5 ms·

patio11 refers to subscription based software as a "financialization" of it, but I'd argue it runs deeper: it turns software from a single, large "opt-in" trans

by gfodor 9y ago

patio11 refers to subscription based software as a "financialization" of it, but I'd argue it runs deeper: it turns software from a single, large "opt-in" transaction, to a small "opt-in" transaction followed by a series of "opt-out" decision points for customers, putting more of the burden on the customer to disengage vs the business to sell the customer on the latest version every couple of months. This runs into some tricky ground. Consider the fact that many customers who do not churn may also have not used the product, at all, in a given month. Given the difference between "existential risk" and "profitable enterprise" is a 5% change in churn rate, these customers may make all the difference! How does a company balance reducing churn with ensuring that customers who (perhaps temporarily) have dis-engaged can easily turn off the software? For example, how long of a period of inactivity should a company wait before asking a customer if they would like to unsubscribe? Do any companies actually do this? Should we expect them to do this given that doing so may kill their entire business?

atg__ 9y ago
The people that don't show up to the gym are what make the business profitable.
- biztos 9y ago
  I've heard this before and intuitively it seems right, but only for certain gym cultures. In the US almost everything is membership-based, so a paying member who doesn't show up is free money until they cancel. But there are other places where it's more flexible, for example my gym has monthly passes, dailies, and 10x or 20x passes. The 20x is the best deal if you miss a few days a month due to travel. None of this has any recurring billing. I'm sure even that gym has a bump in monthlies in January and May/June but with their setup it seems much more in their interest to have everyone actually coming to work out, else they might just not bother to buy that next monthly.
  - kbenson 9y ago
    There are different types of gyms. 24 hour fitness, for example, will happily keep charging you if you don't come in, and if you try to cancel over the phone often tries to force you to come in and do that in person (I'm not sure how much of this part is corporate strategy or poorly incentivized branch behavior).
    - biztos 9y ago
      I'm guessing corporate strategy, and not just for the cheaper gyms. Good luck trying to get a one-week pass to Equinox without pretending to be a local who's interested in joining. OTOH I know an awesome gym in LA that is perfectly happy to sell you a week pass if you're visiting. (Maybe that's a film-industry thing.)
jacquesm 9y ago
> Given the difference between "existential risk" and "profitable enterprise" is a 5% change in churn rate, these customers may make all the difference! That's exactly how it works. > How does a company balance reducing churn with ensuring that customers who (perhaps temporarily) have dis-engaged can easily turn off the software? The ideal model in my opinion (but that one is obviously not going to maximize profits/revenues) is to stop billing if the customer has not used the product in 30 days. That way there is a balance between payment and performance, maybe at some point we'll see laws to enforce such a setup.
- gnode 9y ago
  I can imagine this driving providers to work around that, structuring their service such that they can argue the user is still engaging with the service passively. For example, having data stored on their servers is use (as I may later want to use it, and incurs them a cost to store it). Or, perhaps being emailed updates about my credit score could be regarded as engagement as they can't necessarily tell whether I am reading their emails.
  - threeseed 9y ago
    > I can imagine this driving providers to work around that And those providers will be punished by consumers for it. One angry customer can cause all sorts of damage.
  - woolvalley 9y ago
    For some SaaS businesses although, such as dropbox & google drive, their most of their business is storage. It would be hard to blame those kinds of services to keep on billing you even if you don't look at the data most of the time.
    - gnode 9y ago
      Pretty much all SaaS businesses have storage as significant factor. Office 365 has documents; DocuSign has contracts; Salesforce has customer information. Even if it's not a significant amount of data in commodity storage terms, the storage and handling of that data is central to the service.
encoderer 9y ago
In my experience it's best to focus on new user on-boarding and the needs of the most engaged "in love" users. Reasons for focusing on smooth on-board are obvious. Reasons for focusing on your engaged users: - It's easier to get direct and indirect (metrics) feedback that you need to actually improve their experience. - These are the users who push your product in areas you possibly hadn't considered or prioritized and can often have sub-optimal experiences. - Large teams using your product is one of the few viral channels available to B2B saas. People change jobs and say "you know, at my last place we used..." - You can probably grow their ARPU. You should definitely track people who deactivate or never log-in, but it's a hard thing to optimize.
biot 9y ago
Slack does this via their Fair Billing Policy [0] and it’s completely automatic. You only pay for active users, so those who go inactive are free. [0] https://get.slack.help/hc/en-us/articles/218915077-Fair-Billing-policy https://get.slack.help/hc/en-us/articles/218915077-Fair-Bill...
- repple 9y ago
  I love this about Slack. It puts me into a different mindset. I'm less defensive and therefore more creative, productive, and happy. Most other services put me on a constant lookout. How are they going to "get me"?
threeseed 9y ago
> Should we expect them to do this given that doing so may kill their entire business? Absolutely. Don't forget that these customers may just file a chargeback through their bank. I did this with a service called Classpass which misleadingly kept you signed up without any notice. I and my partner both filed chargebacks and overturned 6 months of subscriptions. That sort of thing can really harm a SaaS on a number of fronts and so IMHO they should ask the customer after one billing cycle and no activity.
- Androider 9y ago
  How is it not absolutely obvious on the Classpass pricing page that it's a monthly subscription? Chargebacks are a real dick move, and should be used as a last resort if the company gives you any trouble when cancelling. Otherwise you're literally stealing from the service, for example your patronage cost the company 15*6=$90 in just chargeback fees (Stripe) because you couldn't be bothered to cancel your plan online in a minute. I think most SaaS companies would be happy to not have you as a customer.
Joeri 9y ago
As a customer of a few B2C SaaS products I would say to not try to keep users on board too hard. From my personal experience, unsubscribing from a service I am not using may only be temporary, but the surest way for a company to make it permanent is to be clingy and make it hard for me to get out. The nicest exits are the ones where I leave on a high note, like how amazon prime refunded my last month because I hadn’t been using the service that month; makes me way more likely to sign up again.

