Category: Business Success

Today, subscriptions are everywhere. If you want to watch a movie, you need a subscription. What do you need to listen to music? A subscription! And what about a car? You guessed it, you can actually get a car with a subscription with some brands. But why is that? What made companies switch from perpetual, try-and-buy pricing models to the subscription pricing model for software products?

In this blog, we will answer that question and show you how a subscription pricing model can take your software business to the next level. We have also made a video covering this topic:

Advantages of the subscription pricing model

Firstly, subscriptions are oftentimes preferred over a one-time payment since they significantly lower the upfront cost for your customers. Most people do not have $50.000 in liquid cash to spend on a car, but they might be able to afford $500/month. And although software products are usually a bit cheaper than cars, the logic is still the same.

You can also create different pricing plans to attract different kinds of customers. A basic pricing plan can be sold for a small subscription fee of $50/month for users who will only use the basic functionality of your application. It is then possible to charge extra for an unlimited pricing plan with all features at a higher price, let’s say $350/month. Both newcomers and advanced users can buy your product!

But that’s not all. You can also get more predictability from the cash flow of your business. Instead of having them buy your product and then you never see them again, subscriptions will give your business an MRR – a Monthly Recurring Revenue.

For example, let’s say that you have 10 customers, 8 of them are on the basic plan, and 2 of them are on the unlimited plan. That would give you, in this example, a monthly recurring revenue of $1.000. This is a game-changer for budget planning, you know exactly how much money you can spend on ads each month, for example!

Unless a customer cancels their subscription…

Disadvantages of subscriptions

That gives me a perfect opportunity to cover some disadvantages. The churn rate can indeed be a problem. If you charge customers on a monthly basis, you give them a lot of opportunities to churn. In the previous example, we can see that it would be especially bad for the MRR if one of the 2 customers on the unlimited plan churns since they actually bring in most of the money each month. This highlights a dependence on a few customers that you don’t have if you let customers pay the entire price at once.

You can incentivize people to pay upfront even with subscriptions. A popular way is to offer a slightly cheaper price if customers pay once a year instead of once per month, but that is not always ideal. The churn rate is definitely something to consider before choosing to implement a subscription pricing model.

Implementing subscriptions with Cryptolens

If you sell a software application as a subscription, you need a system that can automatically restrict access to your application from customers who stop paying. The system you seek is a software licensing system, but coding such a system will take significant time and money.

Using Cryptolens and our easy-to-use software licensing system is a lot more effortless! Since Cryptolens is also completely free during the development phase of your application, there is no risk of trying it out. We are trusted by hundreds of innovative and world-leading companies worldwide.

With comprehensive implementation guides in the programming languages you love, you can implement the subscription pricing model within minutes!

Choosing between different pricing models can be hard, but it is a crucial decision to get right. Should your software product be sold at a one-time price? Should you charge a continuous subscription fee? Or should you maybe even charge customers differently depending on how they use the product?

These questions will be answered in today’s blog, as I will briefly introduce three of the most common pricing models, Try-and-Buy (Perpetual), Subscriptions, and Pay-per-Use.

You can also find the video that we have made for this blog here:

The Try-and-Buy (Perpetual) Pricing Model

To illustrate some different ways a software product can be priced, consider the case of a music streaming app. They could let you try the application for one month before you have to pay the price of $50 to continue to use it forever, a so-called Perpetual, or Try-and-Buy model. That way, users are able to temporarily realize the value of your product for free, and at that point, they have an easier time justifying the one-time price.

The Subscription Pricing Model

The streaming app could, maybe more realistically, choose to impose a continuous fee. Let’s say a monthly fee of $12. Does that sound familiar? That is called a subscription model, and it can be beneficial from a business model perspective since you get a more predictable cash flow each month, and you might be able to attract users who are not willing to pay that high one-time price. The lifetime value of a customer can still be very high if they continue to use the app for a long time.

The Pay-per-Use Pricing Models

The last pricing model is to charge customers differently depending on how they use the application, the so-called Pay-per-Use model. The music streaming app could charge customers, let’s say $1, for every hour of streamed music. The more you use the application, the more you pay at the end of the month! This can create a more fair pricing plan – big users of your product pay a high price but they get a lot of value, small users pay a bit less but at that price, they still think it’s worth it.

Implementing Pricing Models with Cryptolens

So how do you implement these pricing models in practice? It all begins with a software licensing system. In short, the system is linked to your payment provider such as Stripe or PayPal, and it makes sure that only people who pay get access to your application.

With Cryptolens, you can implement an easy-to-use software licensing system within minutes with our comprehensive guides. Hundreds of innovative companies are using our licensing as a service (LaaS) platform to license all kinds of applications.

When developing a software application, many ask how they should implement a software licensing system. Should you code it yourself? Should you outsource software licensing?

