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Yearly Renewal Vs Subscription Model

Daniel Hood

Well-known member
#1
Last night I was driving back from my weekend visiting down south and I got to thinking about my add-ons (and really add-ons in general). I was wondering how people would feel if instead of paying a yearly renewal fee, which can get expensive very quickly, if they'd be more interested in a monthly subscription at a reduced price.

I kind of feel like yearly renewals are bad for both parties for a few reasons;
  • For customers: A lot of people buy add-ons in batches which means they expire in batches and it can suddenly be a few hundred dollar bill that sneaks up on them. Replaced with a monthly subscription model, it'd be a lesser amount albeit more frequently. To justify my rationale on this I look at Netflix/Hulu vs Amazon Prime. Amazon Prime is $99 a year (I think, I don't even know because it's so infrequent) and it sneaks up on you. Netflix is $96 a year, not much difference but because it's monthly it's no big deal.
  • For developers: I don't know if I'm the only one, but it seems like a small percentage of the license holders actually renew yearly. Sales typically go up year over year (granted, small sample size) but not everyone renews. It seems like people don't renew because the features they wanted still exist, they're happy with it in the current form and can't justify the renewal fee, or they legitimately just forget about it. My theory is, if it was a smaller amount and presented to them from the start, more people might subscribe to an automatic payment and be more content with small amounts frequently. These small amounts would make it easier to fund ongoing development on a month by month basis as well.
It's really just a thought, to switch to such a scheme for my use would take a decent amount of development and I'm not sure it's worth it but I'd like to see some opinions on the topic.
 

Mike Edge

Well-known member
#2
Thing would be, you would need to push lot of updates to make a decent profit.. Say Add-on "A" expired for me four months ago.. 6 months pass, no updates.. No need to upgrade yet.. Next week update comes out, so pay monthly fee.. Great got the update, no new updates again for 4 months.. So I just wait to pay again til that update again.. etc.. That 3 months not renewing after 1st month to get an update is a lot of recurring revenue lost..
 

Daniel Hood

Well-known member
#3
In theory, it'd be a subscription (automatic payments, you'd have to go in and cancel each one manually) and customers would understand that they're paying segments of a yearly fee and wouldn't cancel every time. I understand a few bad apples will likely ruin it though.
 

DroidOne

Well-known member
#4
Both options would be great. Paying monthly adds a burden if you're for example self-employed and partly pay your accountant based on the number of transactions :) I usually pay on a yearly basis if possible to save both time and money. It's also a hassle to keep tabs on all of the receipts.
 

Sunka

Well-known member
#5
For me is easier to pay on yearly basis. I do not have job, but have a little daughter and in this time it is easier to me to put every month some money in the box and pay yearly price at the end of 12 months
 

HWS

Well-known member
#6
Subscription models IMHO only make sense if the customer has no access to the source code and you are able to disable the software if not paid. Otherwise you will loose money.

Subscriptions in general are good for ongoing services you provide. I cannot see a working subscription model for open PHP software plugins.

The only chance you have is to raise the price of commercial add-ons to at least (!) the result of the calculation

[[(needed_work_hours) * (hourly_rate)] + (income_tax_and_expenses)] / (expected_sold_licenses) + (sales_tax)
If you are a serious developer and want to run a profitable business, this is the only solution to work without headaches.

If you see the prices asked for add-ons here, I doubt many of the commercial developers will be in business in 5 years from now. Custom work is the only thing such developers are able to pay their life from, but even those custom work is often calculated to low.

Syndol, for example, would not have left, if he would be able to get enough money from his perfectly coded add-ons. And many other too.

In general prices for add-ons and custom work is much to low in the XenForo market.
 
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empire

Well-known member
#7
I would expect it to be the other way around: a higher monthly fee and a discount for people who pay in advance. That's usually how it works with other kinds of subscriptions. I don't care for the subscription model but wouldn't mind it as long as I still had the option to pay up front.

One thing I've seen other software developers do for software with an annual fee is to say that the low renewal price is only available if you upgrade within a month of expiration.
 

Fred.

Well-known member
#8
Maybe you could offer a few different payment models so people can choose?
Then you can see which one is the most successful.

I don't like renewal fees, I don't mind to pay the full price the first time when I buy it.
 

Alfa1

Well-known member
#9
Renewal fees keep the developer interested in releasing upgrades. I believe that renewal fees can be the same price as the original price. Its up to the customer to decide if upgrades are worth the renewal price or not.
I don't think a monthly subscription works unless its a set deal for 6 or 12 months. So basically paying in monthly installments.
 

