Software Revenue/Licensing Thoughts

[Renegade]

I've been thinking about some software licensing and revenue models, and come up with a small twist that I'd like to hear your thoughts on. (I don't want to get sidetracked with discussions about free -- I want to stick to licensing and revenue.)

To start, Freemium^w. So you get the basic software free, with the opportunity to purchase additional functionality/features.

So, for example, the product has features A, B, C... X, Y, Z. Or whatever. Let's not get caught up in the number of features as it's largely irrelevant.

Features A~D are free.

Next, additional features can be purchased, with possibly varying price points. e.g.

E = $1.00
F = $0.50
G = $2.00
H = $1.50

or

E = $1.00
F = $1.00
G = $1.00
H = $1.00

Whatever. Something like that. And so on down the feature list. In order to make a transaction viable, have a minimum purchase of say 3 features or $3.00 or something. (Again, let's not get caught up with the details there but stick to the big picture.)

Then, possibly packages. e.g.

Features E~I for $5.00
Features E~M for $8.00
Features E~Z for $12.00

So, the complete set for everything is $12.00.

Next, upgrading from features/sets to more features/sets -- price it at the difference +50% (or 20% or whatever), so...

Upgrade from E~I to E~M for $4.50 ($3 * 1.5)
Upgrade from E~I to E~Z for $10.50
Upgrade from E~M to E~Z for $6.00

Yes... It looks complex.

THE POINT
However, the point isn't to actually get people to upgrade from E~I to E~Z or to purchase individual features, but to be able to say, "buy the full package for $12.00 and save 80%" or "buy the full package for $12.00 and save $10.00".

And, at the same time, allow for emerging markets to see that they can get some of the functionality that they want for a very low price, and that they then have the option later on to purchase additional functionality for a low price. e.g.

Buy EFG for $3.00 now, and later on, but HIJ for $3.00, for 2 easy, low payments that are manageable RIGHT NOW. ---- Remember... in some places in the world $1~3 will buy you a meal at a restaurant, with a drink, and $5 will get you a meal at an relatively upscale restaurant.

I've not seen this done before other than the typical lite, standard, and pro type of licensing systems.

At the same time, I'm still thinking that the system needs to use the typical shareware model of "try before you buy" with something like a 30-day or 45-day trial period for the full functionality.

So... Thoughts? Please keep in mind the point there -- to drive home the idea of savings for people in developed economies and get them to purchase the full package, or at least spend some money, while still making portions accessible to people in emerging economies (or those caught in the crises of the developed economies).

[app103]

Interesting idea.

I think if it was a free base app, providing basic functionality, with additional features provided via plugins, with a "plugin store" where you can sell the individual extra features, that might also fly. And if you open it up to other developers at some point, you could have a ton of additional features to offer, things you may never have thought of, and possibly giving other developers a chance at making a little money too.

[Ath]

I've not seen this done before other than the typical lite, standard, and pro type of licensing systems.

This is the licensing system our company has been enforcing for years. Including a yearly renewal fee that's invoiced at the end of the year. Each product has several standardized modules/features, on top of the base product, that can be bought separately, with some combinations requiring some other modules because of technical reasons. It's mostly the pricing that's a 'bit' different And there's no free trial either, we usually go to the (potential) customer and demo the product(s).

I've built the license generator that, based on the administrative database, generates the new or changed licenses for our customers, and makes them available on our support website.

What you present here is IMHO a very viable licensing system, and with the pricing you suggest, indeed suitable for a worldwide market, ofcourse depending on the module-prices and grouping/discounts you select.

[Renegade]

Another thing just occurred to me while reading this thread:

UltraEdit on sale:
http://www.donationcoder.com/forum/index.php?topic=27188.0;topicseen

I HATE limited activation licensing. I've had machines where I've had to reinstall from scratch several times. Yuck. That burns license activations, and isn't really a fair way to treat customers. Still, I can see the point to it.

But what about this idea...

Limit activations according to where people are? And limit activations by unique machine ID. So, if you are in the US, for example, you get 3 unique machine IDs with unlimited activations for those specific machines. Effectively a 3-user license. And if you are in somewhere like Cambodia, limit activations to something like 10 or 30 (or whatever).

That way you can effectively limit piracy, but allow a certain degree of piracy in poorer parts of the world.

I can see some problems in there, but the general principle seems to be somewhat attractive to me.

[steeladept]

Actually that is a very common licensing scheme, just not that common on Windows systems.  It is, however, the basis of the In-App purchasing scheme of many phone apps.  Provide a basic software for the phone, with in App purchases or bundles for "premium" content.  What defines premium is largely defined by the content providers themselves, and - at least for games - tends to be limited severely to only cosmetic changes (we can discuss the merits and reasons for that in another thread if it matters), but it does exist.  Just a thought for you....

