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💡 Opportunity #1 - Alternative Pricing Models for Software
🗂 Overview:
Not every software business needs to charge monthly.
Software used to be a one-time payment, installable thing. Now it’s a monthly cost (that can cost businesses many thousands) and you never own it. At least, that’s what companies like once.com believe (definitely worth a read).
There’s a growing trend of SaaS brands moving away from fixed monthly billing and instead using either one-time payments like the good ol’ days or usage-based (like Zapier’s pay-per-task) pricing.
Utilising different pricing models can be a huge advantage over your competitors. For example, some businesses’ Slack bills can cost tens of thousands a month whereas you can get almost the same feature set using Campfire for $299 once.
Campfire might not be as feature-rich but it does the job for the majority of people and can attract a significant portion of Slack’s unhappy users or those that are on the fence of upgrading from the free version.
We pay ~$40k/year for Figma. When I see the bill every month, it doesn't feel great.
I wish it was pay-per-pixel, pay-per-project, one-time-purchase etc.
New models are emerging.
— #GREG ISENBERG (#@gregisenberg)
7:25 PM • Jan 9, 2024
⭐️ Examples:
Campfire replaces Slack or Teams. So instead of paying $10,000/m for Slack you can now just pay $299 once and get 90% of the features.
Ableton (like most music software) is a one-time payment software. You pay once and install it on your computer. Every few years they release a new version with some updates, if you want it, you can pay an upgrade fee.
If you have some technical ability you can buy full CRMs, email marketing tools, accounting software, and so on at CodeCanyon. Some even let you pay extra to brand them as your own and resell them.
Zenvoice offers an unlimited lifetime plan for $69. It allows users to save money on Stripe’s invoicing fee and customer support requests by automating this task for a one-time fee. This is really beneficial for brands processing a lot of Stripe payments.
Obsidian replaces Notion and runs locally on your computer but also has browser/plugin features. Appflowy is similar
👎 Problems:
Costs Over Time: SaaS bills can cost businesses a significant amount every month and over the lifetime of usage can cost significantly more than they used to when perpetual licenses were the standard.
Example: Adobe Creative Cloud used to be Adobe Creative Suite which offered perpetual licenses that cost between $1299 and $2599. Upgrades from previous versions were available at lower costs, ranging from $299 to $549.
Subscription Fatigue: With the proliferation of subscription-based services in various aspects of life, from entertainment to software, users are experiencing subscription fatigue. Managing multiple subscriptions and their renewals can be tedious and overwhelming.
Example: Netflix pioneered the streaming subscription and massively disrupted the cable/entertainment industry. Nowadays every production company has a streaming service and it costs about the same as cable.
Lack of Ownership: In a subscription model, users essentially rent access to the software without ever owning it. This lack of ownership means that if they stop paying the subscription fee, they lose access to the tool and, potentially, their data.
Inflexible Pricing: Monthly subscriptions often come in tiered packages, which might not perfectly fit everyone's needs. Users end up paying for features they don't use or need more than what their current plan offers but less than the next tier up.
Budget Predictability: For businesses, particularly startups and SMEs, predictable budgeting is crucial. Monthly subscriptions add a variable cost that can fluctuate, especially if the pricing is based on usage metrics like the number of users, making financial planning more complex.
🧐 Opportunities:
Below is a list of popular SaaS applications that you could create competing software for that either offers:
lifetime access for a one-time payment and the customer sets up and pays for the server themselves (similar to Campfire).
lifetime access for a one-time payment where you still cover the running costs (similar to Zenvoice).
lifetime access for a one-time payment but the option to subscribe for upgrades & support.
SaaS Brands to Disrupt:
File Sharing like Dropbox
Accounting & Bookkeeping like Xero/Quickbooks
Email Marketing like Mailchimp/Klaviyo (lots of people are unknowingly paying far too much for Klaviyo)
SEO Tools like Ahrefs/SEMrush
Customer Service like Zendesk
CRMs like Salesforce/Hubspot
Design Programs like Adobe Creative Cloud (see Affinity and Davinci Resolve as examples)
Social Media Management like Buffer/Hootsuite/Sprout
Sales Management like Pipedrive/Freshsales
Lead Generation like Apollo (pay-per-lead)
Database Tools like Airtable
Basically, think of a SaaS that brands pay hundreds/thousands to use every month and find a way to make it cheaper whilst giving at least 90% of the features.
You could also charge extra to set up and install it for them as a premium Done-For-You service.
Alternatively, if you don’t want to make/run a software business you could create a service-based business that goes into companies and helps them save money on their software by setting up, installing and providing training for alternative software solutions.
If you don’t want to start a software business from scratch you could also use CodeCanyon to find prebuilt software for your chosen niche and purchase an extended license that allows you to resell it as your own. This is a good way to quickly validate an idea without spending too much on development - definitely not a great long-term solution though.
Finally, something a lot of these have in common is the customer needing to pay for the server themselves - a lot of the time this would mean the customer going to AWS. You could potentially create your own sever network designed specifically for these types of applications - where you sell multiple versions of the above applications and make recurring revenue off the server too.
🛠 How to Build:
Identify a Gap: Research to find unmet needs or frustrations with current SaaS offerings - in particular, look for SaaS offerings that cost users thousands.
Develop a Unique Value Proposition: Focus on what makes your solution different and better - the pricing model will be a big aspect of this but the more you have the better.
Choose a Pricing Model: Consider one-time or pay-as-you-go based on target market preferences.
Build a Minimum Viable Product (MVP): Create a basic version of your software to gather early feedback or find a pre-built template at CodeCanyon or contact an MVP agency.
Gather User Feedback: Use initial users' feedback to refine and improve the product. Also gather competitor feedback and feature suggestions.
Develop the Full Product: Based on MVP feedback, develop a full-featured version of the software.
Launch a Beta Test: Invite users to test the full product and provide feedback.
Iterate Based on Feedback: Continuously improve the product based on user input.
Set Up Customer Support: Ensure users have access to help when needed.
🚀 How to Grow:
Direct Outreach: Identify unhappy competitor customers through reviews and social media, and reach out with personalized offers.
Building in Public: Share your journey, including successes and failures, on social media and your blog. This fosters transparency and community.
Create a Narrative: Look at Jason Fried and his companies and construct narratives around why there needs to be a change for this niche and why the existing way is outdated/inefficient/costly/etc. I wrote about this in more detail here.
Content Marketing: Create valuable content related to your niche to attract and engage potential customers.
SEO Optimization: Optimize your website and content for search engines to increase visibility.
Social Media Marketing: Use platforms like LinkedIn, Twitter, and Facebook to share content and engage with your audience.
Email Marketing: Collect emails through your website and send regular updates, offers, and content.
Referral Programs: Encourage existing users to refer new customers by offering incentives.
Partnerships: Collaborate with other businesses to reach a wider audience.
Paid Advertising: Use Google Ads, social media ads, and retargeting to attract users.
Product Listings and Reviews: List your product on SaaS review sites and directories.
Public Relations: Get featured in industry blogs, magazines, and news sites.
Community Engagement: Actively engage with your users and potential customers in online forums, social media groups, and other communities.
Webinars and Workshops: Host online events to educate your audience about your niche while showcasing your product.
User-Generated Content: Encourage users to share their experiences with your product, which can be repurposed for marketing.
🛠 Builder’s Toolbox
Useful ad creation technique using ChatGPT by Alex Cooper.
How to structure your homepage by Aakash Gupta
How to create killer VSLs by Alex Fedotoff
Simple framework to monetising your skills by Nick Abraham
Interview with Jason Fried on the MFM podcast about this topic.
