Last week we announced that our next product, PDF Office, will be subscription based. Every successful software product in the world is subscription based. It might sound wrong, but it's true and I am going to prove it.
You never pay once.
The only difference between one time purchase and subscription is perception. There's a perception that back in the day, you were able to buy software and own it forever. Think Microsoft Office before it became Office 360, or Adobe Photoshop and other Adobe products before Creative Cloud. But every now and then (around once a year), these applications would be updated to newer versions — ones with new features, new design or just simple compatibility with new versions of operating systems.
Angry that you have to pay to upgrade (even if you get a discount for being a pre-existing customer)? Well, you can always switch to a different product, but you're still paying a fee, just to a different company. But, aha, if the upgrade is for a new operating system, you don't need it as long as you have your old computer, right? But that computer is bound to break, and you'll have to get a new one, with an upgraded operating system, which means your software will no longer work. Time to buy the upgrade!
Whatever the case may be, the fact is that if you rely on a certain software, you're paying for it regularly , not just once. And this in and of itself is a kind of subscription.
You're always paying in some way.
So let's say you decide that free software is the way you want to go and forget about all these paid ones. After all there are a lot of great products like Google's Gmail or Google Drive. Well, it's very simple — they are not free
, you're just not using traditional money to pay for them. You're using another currency and it's called your personal data.
Let's use Gmail as an example. Your personal mailbox, with the simplest of analysis, can reveal a treasure trove of information about you: your gender, how much money you make, which brands you love, your interests and general behavior. Information that marketers would sell their souls for. You pay for Gmail every single day when you open, click or respond to emails and help feed the huge Google data mining machine — yet another kind of subscription. You pay to make sure the company continues working for your benefit.
It's not only common just for software. Even hardware companies like Apple get you on a subscription plan , just in less obvious ways. Ever bought an iPhone? Ever replaced one? iPhones, and probably other phones, were designed to be replaced once in two to three years. This is so intentional, that they (hardware companies) even mention it in the financial calls as upgrade cycle term (this is also why iPad sales are hurting right now since the upgrade cycle is longer).
But why should this make you happy instead of angry? Why should the idea of paying the price once and receiving updates for the entire lifetime of the product make you shudder? Well, that's because you should want companies to always be working for your patronage and ultimately, money.
The Two Restaurants.
Imagine there are two restaurants. One is based in the center of the city with a lot of tourists passing by. It looks nice, has great advertising, and people who visit the city choose it since it's right there. However, the food is kind of "OK" and people usually don't come back again.
But that's fine with the owners! They're not worried about recurring diners; they only care about getting new people in through the door. So their focus is on ads to get new people and not on improving the food so that people will come again.
So now to that second restaurant, the one where locals prefer to eat. It's not too fancy and not located in a high-traffic area, but it's got great food and you can rarely find a table there. It doesn't have a lot of new visitors (since it's in a low-traffic area), so it depends on returning customers or ones who are referred. The owners here can't afford to serve subpar food, since they would lose all business. Moreover, since people can easily get tired from the same menu, they are always trying to find ways to update it, and even reward customers with loyalty cards.
They have to continuously improve their "product" to keep people "subscribed" to their restaurant. This is the way we'd much rather pick as a company.
Win-win situation.
A subscription model forces companies to work for your money every single day, and competition is great for consumers! As a result:
1. The company has to find new ways to push the envelope and produce a best-of-class product. If they are not the best, their customers can easily walk away and they will lose revenue. That means, you get constant updates to improve the product.
2. They'll work hard to make sure you're happy which means your support issues get resolved quickly. They recognize how much money they can lose if you and others have the same problem and could possibly leave because of the glitch. Every unresolved bug has a price tag attached to it.
3. You get the lowest entry price possible. For example, my wife (an amateur photographer), was never able to use Photoshop when it was a $499 purchase. Last week, she paid $10 to use for one of her projects.
4. The total cost of ownership for a true subscription-based product is usually less than a one-time fee. Lower entry costs widen the market for the product and make sure more people use the product for longer periods of time. It also reduces the uncertainty factor for the company, which can also positively affect the product's price.
In a nutshell.
Subscription-based models in a competitive market are a rare example of a win-win situation for both consumers and companies. Any product you use single day requires you to pay in some way, whether with your money or personal data. We are just being honest with you and aim to create the best in class software that will save your time and money.
I'll be happy to answer your questions in comments below.
Readdle Co-founder,
Alex.
