One of the business models that is common (although not as common as it used to be) in the economy of WordPress is the unlimited support for for a single purchase. That is, you buy a theme or a plugin, and you pay for the product and the purchase often includes a license for lifetime support.
For those of you who have made a similar purchase, then you’ve likely seen some type of pricing defined like this:
- $X for the purchase of the product
- Use the product on Y number of domains
- Unlimited support and updates
And then the above scheme is tiered such that X and Y change based on the amount of money paid toward the product.
But, like I said, this is nothing new and it’s something that we see frequently see, but anyone who has worked with this particular business or who followed this through to its inevitable conclusion realizes that this is a completely unsustainable business model.
To that end, if more small businesses based on WordPress want to have a better shot of “making it” (where “making it” is defined as staying in business – not some arbitrary amount of money to be made), then this particular pricing model needs to die.
Unsustainable WordPress Business Models
Simply put, the transactional pricing model – that is, one time purchases – for pricing WordPress products does not scale.
Practically speaking, let’s say that you have a one or two man shop building a premium plugin. The plugin follows the model outlined in the introduction of this post. As the plugin’s customer base grows, the demand for support is placed on the suppliers of the product.
As more and more people purchase the product, the amount of support that the product demands exceeds the amount of work that the two person team can do, so they hire someone else to help with support. Naturally, this helps for a bit, but then the demand continues to increase and the team is back where they were when they started.
But although the amount of money that the business is making increases over a short time, there’s not a solid amount of cash flow. That means that eventually, you’re working towards a point where the amount of money coming in is not going to match the amount of money needed to pay the original team and those who offer support.
At this point, there are N-number of people continually asking for support, expecting updates, and so on, but there’s no money coming in to support that amount of work. That is, the customers have paid a one time fee of $50 for an unlimited amount of service.
That’s part of where the problem lies: When you offer unlimited support, you’re not just offering support. You’re also offering continual updates (because WordPress is under constant development), support for a variety of web hosts (because customers are not one-size-fits all), and you’re placing more demand on the staff of the product rather than on the customer base.
That is, we need to turn the pricing around such that customers have the choice of something like this:
- One time purchase along with one unit of support (where a unit may be a month, may be six months, maybe a year)
- The option to renew their license for support when the initial period of time has passed.
This creates cash flow for the business which makes it more sustainable, and helps to fragment the customer base between those who need support (and will be paying for it), and those who just need the product.
Additionally, it provides a gateway to paid upgrades which helps to fund the continued development of the product, and does so purely based on how many people are willing to renew their license to pay for the product.
“But Wait, There’s More!”
Talking business models, pricing, and so on in the context of any business – let alone WordPress – is a large topic that can’t be easily summarized in a single post.
This is why there are sessions at WordCamps devoted to this topic. This is why leaders of larger WordPress companies have blogs and/or are featured on podcasts and roundtables to talk specifically about the WordPress economy.
This post is not intended to be an authoritative, all-encompassing write up on product development and managing a business of WordPress products. It is, however, meant to be a high-level survey of problems I’ve seen and experienced, and a case for why I think a model that current exist needs to go away.
But I know that there are people who are far smarter than I am and who are far more educated than I am as it relates to pricing products, dealing with both supply and demand, and creating pricing strategies for products and those people are worth your time, but perhaps all of the above provides enough food for thought for how to price your next product or the next version of your product.