We’ve seen how the SaaS industry toils to create enough value for its customers to qualify for a recurring revenue stream. If you have been in the software business long enough, you know how Lifetime deals offer money upfront, helping with cash flow that is oh-so-crucial for early-stage businesses.
The idea of lifetime deals promises easy money in a singular payment, albeit less than the value of the product. If you are a business thinking of running a lifetime deal, you sure can earn good money and gain easy traction at the same time. It can also be a way to raise money, while not giving up any equity.
But! First Know a Thing or Two About Discounts
Discounts are excellent tools for promotions and can really get your business going. But when it comes to SaaS lifetime deals, you need to have a long term horizon.
- Blowing the trumpet about how low your pricing is can really annoy the customers who pay full price for the same product on a recurring basis.
- You can be selective in giving discounts or running promotions. Why slash the pricing for a user who would gladly pay the full price for your software? Have your sales funnel filter out prospects who would convert to paying customers with a push from your deal arsenal.
- Discount should be offered to lower the activation energy required for someone to convert. But eventually the product should then justify the full value of the price. As such, discounts and promotions should not add to the customer acquisition costs.
How to Price a SaaS Lifetime Deal?
1. Development costs
It’s not cheap to develop a robust service. A big factor that plays into this is the development costs. It is imperative to decide the licensing model of the service. It could be open-source or proprietary. The service could be charged per user per device or a flat fee for a fixed number of users with slab-like increments.
2. Future costs
If you’re working with a software distributor, how much do they charge to add a new feature or to release an update? Do you have staff with the necessary skills to further develop and improve the service? Another point to remember is the cost of maintaining servers and databases for a larger number of users.
3. Deployment costs
The distribution of software isn’t cheap. The service has to be compatible with a majority of the systems and should run smoothly. This can only be achieved by research and testing on the developer’s end. Only if the service is optimized can it run without any hiccups.
4. Maintenance costs
Every software needs constant maintenance and updates. Customers can also send in their grievances about the product and report bugs that they’ve encountered. Sending out these updates needs a team of dedicated developers, distributors, and researchers.
5. Data plans
If this is a software that needs the internet to function, the cost of data should be taken into account. Having a faster data plan will shorten the customer’s work time but at the expense of higher prices. Opting for a data plan with a bigger bandwidth might be beneficial if an immense workload is expected.
6. Upgradation cost
Along with the front end of the software, the back ends have to be maintained too. Security and server capabilities should also be updated periodically to make it easier for the servers to handle more workload and to make it impregnable against hackers.
7. Training cost
A lot of products are hard to learn and master, so some amount of training might be necessary. One decision that falls on the developer is if they outsource the training to an outside firm or hire trainers themselves. If the software is more regional, then it would be easier to hire a dedicated expert to train customers.
8. Growth opportunity
This is where market research comes into play. In-depth market research can help the developer to know the demand and scope for the product. Knowing the market demand can in turn make it easier for the developer to calculate all other costs, like server and bandwidth.
Steps for Launching a SaaS Lifetime Deal
Check for Product Readiness
Haste is the enemy of perfection, they say. Take a not-so-ready SaaS to market and get ready for perpetual trouble. Mainly because, most platforms that run lifetime deals also come with no-questions asked refund policies. That means if a subscriber doesn't really like the product they buy, they can claim their refund, consequently leaving you cash parched in the end. This would defeat the sole purpose of running a lifetime deal.
Instead, fix problems as they come to you and gradually build a product that meets the problem statement that your target audience presents.
Define ‘Lifetime’ to Begin With
So, the general consensus around the term ‘lifetime’ makes the subscribers very demanding when it comes to their expectations from a SaaS product. Given that most life-time deal baggers are price sensitive users who keep an eye out for discounts, they are motivated to get the maximum amount of use from your software. So, it’s best to inform them what ‘lifetime’ means in case of your SaaS deal, upfront. Does the deal hold for the lifetime of the business, for the current version of your SaaS or for all the future versions?
An avid SaaS user would understand that there is no-forever when it comes to digital consumption but would expect to benefit from long-term usage of your product.
Build Clarity Around Licenses
Build a lifetime deal that brings clarity around licenses that your users will own. Do not bring the sign up process and get them to pay without sharing the details of license ownership upfront. Ideally, a user should be able to pay for as many licenses as they want. If a user wants to buy multiple licenses at once, it should be made convenient for them.
Also, specify if users can resell their licenses, exactly what each license covers, what happens in case of upgrades or system changes. Write down the value metric and how much of it your product will deliver.
We suggest having a dedicated page that illustrates what all the lifetime deal covers, exclusions, the way it works, details about the value metric and how this deal would work in sight of the metric.
Distribute Your Deal
A giant in the lifetime deals business is AppSumo. You can begin distributing and marketing your deal at small platforms like Facebook and LinkedIn groups that cater to niche audiences and then gradually scale your way up to AppSumo, once you have enough traction. You would be surprised by the number of close-knit communities built around lifetime deals. You can seek help from the community moderators here and further polish your offer to lure your target audience.
In the End
Eventually, lifetime deal users would use your SaaS for a long time and not pay for it on a recurring basis. But on the other hand, SaaS model poses a recurring price because of the value it delivers consistently and the maintenance it goes into. So, if you look at it, lifetime deals are a direct breach of this arrangement, creating a cashflow impediment of sorts.
Giving discounts via SaaS lifetime deals also leads to revenue ceiling. That means cash from one time sales of the software sale can equate to some months of subscription revenue. If this sum is less than the lifetime value of the customers, it means you will not be duly compensated for the value your software delivers over the years of use i.e. in the long run. But before these lifetime customers turn into a liability, they remain an asset for the upfront cash they bring to the business.
A lifetime SaaS deal should be only a means to pick-up the business in the initial stages, so that it doesn't adversely affect your revenue. In no way, are they a means to an end. Businesses that plan to stay afloat solely with lifetime deals, also demonstrate how their product is not as valuable to a user to have him pay for it time and again. Here are some takeaways from our research around lifetime deals:
- De-risk your business by limiting the amount of financial stress you undertake by on-boarding one-time paying customers. Let the majority of your customers pay on a recurring basis.
- Set some hard usage limits. Steer clear from infinite usage. Integrate a visually tracking and display system to show usage quota and charge signees for over-usage.
- Price life-time deals to at least equate the lifetime value of your ideal customers.
Also read: Freemium Strategy in SaaS - Notes and Models for making pricing decisions