[Renegade]

Actually that is a very common licensing scheme, just not that common on Windows systems.  It is, however, the basis of the In-App purchasing scheme of many phone apps.  Provide a basic software for the phone, with in App purchases or bundles for "premium" content.  What defines premium is largely defined by the content providers themselves, and - at least for games - tends to be limited severely to only cosmetic changes (we can discuss the merits and reasons for that in another thread if it matters), but it does exist.  Just a thought for you....

I'm aware of the "item purchase" model for games, though it is kind of different, it is very similar in a lot of ways. Basically, it's the purchase of content vs. functionality.

Really, I think the content model is a much better model, as that's what seems to be driving a lot of software lately (the last few years).

[steeladept]

For games, yes, but it is also common now for non-game apps.  For example some of the utility apps are free to download with a few of their apps, but have in-app purchases available to expand on the "toolbox" of utilities.  That, from what I understand, is exactly what  you were talking about.

[Renegade]

For games, yes, but it is also common now for non-game apps.  For example some of the utility apps are free to download with a few of their apps, but have in-app purchases available to expand on the "toolbox" of utilities.  That, from what I understand, is exactly what  you were talking about.

Pretty much. I've not seen any toolbox/suite setups like that yet though. Do you happen to have a link to one that's setup like that?

[steeladept]

I believe AppBox is setup like that, though I am not sure.  It has been a while since I looked at new software - I have enough old software I don't know how to use yet 

[Renegade]

I believe AppBox is setup like that, though I am not sure.  It has been a while since I looked at new software - I have enough old software I don't know how to use yet 

I'm confused... I can't tell whether it is $4.99, $1.99, or $0.99, but it looks like it's $1.99. And I'm not sure if you get everything in it or not. One review talked about it being a "dollar store", but the metaphor is ambiguous.

It looks like you get everything for one price (from another review).

But anyways -- yeah -- that looks like it could be the same type of deal. e.g. Get 10 tools for $0.99 with 20 more available as options.

I know what you mean about looking at new software -- I'm pretty reluctant to try anything new anymore unless I've got a very real need.

[Renegade]

I just saw this:

http://www.techdirt.com/articles/20110630/14580814924/why-piracy-happens-because-no-one-mexico-thinks-tron-legacy-is-worth-paying-136.shtml

This may seem like an obvious conclusion but it is strikingly absent from policy conversations about intellectual property, which focus almost exclusively on strengthening enforcement. Nowhere in the industry literature or in major policy statements like the US Trade Representative's annual Special 301 reports will you find an acknowledgement of piracy's underlying causes: the fact that, in most parts of the world, digital media technologies have become much much cheaper without any corresponding increase in access to legal, affordable media goods. DVDs, CDs, and software in Brazil, Russia, Mexico, or South Africa, for example, are still priced at US and European levels, resulting in tiny legal markets accessible to only fractions of the population. Would you pay $136 for a Tron Legacy DVD (the relative price in Mexico, adjusted for local incomes)? How about a $7300 copy of Adobe's Creative Suite? I didn't think so.

[40hz]

One of the best licensing approaches I've ever seen is used by Nola Pro accounting by Noguska LLC.

They release an exceptionally powerful and very well-featured accounting package (easily on par with Peachtree Complete IMO) at no charge. There are, however, certain features and advanced capabilities that require separate licenses to use. These licenses can be purchased and installed via a built-in mechanism.

NolaPro Add-Ons & Plug-Ins are additional features you can activate inside your NolaPro installation to give you certain capabilities not included in the base package. The activation process is very simple:

• Click the purchase button for the add-on/plug-in you are interested in.
• After buying the feature you will be sent an activation code.
• Paste the code in the appropriate feature box on this page.
• Click the activate button, and then the finalize installation button at the bottom (in case new menu links need to be added).

Your feature will be turned on inside NolaPro, and you will be able to use the add-on or plug-in even if you need to move your application to a different server.

[attach]

[Ath]

He's just in the time consuming process of doing an in-depth review of Nola Pro for another website and wound up being very impressed by it.

Would be nice to supply a link to that review once it's publicly available, please

[40hz]

He's just in the time consuming process of doing an in-depth review of Nola Pro for another website and wound up being very impressed by it.

Would be nice to supply a link to that review once it's publicly available, please

Will do. 

[JavaJones]

40hz, to me the Nola licensing system with modular upgrades sounds great. But I can't help mentioning that I've seen lots of other modular systems turn into multi-tiered versions over time. Going from tiers to modules seems less common in my experience. I don't know if it's a business/profit motive for this (get more money by bundling features), or if it's user confusion that drives it. But I have to ask, do you think Nola's model appeals to us because we're techie and we "get" it? Or do you think it's also pretty intuitive to the average person as well? I know the app model with upgrades has proven very popular and successful, but purchasing items for a game is a bit different than purchasing functionality, as others have mentioned.

- Oshyan

[40hz]

But I have to ask, do you think Nola's model appeals to us because we're techie and we "get" it? Or do you think it's also pretty intuitive to the average person as well?

@JJ - I don't know about the average user. But the business users I've discussed it with thought it was a great idea. Even the most skeptical were all for it, once they saw they weren't about to be nickle & dimed for every little thing.

