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Episode 9: Business Models for WordPress Products – Part 2
Welcome to Episode 9 of Mastermind.fm! Last week Jean and James began a multi-part series discussing different WordPress business models. Episode 8 tackled free and premium business models, and this week we continue with a discussion of licensing strategies, the freemium model, productized service model, and membership model.
Recurrent vs. Lifetime License Models
The topic of conversation turns first to recurrent versus lifetime license models. Recurrent licenses typically require annual renewal to continue receiving basics like product support and updates, whereas lifetime licenses are exactly what the name implies. Jean and James point out that WordPress plugins typically favor recurrent licensing while most themes choose lifetime licenses.
James parses the reasoning behind that split in fairly simple terms. If you have recurrent expenses that customers benefit from, a recurrent payment structure ensures that you always have the income to provide those benefits. It also establishes a sustainable business model for your company that can grow over time.
On the other hand, a lifetime license often makes better sense for theme providers as themes usually don't require frequent support (assuming solid documentation) or updating. They are more static over time. Additionally, theme companies tend to be more diversified into other products or services and generally do not bring in the majority of their revenue from the themes themselves. StudioPress is one such example.
Freemium Model
Freemium is a licensed based model exemplified by the like of MailPoet, iThemes, Soliloquy, BeaverBuilder, Migrate WP Pro, Advanced Custom Fields, MailChimp, and others.
The basic idea of the freemium model is to offer a free or lite version that acts as a channel to a more robust, paid version of the product.There are 2 factors that Jean and James raise as points of consideration here:
* Support still has to be provided for the free or lite version of the product. The risk of not doing so is a ton of bad press and 1 star reviews surrounding your product. The question of how to provide support for a free product is something you have to tackle early.
* You must choose wisely in selecting features to be limited in the the free or lite version. There are good and bad ways to implement these artificial limitations. A good rule of thumb is to stick to features that require resources for you to support. Examples include the Slack plugin that limits messages sent, and MailPoet which limits emails sent. Both these things require resource expenditure on their part. Limits that are arbitrary or deny basic functionality expected from your product type should be avoided.
Our resident masterminds also direct our attention to the product's codebase in this model. Even though you may be offering both a free/lite version and a paid version, splitting the codebase to differentiate the versions introduces challenges both for future development and user experience. License based products should be built from a single, highly extensible codebase, and it's important to do this early on. The larger your customer base becomes, the harder it is to turn the ship and effect major change.
Product Services Model
Jean addresses Productized Services from his position of experience with WP Mayor. The idea behind this model is scalability. As a freelancer or agency you typically meet with a new client, discuss the project requirements, then provide them the service. Employing the productized service model cuts out initial inquiry and discussion phase and alternatively offers a select choice of predefined service packages; the customer selects the package they want and people can see price right away and order with minimal or no sales contact.
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By Jean Galea & Joe Galea
5
1818 ratings
Welcome to Episode 9 of Mastermind.fm! Last week Jean and James began a multi-part series discussing different WordPress business models. Episode 8 tackled free and premium business models, and this week we continue with a discussion of licensing strategies, the freemium model, productized service model, and membership model.
Recurrent vs. Lifetime License Models
The topic of conversation turns first to recurrent versus lifetime license models. Recurrent licenses typically require annual renewal to continue receiving basics like product support and updates, whereas lifetime licenses are exactly what the name implies. Jean and James point out that WordPress plugins typically favor recurrent licensing while most themes choose lifetime licenses.
James parses the reasoning behind that split in fairly simple terms. If you have recurrent expenses that customers benefit from, a recurrent payment structure ensures that you always have the income to provide those benefits. It also establishes a sustainable business model for your company that can grow over time.
On the other hand, a lifetime license often makes better sense for theme providers as themes usually don't require frequent support (assuming solid documentation) or updating. They are more static over time. Additionally, theme companies tend to be more diversified into other products or services and generally do not bring in the majority of their revenue from the themes themselves. StudioPress is one such example.
Freemium Model
Freemium is a licensed based model exemplified by the like of MailPoet, iThemes, Soliloquy, BeaverBuilder, Migrate WP Pro, Advanced Custom Fields, MailChimp, and others.
The basic idea of the freemium model is to offer a free or lite version that acts as a channel to a more robust, paid version of the product.There are 2 factors that Jean and James raise as points of consideration here:
* Support still has to be provided for the free or lite version of the product. The risk of not doing so is a ton of bad press and 1 star reviews surrounding your product. The question of how to provide support for a free product is something you have to tackle early.
* You must choose wisely in selecting features to be limited in the the free or lite version. There are good and bad ways to implement these artificial limitations. A good rule of thumb is to stick to features that require resources for you to support. Examples include the Slack plugin that limits messages sent, and MailPoet which limits emails sent. Both these things require resource expenditure on their part. Limits that are arbitrary or deny basic functionality expected from your product type should be avoided.
Our resident masterminds also direct our attention to the product's codebase in this model. Even though you may be offering both a free/lite version and a paid version, splitting the codebase to differentiate the versions introduces challenges both for future development and user experience. License based products should be built from a single, highly extensible codebase, and it's important to do this early on. The larger your customer base becomes, the harder it is to turn the ship and effect major change.
Product Services Model
Jean addresses Productized Services from his position of experience with WP Mayor. The idea behind this model is scalability. As a freelancer or agency you typically meet with a new client, discuss the project requirements, then provide them the service. Employing the productized service model cuts out initial inquiry and discussion phase and alternatively offers a select choice of predefined service packages; the customer selects the package they want and people can see price right away and order with minimal or no sales contact.