The Software as a Service model has long been the dominant force in the software industry when it comes to how software is being sold. However, a growing trend among indie hackers and solo founders is challenging this paradigm: the resurgence of one-time payments for software.
Even though it is called different names such as "lifetime subscription", this model reminiscent of the CD-ROM era of the 1990s in that it allows users to pay once and use the software indefinitely. Let's explore the factors driving this new trend, its potential benefits and drawbacks, and let's explore whether one-time payments are a sustainable model for growing a software startup.
The Resurgence of Lifetime Subscriptions
Lifetime subscriptions, also known as lifetime deals, are essentially a modern twist on the old one-time payment model. Instead of paying monthly or annually, users make a single payment to access the software for life – very much going back to the oldern days of buying a certain version of a software and using it indefinitely.
The main difference is only that updates are usually included. So this "new" model is in essence a subscription given that updates and new versions come for free, but with the twist that a larger sum is paid upfront for the use of the software.
The Appeal of Lifetime Subscriptions
Simplicity and Convenience
For customers, the simplicity of a one-time payment is appealing. It eliminates the need to manage recurring charges and provides peace of mind knowing they won't face unexpected price increases. You pay once and that's it. You don't have to worry anymore whether the subscription is worth it, if you use the product often enough, it's yours and you can use it whenever you want.
Cost Savings
Over time, a one-time payment can be more economical for users compared to ongoing subscription fees. Yes, the upfront fee is of couse much higher than a monthly subscription payment, but after the initial payment, no payment has to be made anymore. This is the biggest driver from a customers standpoint as to why this model is popular: This cost-saving aspect can be a significant selling point, especially in an era where subscription fatigue is becoming a real issue.
Ownership Perception
Lifetime subscriptions give users a sense of ownership over the software, similar to owning a physical product like a CD-ROM. This psychological benefit can enhance user satisfaction and loyalty to the actual use of the software. A subscription is easy to forget and easy to cancel. But when you own it you might as well use it.
Shifting Customer Preferences
everything from a toothpaste to a calorie tracking app can be bought as a subscription. With an increasing number of services adopting subscription models, consumers are experiencing what is called subscription fatigue. Managing multiple subscriptions can be overwhelming and costly, and to some degree even annoying, so customers seek alternatives. The once seemingly "outdated" lifetime purchase model is all of a sudden interesting again as it stands out compared to subscription services.
The prevailing economic uncertainty is another factor. Inflation, mass job cuts, and the US elections all contributed to customers in both B2C and B2B becoming more cautious. A one-time payment offers a clear, upfront cost without future financial commitments. Besides, consumers are becoming more discerning about the value they receive from subscriptions. If they perceive that they are not getting continuous value, they may prefer a one-time payment to avoid feeling locked into a service.
The Challenges of Building a Business on One-Time Payments
While lifetime subscriptions can attract users and provide immediate revenue, they pose significant challenges for building a sustainable software business. Subscriptions offer a predictable and recurring revenue stream, which is crucial for financial planning and stability. This is actually one of the main reasons why software startups switched over to the subscription model in the 2010s and the reasons for that are very much still valid to this day. One-time payments, on the other hand, can lead to revenue spikes followed by periods of stagnation.
In addition, subscriptions inherently encourage ongoing customer engagement and retention. With a one-time payment model, maintaining customer engagement can be more challenging, as there is no financial incentive for users to stay connected. If your lifetime payment was high enough you might say that you don't care about that, but if no one is using your software, you will feel less and less word-of-mouth effects and on the contrary people who bought your software for a high one-time price might even tell their friends that it wasn't worth it.
The suitability of lifetime subscriptions largely depends on the nature of the software product. Tools that perform specific, unchanging functions (e.g., PDF converters, simple productivity apps) may be well-suited for lifetime subscriptions. These products require minimal can provide lasting value with a one-time payment.
Transitioning to a Subscription Model
While one-time payments can be an effective way to attract early users and generate initial revenue, most software businesses will eventually need to transition to a subscription model to achieve sustainable growth. Subscription models provide the financial stability and predictability necessary for scaling operations, investing in continuous improvement, and delivering ongoing value to customers.
Tools to Facilitate Subscription Management
Modern tools like Wingback make it easier for startups to manage subscriptions and transition from one-time payments to a recurring revenue model. Wingback offers features such as customizable pricing models, automated billing for any pricing model, and payment links, helping startups to setup pricing plans and ship them to their customers with minimum technical and operational effort
Examples of Startups Successful with One-Time Payments
There are notable examples of startups that have achieved success with one-time payment models. These companies have managed to carve out a niche by offering significant value upfront, thereby attracting a loyal customer base without the need for recurring fees.
Sketch
Unlike many design tools that have moved to a subscription model, Sketch initially offered a one-time payment for a perpetual license, which included updates for a year.
Why It Worked
Target Audience
Sketch targeted designers who preferred a straightforward, one-time purchase over the ongoing costs associated with subscription models. This was particularly appealing to freelancers and small design teams with tight budgets.
Continuous Value
By providing regular updates and improvements within the first year, Sketch ensured that users felt they were getting ongoing value from their one-time payment. This approach helped build a loyal customer base.
Market Differentiation
At the time, many competitors were moving to subscription models, so Sketch's one-time payment option stood out as a unique selling proposition.
Transition
Over time, Sketch has introduced a hybrid model, offering a one-time payment for the software with an optional annual renewal for continued updates and support. This has allowed them to maintain the benefits of the one-time payment model while also securing a recurring revenue stream.
Affinity Designer
Affinity Designer, developed by Serif, is a vector graphics editor that was launched in 2014. It offers a one-time payment model, providing users with lifetime access to the software, including updates.
Why It Worked
Cost-Effective Solution
Affinity Designer positioned itself as a cost-effective alternative to more expensive subscription-based design tools. This made it particularly attractive to individual designers and small businesses looking for powerful design software without the ongoing costs.
High-Quality Software
The software's robust feature set and high performance matched or exceeded that of subscription-based competitors, ensuring that users felt they were getting a great deal.
Loyal Customer Base
By offering lifetime access, Affinity Designer built a loyal customer base that appreciated the transparency and simplicity of the pricing model.
Sustainability
Serif has continued to support Affinity Designer with regular updates and new features, funded by the initial sales and the success of their other one-time payment products like Affinity Photo and Affinity Publisher.
Final Thoughts
Lifetime subscriptions are a good alternative for indie-hackers and small startups to get their product out in the market and charge a bit more upfront rather than having customers buying a suscription and canceling one month in. But the nature of the software product plays a crucial role in determining the suitability of a one-time payment model.
Can they replace subscriptions on a larger scale? We don't think so. For most software businesses, transitioning to a subscription model will be necessary to ensure long-term success. In fact, even large scale one-time software purchases have been subscriptions in the past as customers oftentimes still had to pay for updates or even buy the new version of a software two years after the initial purchase. So after all, the label "lifetime suscription" is pretty much a marketing gimmick, but it is one that can be used wisely if it works for your product.
