Is it really worth doing lifetime deals for products with small ongoing costs?
I've been considering launching my product on App Sumo. I've never done this before. I'd like to hear from those who have already sold or are currently selling on the platform – how do you manage to keep the business profitable? While customers make a one-time payment, there are continual expenses on our end, and App Sumo claims a significant portion of the sales value.
My recurring costs mainly involve storage, data transfer, and cloud processing.
My main concern is a user who extensively utilizes the platform to the extent that their costs far exceed the amount they initially paid for the product. Is this entirely offset by users who use the product sparingly or not at all? What's the mathematics behind this?
I'm curious about your strategies for maintaining profitability in the long run.
I've always wondered the same thing. I mean, a lifetime deal seems like too big of a commitment to me. I think one possible solution is to limit users' usage based on the deal. For instance, if data transfer is your biggest cost, you can limit it on a monthly basis. This way, you would avoid the scenario where one customer's cost scales too fast. However, over the years, this user's cost can still surpass the amount he paid for the software.
I'd really love to hear from someone who already sold on App Sumo how many of the acquired users keep active over time.
I have realised that you can do an LTD outside of AppSumo too, but your site needs to drive a lot of traffic or via influencers.
Once you decide to go this route identify your expenses and either come up with a plan/product roadmap to mitigate your costs or restrict your features.
I am still in the planning phase too.
Absolutely, that's why I'm considering launching on AppSumo. It provides a fantastic marketing opportunity for those just starting to gain their initial customer base. I'm in the planning phase, carefully evaluating if it's indeed the right decision. The exposure and early customer acquisition potential on AppSumo seem promising, but I want to ensure it aligns well with our overall strategy.
you also pay appsumo 90% of the total revenue earned. Are there competitors who have launched on AppSumo? Who is buying from them
Selling a traditional software license was essentially selling a lifetime deal for that product. That worked because there was no on-going cost for the license, and the costs for supporting the overall software only last until they publish a new version.
The economics for SaaS are very different . The costs are mostly on-going, and so favour an on-going subscription. I'm sure that a lifetime deal could work, but if the economics of your product are such that it is possible for a user to far exceed the initial payment, then offering a lifetime deal sounds like a offering hostage to fate. I think you have to assume that many people who would sign up for a lifetime deal are doing so with the intention of costing you as much as possible.
American Airlines thought that most travellers who purchased their unlimited, lifetime AAirpass would use it infrequently.
Wow, you've completely shifted my perspective from what I used to think. When I talk to other people, they always say the opposite: most users won't use your product. It's like when you buy a course on Udemy, most of the time, you don't even watch a single lecture. However, your comment has started to make me think differently about lifetime deals. Thanks!
It depends very much on your product and customers. A lifetime deal for a Udemy course isn't an onerous commitment because nobody in their right mind will watch the course more once or twice. But if the customer is getting on-going benefit and that benefit costs you money, you're in a difficult position.
American Airlines failed to understand their customers and how the customer would use the product. They thought that multinationals would buy the unlimited tickets for their top executives, who wouldn't fly much more often just because they could. But when a mostly-regular Joe stumps up the quarter-mill for a lifetime ticket, they would most definitely run it into the ground.
Perhaps the only thing thing worse than having no customers is having customers that cost you money and you can't get rid of. American Airlines unilaterally cancelled the lifetime tickets of their most expensive customers, which was probably the right business decision, despite the legal/ethical issues.
The AA lifetime tickets were originally conceived as a way to raise cheap capital in days of high interest rates. That's still an option, but most SaaS providers prefer a regular cashflow over one big payment.