I sell software with an inflation pegged maintenance component. It acts as a perpetuity and as interest rates are so low it makes the net present value (NPV) of the perpetuity very high to the point it dominates the initial purchase price. If real interest rates were not so low I could invest the initial purchase price and use the recurring revenue from that investment to cover ongoing costs.
People’s expectations are anchored and it is hard to sell against that, they expect to pay X for the software price with a Y yearly maintenance. So we stick to industry standard where possible. The standard varies by country so we have country specific setups.
I’m annoyed by subscriptions as well but mostly because I dabble in a lot of things and it’s expensive to have a ongoing subscriptions for something I may only use a few days a year. I generally try to get perpetual licenses and stick to old versions.
The software I make is very niche and domain specific, users spend 70% of their work time on it and are vastly more productive with it. The end users also hate change so they’re very happy to keep paying so that someone will care about their problems and they don’t want upgrades for the sake of it.
Do you also increase your price to new potential customers at the same inflation adjusted rate as existing customers?
Because if not, how do you not get resentful existing customers who are long time buyers of your service who end up paying more per month than a new customer?
Yeah, the initial price is pegged to CPI inflation as well. So everyone is paying the same amount, I’ve grandfathered in a few old customers on sweetheart deals, it’s a lower cost substitutable good so my market is at the low end and sometimes they really don’t have much money. It’s an ignored segment and we’ll work our way up the value chain to the high end eventually. It’s a slow but steady process.
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I sell software with an inflation pegged maintenance component. It acts as a perpetuity and as interest rates are so low it makes the net present value (NPV) of the perpetuity very high to the point it dominates the initial purchase price. If real interest rates were not so low I could invest the initial purchase price and use the recurring revenue from that investment to cover ongoing costs.
People’s expectations are anchored and it is hard to sell against that, they expect to pay X for the software price with a Y yearly maintenance. So we stick to industry standard where possible. The standard varies by country so we have country specific setups.
I’m annoyed by subscriptions as well but mostly because I dabble in a lot of things and it’s expensive to have a ongoing subscriptions for something I may only use a few days a year. I generally try to get perpetual licenses and stick to old versions.
The software I make is very niche and domain specific, users spend 70% of their work time on it and are vastly more productive with it. The end users also hate change so they’re very happy to keep paying so that someone will care about their problems and they don’t want upgrades for the sake of it.
Do you also increase your price to new potential customers at the same inflation adjusted rate as existing customers?
Because if not, how do you not get resentful existing customers who are long time buyers of your service who end up paying more per month than a new customer?
Yeah, the initial price is pegged to CPI inflation as well. So everyone is paying the same amount, I’ve grandfathered in a few old customers on sweetheart deals, it’s a lower cost substitutable good so my market is at the low end and sometimes they really don’t have much money. It’s an ignored segment and we’ll work our way up the value chain to the high end eventually. It’s a slow but steady process.
Would you mind revealing what the segment is? Now I'm curious!
Sorry to disappoint but not until I have a sizable moat.