Subscription Pricing Models

September 8, 2017 • #

Since Apple changed their subscription pricing options for App Store developers back in 2016, several high-profile apps that have made the switch from fixed pricing to the subscription model. TextExpander, Day One, and Ulysses are just three that I know of and use.

I may be biased as I’ve been building and selling subscription software for years, but I love that the Apple ecosystem is supporting this now. Ulysses provides a great example: their fixed model had the price at $45 for the Mac app and $25 for the iOS app. Their new subscription is for universal access on both platforms for either $5 per month or $40 per year, plus a 14-day free trial for new users. I’d long heard that Ulysses was a great editor for writing, but held out forever on really using it because, for one, there are a ton of great text editors, but also I didn’t know how much I’d really use it once I dropped the coin. At a $5/month subscription, I don’t have to feel bad, I can just cancel if I’m not using it enough and be out a $10 or $15.

There’s been some backlash from the community about this shift from fixed to subscription models. The AppStories podcast did an episode recently on the topic with some interesting discussion. To me the reasons for backlash are threefold:

  1. Users don’t like change — We’ve experienced this time and again with our product. Even when we release new features that seem universally fantastic, we’ll still get naysayers wanting a checkbox to “make it work like it used to.” Change that makes the price higher, even if it’s only perceived to be higher, or even when the alternative is the developer is no longer able to support the app, there are those that still can’t accept it.
  2. Users don’t get continued (or enough) value from the product — Even if the recurring price is super low, like $1.99 per month, some users will feel like they don’t use the app enough to warrant that price forever. A flat $10 might be okay. A fair enough reason. It comes down to who the developer wants as a customer. Are they building something for the few, higher-value niche customers, or a mass market?
  3. Most people are cheap — There are a shocking number of people who are willing to have subpar experiences to save some money. The frustrating part for developers is when users want the savings part, but don’t want to make that sacrifice in quality. The glut of free replacements out there makes it challenging for developers to charge anything at all for many users.

Of course it’s possible for a developer to misprice their app, to overpredict the value delivered to a user. I’ve seen it happen with SaaS products: something I use a little changes their pricing model a bit, it becomes not worth it to me anymore so I cancel. But I’m a believer that developers will tend to get this right more often than not (at least eventually). With subscription pricing, small pricing adjustments are easier decisions for a developer to make. Going from $5 to $2.50 a month is less momentous a choice than going from $50 to $25 in fixed price model. It’s better for the user, too; there’s less feeling of being ripped off, and no need for promo codes and refunds.

But hands-down the best feature of subscription models is that the apps you love get to stick around for the long haul. At this point we’ve all been burned by services we rely on disappearing on us. I’m happy to pay to keep things around that I use regularly.

Topics:   SaaS   business