One time payment vs subscription?

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.

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 :)

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

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.

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.

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.

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.