Growth September 26, 2020

Is the software subscription model a barrier for user adoption?

Eddie H. @eddieaich

My friend scoffs when he sees a $0.99 charge on his credit card for Apple iCloud storage every month. On the other hand, he won't hesitate to get coffee from Starbucks every day and spend $5.

Have you experienced the same sentiment? Is the subscription model for software a non-starter for some people?

What was the original driver of the subscription model? Was it essentially forced down to users by software vendors and investors focusing on MRR or did users actually want it this way?

  1. 2

    From a business perspective I understand that subscriptions are what everyone wants to have. Always reminds me of the gym business model. Fix income and people barely using it.

    From a user perspective I am much more willing to pay for non-fix-cost pay-as-you-go models that might be a little more expensive, and then let me voluntarily switch over to a more fix cost model.

    I personally try to avoid subscriptions like a plague because they add up - even if you barely/don't need/use them. Hence whatever business I can come up with next, I want to cater to the people that feel the same way.

  2. 2

    This is a real bias, not just for consumers. Companies balk at $500 / month software but spend on $100 / hour consultants who do the same thing. I've done this before as a buyer.

    Don't take this as gospel, but my understanding is that the subscription model was a welcome change from the licensing model used in enterprise software in the 90s. Where you'd pay $5M up front to implement an on-prem Siebel CRM... before knowing it worked. Then Salesforce comes along and says, "that model sucks, pay $50 per user per month and we'll host your application too." It took a while to catch on.

    Obviously it's got downsides, but think of it this way: With a monthly subscription vs. one-time fee, you have to keep earning your customers' loyalty month after month.

  3. 2

    Yes, I perceive something like that.

    As a user, my only problem with subscriptions is they add up quickly, even if individually affordable. I already subscribe to several web and mobile apps, news sites, file storage and backup services, streaming media, miscellaneous platforms, and more. On top of what I pay for fiber and mobile Internet access.

    Thus I have to be increasingly selective when I run across a potentially interesting SaaS. Not because I don't recognize the value or the effort and resources the developers put into it, but becuase the available budget for this kind of expenses shrinks fast.

    1. 2

      That's how people working off a fixed salary think. Companies think based on price-vs-value. An hourly-fee contractor can behave the same to an extent.

      Listening to podcasts over time, the general advice is to provide 10x the value of the price you're asking for so that the software is a no-brainer for a business to buy.

      1. 1

        You're indeed right, what I said applies in particular to consumers.

    2. 1

      Interesting. A low-cost app subscription is actually competing with your Netflix, phone bills, and rent for budget space! Thanks for the insight.

      1. 2

        Exactly. Every SaaS subscription competes for any money left after paying for Netflix, Spotify, Disney+, sports content, cable, Google Drive storage, one news site or two, and so on. Which is not much.

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