So in the case of Nola Pro, it think it's as much a function of how they treat their customer as it is how they implemented their in-app modular licensing.

I guess what I'm trying to say is they give their users a very fair deal. The clever way they make the deal work is pretty much icing on the cake after that. And it's especially refreshing because it's all up front and easy to understand. No games.

Gotta love that after wading through all the bogus "lifetime license" and adware bundling nonsense that's been going on.


----

P.S. If you need a really nice business accounting app, grab a copy and check it out. You can run it on a PC. It doesn't require an actual server although it can be installed on one if you want to. I like this puppy enough that I may shift my operation over to it eventually if I like the way they handle tech support.

[JavaJones]

Yeah, I think you're right - the way they treat customers and approach licensing probably has as much to do with how the licensing and purchase system is perceived as the system itself. I just know that I've heard complaints about modular systems being confusing in the past. But I do tend to like them myself...

Is Nola a Quickbooks level of app (or beyond) - the kind of thing a non-profit with a $4million/yr annual budget could/should use?

- Oshyan

[40hz]

^On par with QB for sure when it comes to straight accounting.

QB however, will have a definite edge for tax reporting support if you get the industry specific Non-Profit one.

The real issue would be if your auditors were comfortable with you guys using it since it's all about making them and the IRS happy.

[JavaJones]

Cool, not my department just curious.

- Oshyan

[Renegade]

Thread resurrection powers... ACTIVATE~!

Well, not so much resurrection as bring back from the brink of forgotteness... (not really a word, but whatever)


New idea...

Instead of actually charging for specific features... why not charge for NUMBER of features? e.g.

* You have 10 paid features in an application.

* You charge:

$10 for all of them
$7 for 5
$5 for 4
$3 for 2
$2 for 1

Now, in the software, you have a license admin page that lists the 10 options. Users can then check which ones they want to use, and can check as many as they have purchased.

The next question is whether to allow/force users to PERMANENTLY check options, or to allow them to CHANGE them as they need.

Or perhaps mix it up, with some being permanent and others being switchable. I suppose it all depends.

But the basic idea is to charge for the number of features, and not for specific features.


For allowing people to switch features on/off, the motivation to purchase all of them would be convenience. i.e. Do you want to toggle them on/off every time? For an extra few bucks, you can kiss that inconvenience goodbye.

Thoughts?

Nutty? Good? Complex? Confusing? Super Simple?

[f0dder]

Commenting on the original post:

As an end-user, I hate it. It's too confusing, and it smells of the developers trying to confuse me.
As a developer, I hate it - it's a maintenance and support nightmare.
As a reverse engineer and protection developer, I like it - sounds like a fun 6+ month project to implement.

[40hz]

FWIW I got to the line that read "$5 for 4" and stopped reading...

I understand where you're going, but I'd never be able to present it to any of my clients. They hate tiered or granular pricing schemes. Their attitude is: "Don't give me details, just quote me a firm price for XXX copies of the whole package. I'll either hand you a check - or thank you for your time and have someone escort you back to the lobby."

In my experience, business buyers usually don't want to know how you run your business. They just want a single number (or at most two) they can negotiate from. Anything over that tends to jeopardize the sale and make them think you're gaming them.

Most people start shopping with their head. But most make the buy based on a feeling. Which is why it's been said that you hardly ever get - or lose a sale - purely because of price. It's always price plus one other thing. Something to think about...

I used to give several options when I first started quoting on projects or services. Now I go in with one firm price and sometimes allow a little room if I seriously want "in" enough to dicker.

Guess what? My sales closure rate went up from around 15% to over 60%. That's a fourfold improvement gained by offering my clients much less to think about.

Weird I know. But that's the way it works in my business.

[mwb1100]

My own personal opinion on this idea is that simpler is better than complex, and too many choices increases complexity.

I think that having 3 'tiers' of feature sets is about the maximum you should consider.

Having a menu of a slew of features is just kind of crazy.  And if you throw in the additional complexity of discounting for bundles of features, it'll make my head explode, and I don't think that's good for business. Yours or mine.

I'd end up spending all day trying to figure out which set of stuff I should buy to reduce my cost to the minimum ('cause I'm a cheap bastard) while still getting the features I want or need.  And if that sounds like a word problem for your linear algebra class - it is.  And believe me, customers really aren't looking for additional classwork when they're going to buy stuff.  At least I'm not.

Not to mention that it would almost certainly make licensing a pain, and 'd probably end up wondering why done feature wasn't working 6 months later - when I forgot exactly which set of features I had licensed.

Just thinking about this is making my head hurt...

[mouser]

As everyone has said, complexity is a killer and you pay a real price for it..

I know that DC methods are more complex and confusing than they should be and it scares away people.

[Renegade]

Hmmm...

Yeah... It's a bit over the top.

My goal there was to target emerging markets and present something that's flexible enough to make the software at least partially affordable.

I have a large portion of users in the third world.

Back to the drawing board...