Should I move from a perpetual to a subscription, or consumption based licensing model?

Challenge

A software company’s new owners were encouraging product managers to move their flagship product from a perpetual to a subscription or consumption-based licensing model. The product managers needed better information about customers and how they were using the product to fully understand the issues and implications.

Licensing changes are high-stakes decisions: mistakes in structuring, pricing, and packaging could fundamentally undermine the product’s or company’s viability. To plan these changes, product management needed to accurately project how customers would likely react, based on how they currently use the software. Information about user engagement can be viewed on the Product Metrics > User Engagement report:

Solution

With Usage Intelligence event tracking and user engagement reporting, the company came to understand that many users worked with their software intensely for two or three months in connection with a specific project, using a wide range of product features. But, once the project was completed, many did not use the software again for several months, until another project came along.

Avoided a costly misstep when introducing a new licensing model.

Results

If the software vendor implemented a monthly or quarterly subscription plan, as it had been considering, many of its users would likely abandon the software as soon as their projects ended, and then only briefly re-subscribe whenever the next short-term project arrived. This behavior would result in a financial disaster for the company.

Knowing this, executive leadership concurred with the product managers. For this product, if subscriptions were to be offered at all, they would need to be multi-year subscriptions with strong pricing incentives to promote the longest subscription period. By limiting shorter subscriptions, the company avoided a major strategic blunder.