I wish I had all the correct answers all the time. I wish I had all the correct business acumen all the time. Nevertheless, I am a fallen man prone to error.
I have been selling Soliloquy for about 16 months now. During that time, I have gone through 4 different pricing/support/upgrade structures. With that in mind, I am incredibly grateful and humbled that my customers have yet to abandon me.
Although I would like to think otherwise in my prideful state, I confess that I am not a perfect businessman. I learn new things each and every day, but often those lessons are learned through very real and sometimes painful mistakes.
Now that I am on the other side of my decisions, I believe I have some insight into how each model I choose worked, the flaws inherit in them, and the reasoning behind the final decision to switch back to what I (almost) originally started with: yearly support and upgrade fees.
1. Automatic Yearly Support and Upgrade Fees
When I first began selling Soliloquy in April 2012, my business model was that of automatic yearly support and upgrade fees. When you purchased the plugin, it created a recurring billing cycle in PayPal that would automatically bill you when the time to renew came around.
This model is not bad – it is actually very good. However, I absolutely sucked at marketing. There is something to be said about good marketing, and at that time I thought way too much like a developer and not a marketer. It was no wonder I wasn’t making as much as I thought I should, especially when I learned what other competitors in the same field were making.
In my flawed view, I thought that the yearly fee model was killing sales. While that may have been true for some, I’d guess that wasn’t true for the 95% of other folks. I didn’t understand that I wasn’t marketing my product well, so I thought yearly fees was the reason behind the lack of sales. Somewhere around December of 2012, I killed off the yearly automatic updates/support and gave everyone lifetime updates and support.
What an incredibly stupid and costly mistake. Assuming an attrition rate of 50% (which is probably modest), I’ve already lost tens of thousands of dollars from renewals. Ouch.
2. Lifetime Updates and Support
When I switched over to lifetime updates and support, I also had a major catastrophe with the ecommerce plugin I was using – Cart66. That coupled with a sub-par PHP setup caused my I/O to run out the roof and got my account suspended for 6 days. Those 6 days were tough, but with hindsight being 20/20, it was an absolute blessing in disguise.
I implemented the design and marketing plan currently on the site, and it didn’t take long at all for my sales to quadruple in just a few months. I didn’t change the product at all. I did change the marketing behind it to appeal to the audience that really wanted the plugin – users. And that made all the difference.
However, I began to feel the heavy burden and weight of the idea of “lifetime support and updates”. I may have as well been holding up the white flag of surrender. The more I thought about it, the more stressful the situation became.
I was literally operating a software Ponzi scheme.
In a Ponzi scheme (typically in financial markets), you are constantly at the mercy of gaining new customers in order to support original customers. As your customer base grows, so does your need for attracting new customers. Everything is fine an dandy as long as both are running in parallel, but that never happens. There will always be a tipping point where your sales begins to flatline or decline, and that’s when the Ponzi scheme begins to break down. At this point, the scheme costs more than you can bring in, and you begin to bleed out the lifeblood of your business.
As more original customers begin to request things be done for you, the burden becomes increasingly harder and harder to sustain until it all collapses.
When was the last time you remember anyone coming out good in a failed Ponzi scheme? *crickets*
It made me sick when I began to think about the business I was running as a type of Ponzi scheme. Nobody wins in that situation. Nobody. If for a second you think that you are getting a deal because someone offered you lifetime support and updates, run. Run as fast as you can, lest you get caught in the rubble of an inevitable infrastructure failure. You will be left with degenerate and crippling software that nobody can update or support.
I had to change models and change fast, so I decided to go with a support ticket model.
3. Support Ticket Model
This model, in theory, is a great business model. In theory.
The support ticket model is one where customers receive lifetime updates for the product but pay for each support request they make. This lifts the burden off folks who never ask for support to the folks that do ask for support. This also ensures that anytime you provide support, you have already been paid for it.
Sounds great, right?
It’s not a bad model. I tried it for about 4 months successfully with Zendesk. It did what I intended it to do – drastically reduced support. If you are looking to reduce support, this is the way to go. This is also the way to create pissed off customers who won’t recommend your product to anyone.
