read it a couple times and I'm pretty sure I get it but I'm still not sure, and I feel like it would make me wonder "Whats the catch?".

    I would likely just use the one time purchase model until you have enough to make subscriptions viable, it really shouldn't cost that much to host your product so I wouldn't worry to much about your users having access forever.

    Another option could be to sell the "editing and access" features on a subscription tier and sell the graphics themselves as one time purchases. That way people can still buy them but if they want full access they have to renew their subscriptions.

    Or you can always try offsetting the cost of one time purchases whoby instead making people buy credits. So say the minimum is 10 credits (10 graphics), this would get you considerably more profit than just 1 graphics and you can use those funds to pay for their continued access to the UI.

    1. 1

      Yes, the "confusion" aspect is likely why I will avoid activation fees. So I am 100% with you on starting with the one-time purchase model and working my way to make subscriptions viable.

      I've seen and purchased credits on stock photo sites in the past. I could see this working too, but ultimately, one-time purchases are straightforward and the ideal starting point. And I agree that I don't really need to be too concerned about having to grant access forever.

  6. 2

    Isn't that yearly subscription, what I'm missing?

    I'm in a similar situation. My product suppose to be a one time thing. Sell and forget however I find myself updating it regularly so I kinda wanna charge less with subscription. Also it feels wrongs since I sold less for more $$. IDK.

    I was thinking something similar. Initial payment for $$$ also monthly subscription for $. It may reduce churn due to initial commitment, also a barrier for entrance.

    If you keep updating your collection and already providing a service "(My product UI allows users to customize and export graphics quickly.)" subscription doesn't sound so bad. One time fees aren't feasible especially for indiehackers.

    1. 1

      Let me break it down with an example. I have 3 products currently, but let's say in 6 months, this is what my store looks like:

      1. Icon Pack 1
      2. Icon Pack 2
      3. Illustration Pack 1
      4. Illustration Pack 2
      5. Pattern Pack
      6. Texture Pack

      With a yearly subscription, a user will gain access to everything until they cancel.

      With an activation model, a user makes a one time purchase buying the Icon Pack 1, which will be in their library for a year. At the start of month 13, they lose access to the UI. Then they buy the Pattern Pack, now they regain access to their library so they have access to both purchased products. At month 18 (1.5 years in) they buy Icon Pack 2, and now they have access to the 3 products for at least 12 more months.

      It makes sense to me as the seller, but might be annoying and confusing to the buyer. I'm leaning on doing one-time payments and work at it until I can charge subscriptions.

      1. 2

        I see, and yeah it's a bit confusing.

        It kinda gives customers a reason not to buy the second item. At least not rush it. I buy the Icon Pack 1, I could use Pattern Pack as well but I may postpone it for a few months just to expand my usage time and I could totally forget about it in the end.

        Sounds like it has pros and cons and IMHO cons weights more.

        Also there is nothing unethical about this, as fas as I get it. :)

        1. 1

          "It kinda gives customers a reason not to buy the second item. At least not rush it."

          Good point, didn't consider this.

  7. 2

    I can't answer this for you. The only way is to try something and adjust.

    1. 1

      Yeah, it's not something I've seen in the wild, so I don't expect anyone to have first-hand experience with this pricing strategy. I guess I'm looking for everyone's gut reaction, which I'm aware might not reflect what will transpire in real-life situations.

  8. 1

    And what's your reasoning for changing your existing model?

    1. 1

      Hey Sunny, this one was solved a bit ago, but at the time I was thinking out loud considering my model for my newer site.

  9. 1

    Activation fees are often nothing but tactical sales tools. If your pricelist isn’t public and customers tend to negotiate, playing the “setup fee” card is key.

    As unethical as it might sound, playing the “setup fee” card is often a necessary evil to preserve revenue.

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