Some things are expensive. If sold only at their price points, they would have a very small addressable market. Even if they are useful, even if they would provide move value over time than what they cost, making a choice to buy them is fairly hard.
The first solution to this problem was delayed payments. Companies will allow customer to settle bills later, helping them in maintaining cash flows. The second solution was loan from banks and the latest one is credit cards. All these mechanisms allow customers to have something of value now and pay for it later (hopefully realizing the value of the thing they purchased). But the risk of not being able to realize the value stays as the purchase is not reversible.
In my opinion the best solution to this problem is service model, pay as you use. Many of the severs used in companies have vanished. The email server, the content management system, the svn repository, etc. We have gmail for email, google docs for content, github for svn and all of these are on services model.
I guess subscription helps in figuring out the "price" of something. Figuring out lifetime value delivered by a product is hard. By forcing ourselves to think about value of something in a month, we have better chances of falling in range that is acceptable to the customers. The second benefit is frequency of choice. We give our customers every month a chance to stop using us and selecting someone else. This has two benefits. One it makes decision making simple for the customer and second it brings focus to the company because we need to keep "selling" ourselves, keep delighting the customer, to be in business.
Software is not the only thing that can be sold as a service. Almost everything can fit in this scheme of things. If you are selling something expensive that provides its value over time, subscription is your best answer to "barrier to buy". Product/Service is a superficial packaging over the value you provide. Package your value the way it makes sense for your customers.
The first solution to this problem was delayed payments. Companies will allow customer to settle bills later, helping them in maintaining cash flows. The second solution was loan from banks and the latest one is credit cards. All these mechanisms allow customers to have something of value now and pay for it later (hopefully realizing the value of the thing they purchased). But the risk of not being able to realize the value stays as the purchase is not reversible.
In my opinion the best solution to this problem is service model, pay as you use. Many of the severs used in companies have vanished. The email server, the content management system, the svn repository, etc. We have gmail for email, google docs for content, github for svn and all of these are on services model.
I guess subscription helps in figuring out the "price" of something. Figuring out lifetime value delivered by a product is hard. By forcing ourselves to think about value of something in a month, we have better chances of falling in range that is acceptable to the customers. The second benefit is frequency of choice. We give our customers every month a chance to stop using us and selecting someone else. This has two benefits. One it makes decision making simple for the customer and second it brings focus to the company because we need to keep "selling" ourselves, keep delighting the customer, to be in business.
Software is not the only thing that can be sold as a service. Almost everything can fit in this scheme of things. If you are selling something expensive that provides its value over time, subscription is your best answer to "barrier to buy". Product/Service is a superficial packaging over the value you provide. Package your value the way it makes sense for your customers.
