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 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.
This model has the advantage of enabling you to work with a higher volume of clients than typical freelancing or per customer agency work. It is a great strategy when you don’t have a product per se, but you do have a service that you can bundle in the form of a product
Examples of this model include Woo Split (A/B testing for Woo Commerce), Audience Ops, Yoast’s review & assessment services, WP Curve (maintenance services), and WP Mayor (sponsored posts, review services aspects)
The idea of the membership model is to offer value to customers through exclusive content or products not available to non-members. Examples include:
- Post Status. Blog. With membership to their blog you get Slack channels and groups, regular newsletters, and other perks.
- Themes: memberships give access to more or all themes rather than purchasing a la carte
- BobWP, WP101: memberships get product tutorials for a variety of products
- WPMUDev: access to plugins and themes, support for WP websites
While the membership model is a perfectly acceptable model for legitimate businesses, there are controversial sites that use this model. Primarily these are sites cropping up that offer other company’s paid products for free or reduced prices. While this is technically potentially legal under GPL and open source, it is ethically controversial. Is thispractise good for the WordPress community or undercutting the work of others?
Jean and James will most likely tackle this question in a future episode all to its own, but they do raise a couple good ethical points here and now. Sites that abide by this practice are often misrepresenting themselves to customers (making people think they have a legitimate copy from the source when in fact they don’t), and many are a potential source of malware and website security breaches.
The conversation will turn back to this topic and more next week, so be sure to tune in to mastermind.fm!
Featured On The Show:
- WP Engine
- Yoast SEO
- Contact Form 7
- Gravity forms
- WP Rocket
- Backup Buddy
- Visual Composer
- Migrate DB Pro
- Advanced Custom Fields
- MailChimp for WP
- Audience Ops
- WP Curve
- Post Status
- WP Mayor’s post about the GPL