I would generally say that outsourced software licensing is the most scalable, reliable, and cost-effective solution in the long run. This blog will cover exactly how a third party can help software developers save both time and money!

We have made the following video covering this topic as well:

Coding it yourself

First of all, what is a software licensing system? We have a short blog post covering that topic that I recommend you to read if you are unsure. You can find that blog post here.

This post will be all about implementing such as system in practice. One way is to code it yourself, and there are some situations where you might want to do that. If your application is not supposed to be sold on a large scale, and you want to grow your coding skills, coding a software licensing system can be a fun project for hobby developers.

You might also say that coding it yourself is the economically smart solution since you pay with your own time rather than your own money. That argument falls a bit flat when considering that some software licensing providers, such as Cryptolens, are completely free during the development phase of your application.

You can then implement software licensing without any risk!

Outsource software licensing – the benefits

Coding your own system will take time. Implementing a third-party solution is a lot more effortless, allowing you to quicker bring your product to the market. This also helps you save money, since there is no internal development cost.

So outsourcing helps you save both time and money, but let’s say that you completely ignored our recommendations and coded your own system anyway. You may suddenly find yourself in a problematic situation – your company grew so much that your self-coded system is no longer able to support your needs. Constantly getting angry emails from customers saying they can’t access your product is never good. This highlights the fact that a software licensing system needs to constantly be updated and maintained to work flawlessly.

What about coding your own system at first, and then switching to a third party when the maintenance gets out of hand? Well, at that point in time, switching licensing solutions will be a big project that will have an impact on all of your customers. Let’s face it, it is probably easier for your customers to go to a competitor than it is for you to switch solutions at that point.

A final shared value perspective

To conclude this blog, I would like to step away from the perspective of time, money, us and them, and step into a world of shared value – the concept that combines business success with providing value to society as a whole.

By outsourcing software licensing to experts, your company can focus on what truly matters:

Your own product.

That way, your company does not only become more productive and cost-effective, but it also helps you provide more value to your customers, and you make the world just a little bit better.

Thank you for reading, stay kind!

Are you working on a software application that you one day want to sell? Then you need to think about software licensing early on. No, I am not talking about End-User License Agreements (EULA) or legal documents, I am talking about a software licensing system – the system that ensures that only customers get access to the application.

Why is a software licensing system so important? Because without it, you simply cannot sell a software application to customers.

In this blog, I will briefly, and in a non-technical, way describe what a software licensing system really is, and how it can enable you to take your software passion and turn it into a business.

We have also made a YouTube video about this blog if you prefer to watch rather than read (like me).

What is a software licensing system?

To make this blog a bit more fun, picture the following analogy. Let’s say that your software application is like a house. The different rooms of the house are the different features in your application. One room can house the most basic features, and another room can house more advanced functionality.

Without software licensing, your application does not have any locks. Users can enter whatever room they feel like without paying at all! It becomes clear that no one would ever pay for such a product, since everyone can just use it without paying.

A software licensing system would establish a lock on the front door, making sure that only people with a key can access your application.

How does this system work in practice? That is a great question! So great that we will cover it fully in a future blog post. For now, let us just assume that the system indeed works as it should.

Software licensing performs key verification

The next step for us is then to create keys for the front door and give them to our customers when their payment has gone through. In software licensing terms, that key is a digital license key that is unique to each customer.

So what happens when a customer tries to enter our application? In the most basic setup, they will be greeted by a locked front door. After providing their license key, the software licensing system checks so that their license key is valid, and if it is, the door is unlocked and the customer can begin to use the application.

The customer can then leave the application, and the key verification process is repeated whenever they try to run the application once more.

If a non-customer tries to access the application, they will be greeted by the same locked front door. Without a key, they cannot enter!

Some software applications choose to charge a customer a subscription fee. Monthly or yearly subscription fees are the most common ones. Then it can be useful to block the license key of customers who stop paying their fee. If such a customer, or ex-customer, tries to use the application, they will not be let in. That is because their license key stopped being valid when they stopped paying.

Charge extra for more features

Now you know the basic setup, but what about the different rooms I mentioned earlier? Let’s suppose that the house has two rooms, one with basic features, and one with more advanced functionalities.

It is sometimes beneficial to charge customers extra for using the more advanced features. You can then create two different types of license keys for the different rooms. A green license could, for example, cost $100 and give customers access to the basic features of your application. A red license could instead cost $500 and give customers access to all of the features in your application.

The moral of the story

So that’s it, right? Is software licensing really that simple?

Of course, it isn’t. But we hope that the simple analogy gave you an introduction to software licensing and how it enables you to sell a software application.

But remember – although a software licensing system enables you to sell your application, it alone can never make your application good enough for customers to want to buy it.

That is something only you have the power to do.

Thank you for reading, stay curious!