Archive for September 18th, 2008

My thoughts on paid upgrades

Sep. 18th 2008

Charging for software upgrades is a bit of a touchy subject. The Successful Software blog makes a case for when you should charge for upgrades from the software developer’s perspective.

Charging for upgrades makes a certain amount of sense. It can be a way to fund new development that your users truly want and need. My problem with paid upgrades is when companies start looking at them as a “revenue stream” rather than funding development in the product.

You know what I’m talking about — the company is no longer doing any real innovation on the product, but switches things around a bit and slaps on a new UI every couple of years in order to justify bleeding some more money out of its users. Meanwhile, they keep your data in a binary format or use other tricks to lock you in and keep you from defecting.

In the end, users notice this and start to rebel. In the CAT tool world, people are starting to balk at paying for upgrades, especially just to get bug-fixes (that often aren’t even fixed).

That’s why you can’t make the decision to charge for upgrades purely based on a revenue chart. That’ll work for a while, until your users catch on and defect en masse.

As usual, Seth Godin has something interesting and relevant to say, talking about how his insurance company kept raising his rates by a little bit every year:

I’d get the bill, sigh about the fee, consider the hassle of switching, pay the bill and move on.

Until last week. Last week the number was too high. Something in my relationship with the insurance company shattered. After all, it’s not like they had done anything for me, not like I knew anyone there. It was just momentum. And the number was suddenly enough to make me take action.

In the end, it comes down to a matter of philosophy. Do you want to maximize revenue per user — essentially strong-arming your oldest and most loyal customers into forking over more and more cash — or do you want to continue to innovate, creating loyal customers who will gladly pay for major improvements, and winning you more customers through word of mouth? I love it when I can make a business case for avoiding scumbaggery. 🙂

For the record, I won’t be charging for Felix upgrades until at least version 4.0. Here’s a very tentative release schedule:

  • Version 1.0 – May 2008
  • Version 2.0 – August 2009
  • Version 3.0 – August 2010
  • Version 4.0 – August 2011

So there’ll be no charges for Felix upgrades for at least three years. I’ll make the decision for version 4.0 based on how much true innovation has gone into the product, and whether Felix users feel like a charge is justified.

Posted by Ryan Ginstrom | in marketing | No Comments »
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