This was an unforeseen consequence of the ticketing model. For starters, people cherish their tokens. You would think that a completely computer-generated, zero face value support token was a family heirloom. I would have people beg me to replace their support token because they insisted that my plugin was the problem, not their horrendously coded theme from ThemeForest.
I got a ton of mean and nasty emails from customers saying how they felt isolated and stuck with the plugin because they couldn’t get any extra help without forking out $9 for a token, half the price of the plugin itself. I thought to myself, “$9 is a steal! I charge $250/hour to do consulting – they are getting an incredible deal!”.
Customers don’t see it that way. They see it as a complete rip-off. I was living in a dream world when I thought they would see things my way.
Finally, the biggest unforeseen consequence (and the most damaging) is the fact that people absolutely will not recommend your product to friends and colleagues when they know that you will be nickeled-and-dimed for support. In fact, it makes customers resent you and your product, no matter how good it is.
Beyond this, let’s look at the monetary aspect. How much money did I make from people purchasing extra support tokens? $75. That’s it. $75 in 4 months. Phew – talk about busting at the seams with revenues! It absolutely did not make me any money as I thought.
So while it did reduce support, the negative consequences drastically outweigh the extra time I would use to provide support to happy, potentially raving customers who would promote my product everywhere. In this light, I probably lost money from all the sales I missed from word of mouth referrals. And I am completely serious about that last statement.
So for anyone who is thinking about using a support ticket model, do yourself and your customers a favor and don’t do it. If you are thinking about it but have never used it before, learn from my mistake. Don’t go down that road unless you just like knowing that you’ve got a lot of pissed off customers on the other line. It sounds great in theory but is flawed in practice.
I talked with a lot of other business folks about this model, too – business folks outside of the software world. They all looked at me like I was a crazy man. I now see why.
4. Optional Yearly Updates and Support
And so now, as of August 3, 2013, I have come full circle (almost) in my pricing/support/updates structure. I have grandfathered in all of my previous customers into lifetime updates and support, and all new customers will fall under the new, sustainable business model.
This model functions just like Gravity Forms. Carl and his team get it right with this model, and it is what I recommend to any new business person that is launching a product in the WordPress market.
In this model, customers pay yearly for support and updates. This ensures that the product stays in active development because business owners are bound to customers by current and future profits. I have a responsibility to continue to develop and support Soliloquy because I have customers counting on and willingly paying for it.
However, unlike the first model, the upgrade and support fees are not automatic. They are manually initiated by the customer if they decide that it is the right path for them. If the customer is fine with the product and doesn’t need any extra support, then they can continue doing what they are doing without any worry of paying any fees. Because they aren’t (and can’t) request support, it doesn’t cost me anything to have them make that decision. It’s neutral for both of us, and that is the absolute best business outcome when you have stagnant customers.
This model ensures that customers who desire support and updates will in turn pay for the support and updates. That payment for the support and updates allows my business to be sustainable and scale as needed.
Well what about normal computer software like Photoshop? They don’t require you to pay yearly fees.
They also don’t mind leaving you in the dust when their next version of the same software hits the market 8 months later. If you are happy with the version you’ve got, cool. You don’t have to pay anything else, but don’t expect support forever. They will phase out the life cycle of the product and force you to upgrade (ehhhemm, paying a fee) in order to continue to receive support.
On Making Amends
With all of the changes I have made in my business models, I’m finally settled on the last one. I’ve had the fortune (and misfortune) of living through all of them, and I’ve experienced the good and bad of each. No model is perfect because no person or business is perfect, but the last model gives the best of both worlds to both customers and businesses alike.
My only regret is that I had to go through this at the expense of my customers. I am incredibly grateful that they would stick with me while I was making changes. Some left, but the overwhelming majority stuck with me through it all. I am floored and humbled that they would do this as they had every right to setup their slider foundation elsewhere.
I still remember the day when I got my first customer. I don’t ever want to lose that feeling. I don’t want to forget where I came from. It is because of the loyal customers that I am here today selling Soliloquy, and the change in my business model reflects my passion for making sure that I continue to create and foster a culture of loyal, raving customers.
Everyone makes mistakes – we are human. It is how we respond to them that sets us apart.