Daniel Hood

Well-known member
#11
My add ons typically have a $15-25 renewal fee. That's still not enough monthly but a lot of people have at least two. I could make a $5/month minimum.

It's just a concept though. I'm more or less just feeling out the idea.
 

sbj

Well-known member
#12
From a customer view-> the cheapest way possible.
That means that monthly subscription model will be the cheapest as most of us would just pay when there is a major update to the add-on.

Subscription model (like Netflix etc.) only works because you get every month something out of it. Once you stop paying, you won't get it.
But for add-ons in general I pay once a fee and get it. It doesn't stop working if I don't pay anymore. And unless you bring out every month something new to the add-on, I don't see the reason why I should pay for a month I get nothing out of it.
That is exactly the reason why add-on developers go with the yearly renewal. I mean I don't have to tell you as you would know it better than us anyway. With that model you minimize the "effort" you have to bring in as a developer as you can decide when to work and what to do. And in most cases, in one year there will be 1 or 2 major updates. For you it is more "safe" to go with yearly renewal. By that model you get more money out of customers.
But if your priority is the customer, go with the monthly way ;), so less money goes out of our pockets.
 

Ashley.S.

Active member
#18
As a customer, I have mixed feelings over subscription models. They are great for the shorter term if you cannot afford paying up a lump sum all at once but sometimes paying a lump sum can work out cheaper in the longer run as 9/10 the monthly subscription is more expensive than paying yearly for example and do not always guarantee updates or support. If a monthly subscription included a tonne of addons/features I wanted, regular updates and support then I'd most likely consider buying it.

Currently I have 2 addons from @Daniel Hood one of them is regularly updated (Conversation Essentials), while the other one hasn't been updated for a little while (HashTagging). Considering this first year I've only needed support once or twice and there have been no updates, I would likely only consider renewing S&U for Conversation Essentials since that one is being actively updated. If Hashtagging (or anything else for that matter) suddenly got updated in the new year after my S&U expired and was something I needed e.g new features or critical bug fixes, then by all means I would pay, so that is what developers should probably target. Regular updates to entice users to renew their S&U.

If I was forced to pay monthly for something with nothing new, then chances are I wouldn't pay anything at all and you'd have very little money in your pocket anyway...
 

Kevin

Well-known member
#19
Thinking out loud...

With a yearly renewal per product I'm likely to save money because I'd be less likely to purchase additional products that I don't really need whereas with a yearly subscription I'm more likely willing to pay a bit more in order to have a 'buffet style' access to everything including stuff that I might not have been considering before.

The problem that comes into play is defining "a bit more"; too much and it'd make me consider just how many of the available products I'd actually use, too little and it'd make no sense for a developer to offer such an option. :coffee:
 

Freelancer

Well-known member
#20
You are talking about how to market products? Rule of thumb: Look at successful businesses and copy their models (if you don't want to contract a marketing pro to council your individual needs).

Some insights/considerations for you:
  • Monthly subscription means 12x the effort in administrating your customers and 12x higher fluctuation in customers.
  • Monthly and Yearly subscription optional: Only makes sense if the yearly is giving you a discount. Like having one month off the final price per year. Not the other way around.
  • Subscribe to a developer model: Provide a maximum of 3 simple subscription models: For example Basic, Advanced, Pro. Basic has a lower rate but you can have up to 2 add-ons with the package. Have Advanced with up to 5 add-ons, Pro 10... etc. just to name possibilities. This strictly depends on the productivity of the individual developer. That is however the least fortunate model for the end user and not recommended if you are not a phone company or hosting provider for example...
  • Software companies let you buy licenses as a one-time effort – first. They provide free upgrades for bug fixes and stability improvements. But every once in a while they come with major releases (the big X in front of the point) mainly to incorporate new features. Then you have to pay an upgrade price which is not as much as the initial software price but like 50% - 80%. All new customers at that point pay the usual 100%. They often provide stability fixes for older versions but only in a limited time span. So customers can decide they want to have it stable or more advanced. Of course, if the XF Core reaches a certain version, old add-ons are abandoned and you have to upgrade as a customer.
It would be helpful to have general policies on add-ons made by XenForo core developer team. Pricing models included. A percentage share to the core developers per add-on, better standards and SOPs to follow for developers in return.