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21 Comments

One time payment vs subscription?

Hey Guys,

How do you know which one is right for your product?

  1. 7

    Let's see:

    • You can charge a lot higher for one-time than for subscription.
    • It's also a lot easier to sell something one-off than an ongoing commitment.
    • You get a lot more cash upfront, crucial for any fledgling business.

    On the other hand:

    • You lose money if your lifetime deal price < lifetime value of a subscription customer.
    • You might run out of people in your target niche after they've all bought your app.
    • It's an ongoing marketing effort to acquire customers, unless you've found a passive distribution channel, like AppSumo.

    Try both and see which on takes off.

    1. 1

      Thanks! Very clear, the lifetime deal being < lifetime value is critical, I'll explore both and see what works

  2. 3

    Hey Victor! I recently had to confront this question myself. My audience is logo designers and my product is a tool that helps them export logos more quickly. It was never a question in my mind that I would sell them my tool, which is an extension for Adobe Illustrator, for a one-time fee.

    Everyone hates subscriptions and I didn't think it was necessary for this tool. When I release a major new version, I charge existing customers an extremely reduced fee to upgrade. No one ever complains.

    I had made up my mind on all of that for my first product. Where I had to confront the choice was for my newest product. My new product is a web-based portal that logo designers can sync their logo files to from my extension. They can then share the logos with their clients via the portal.

    This tool was much more in line with a standard SaaS, and standard SaaS are subscription-based, right?

    Well, I polled my customers, I asked them if they would pay $12 a month for a subscription. The overwhelming response was that they hated subscriptions and did not want to sign up for yet another addition to their monthly costs.

    There was a small number that definitely wanted the subscription though. They made so many logo projects a year that it was a no brainer.

    My solution was to give everyone what they wanted. I charge $50 for a five-pack of projects. It's a one time cost, but eventually, you'll need more projects. The beauty is that payment is on your terms. You only buy more when you need more. However, there is still an unlimited project tier which is a monthly subscription. It's the best of both worlds. Everyone is happy :)

    1. 1

      Nice seeing your extending the logo package product. What i dont quite understand is, why would you want to pay $12 if the customer already has received the logo?! I find that quite a lot of money for such a service if im honest. I could basically make an FTP folder on our website, drop a zip in there. Each time client looses logo send him the link. The idea is really great. But on the otherhand, if you doing logos and logos only. I bet you sometimes go crazy over emails "Can you send the logo again".

      Some clients dont seem the understand how that even already works?!?

      1. 1

        The customer is the designer. They are paying to host unlimited logo packages for their clients for $12 a month. If they only need a few projects, they can pay $50 for a five pack of projects which will last them until the projects are used up.

        The whole idea of the Logo Package Portal is the antithesis of sending a zip. A zip is just a confusing folder structure full of the same confusing file names that clients never understand.

        The Logo Package Portal serves logos in a visual format. Point and click. It also provides dead-simple filtering in language the clients understand. What color do you want and where do you want to use this logo? Point, click, download or share.

        It eliminates a huge chunk of back and forth for the client and makes their life easier, thereby making the designer more valuable, which is something designers will pay for.

    2. 1

      Hey Michael! Thanks for sharing that!

      I have a similar scenario where there's an offline version and an online one that syncs designers files, I'm leaning more towards providing both options, one time payment for offline use (which involves no servers/storage/syncing) and one time payment for the version that doesn't sync someone's account.

      What tool do you use to poll your customers? I have a list of subscribers I would like to poll as well.

      Also how do you handle upgrades with Gumroad, is it a manual process? I'm using Gumroad myself as well and Gumroad License Keys.

      1. 2

        For polling my audience, I just use some sort of free survey tool — Typeform, or Google Forms. Usually, I have something specific I want to say or show, so I include a video before the survey. I send out a link to the survey via email and I usually try to incentivize my users with a discount code or access to beta if they fill out the form. That sort of thing.

        There are two things that you could mean by "upgrade." If you mean allowing users to move from one subscription tier to another, it is possible on Gumroad, but limited. You'll want to look into their articles on memberships:
        https://help.gumroad.com/article/82-membership-products

        If you mean releasing a new version of the product to your users, then this can be tricky. My top priority is my affiliates. I have dozens of affiliates and I don't want to have to issue them all new links every time I release an update. For this reason, I simply replace the files that are associated with my existing product instead of creating a new product. This method has one major flaw. Anyone who is smart enough to access their Gumroad library will always be able to download the most current files. Every email you send using Gumroad will also include a link to the product where the customers can download a newer version for free. Fortunately, only about 5 of the 900 people who downloaded my last upgrade caught onto this.

        I'm happy to talk more with you about this if you go to thelogopackage.com and use the chat to leave me your email, we can set something up :D

        1. 1

          Thanks for sharing that! That's very helpful, I'll definitely reach out on the chat widget on your site! :D

  3. 3

    You can always change subscription type if it doesn’t work for you. As many times as you want. Remember that!

    1. 1

      Hey Marcus, thank you for that reminder, definitely need to keep that in mind!

  4. 3

    ongoing running cost & value = subscription.

    fixed cost & infrequently used = one time payment.

    eg.
    a multi-player game that you need to have a server so users can connect and play, you will keep updating, adding items & levels = subscription.

    a single player game that the user can play by themself = one time payment.

    1. 1

      Thanks for sharing! That makes sense.

  5. 2

    Hey Victor,

    Definitely go with what you think is the best fit for your product. From my day job working in tech in San Francisco, I will say most tech companies going for high-scale growth are trying to make subscription work, and it's what wall street looks for. This is due to predictability in revenue (when paired with retention rates).

    With that said, again go with what you think is the best fit for you.

    1. 1

      Hey Jon, thanks for sharing that, appreciate it!

      1. 1

        No worries! Good luck!

  6. 2

    You try both and see what works best.

    1. 1

      Thanks, I'll try that out!

  7. 2

    I think you should price your product based on the way it provides value to your customers. If you have a SaaS product that users log into regularly, like a CRM, then you should have a subscription model. If on the other hand have a product that users only use rarely, like tax prep software, then you should charge transactionally.

    The enterprise valuation of your company will ultimately be higher if you have a subscription model - and that's what a lot of investors favor. That said, I think it's really frustrating when a service is providing transactional value but using a subscription pricing model. We used to work with some recruiting websites that changed from a contingency (transactional) model to a subscription model. It turned a win-win arrangement into a guaranteed win-lose arrangement, and it seems likely that the change was driven by a tone-deaf attempt to increase valuation.

    1. 1

      That makes sense, thanks for sharing! I would also be frustrated by that transactional model as a subscription model, I'll explore some more and see what the product fits best

  8. 2

    There are a ton of factors -- it's hard to give a one-size-fits-all answer here. Think of these as clarifying questions that push you in one direction or the other:

    • Is there an ongoing cost to providing the service? (subscription)
    • Is the value highly frontloaded? (one-time)
    • Is the product reusable? (one-time)
    • Does value compound with more usage or more users? (subscription)

    It's also okay to start one way and change your mind later. When I bought IntroCave, it was set up for one-time purchases (and still is!). That made sense to me - how many intro videos do you need for one channel? I had a few customers ask for subscriptions, and I've anecdotally seen some users order dozens of videos. I solved that for now with a single bulk purchase, but I'm planning to add proper subscriptions in 2021.

    1. 1

      Thanks that's really helpful, I've had a look at IntroCave and that's very interesting that some were requesting for subscriptions, I guess in your case you now have the chance to test both and see what works best.

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