by gfodor 9y ago

atg__ 9y ago

The people that don't show up to the gym are what make the business profitable.

biztos 9y ago
I've heard this before and intuitively it seems right, but only for certain gym cultures. In the US almost everything is membership-based, so a paying member who doesn't show up is free money until they cancel. But there are other places where it's more flexible, for example my gym has monthly passes, dailies, and 10x or 20x passes. The 20x is the best deal if you miss a few days a month due to travel. None of this has any recurring billing. I'm sure even that gym has a bump in monthlies in January and May/June but with their setup it seems much more in their interest to have everyone actually coming to work out, else they might just not bother to buy that next monthly.
- kbenson 9y ago
  There are different types of gyms. 24 hour fitness, for example, will happily keep charging you if you don't come in, and if you try to cancel over the phone often tries to force you to come in and do that in person (I'm not sure how much of this part is corporate strategy or poorly incentivized branch behavior).
  - biztos 9y ago
    I'm guessing corporate strategy, and not just for the cheaper gyms. Good luck trying to get a one-week pass to Equinox without pretending to be a local who's interested in joining. OTOH I know an awesome gym in LA that is perfectly happy to sell you a week pass if you're visiting. (Maybe that's a film-industry thing.)

jacquesm 9y ago

> Given the difference between "existential risk" and "profitable enterprise" is a 5% change in churn rate, these customers may make all the difference! That's exactly how it works. > How does a company balance reducing churn with ensuring that customers who (perhaps temporarily) have dis-engaged can easily turn off the software? The ideal model in my opinion (but that one is obviously not going to maximize profits/revenues) is to stop billing if the customer has not used the product in 30 days. That way there is a balance between payment and performance, maybe at some point we'll see laws to enforce such a setup.

gnode 9y ago
I can imagine this driving providers to work around that, structuring their service such that they can argue the user is still engaging with the service passively. For example, having data stored on their servers is use (as I may later want to use it, and incurs them a cost to store it). Or, perhaps being emailed updates about my credit score could be regarded as engagement as they can't necessarily tell whether I am reading their emails.
- threeseed 9y ago
  > I can imagine this driving providers to work around that And those providers will be punished by consumers for it. One angry customer can cause all sorts of damage.
- woolvalley 9y ago
  For some SaaS businesses although, such as dropbox & google drive, their most of their business is storage. It would be hard to blame those kinds of services to keep on billing you even if you don't look at the data most of the time.
  - gnode 9y ago
    Pretty much all SaaS businesses have storage as significant factor. Office 365 has documents; DocuSign has contracts; Salesforce has customer information. Even if it's not a significant amount of data in commodity storage terms, the storage and handling of that data is central to the service.

encoderer 9y ago

In my experience it's best to focus on new user on-boarding and the needs of the most engaged "in love" users. Reasons for focusing on smooth on-board are obvious. Reasons for focusing on your engaged users: - It's easier to get direct and indirect (metrics) feedback that you need to actually improve their experience. - These are the users who push your product in areas you possibly hadn't considered or prioritized and can often have sub-optimal experiences. - Large teams using your product is one of the few viral channels available to B2B saas. People change jobs and say "you know, at my last place we used..." - You can probably grow their ARPU. You should definitely track people who deactivate or never log-in, but it's a hard thing to optimize.

biot 9y ago

Slack does this via their Fair Billing Policy [0] and it’s completely automatic. You only pay for active users, so those who go inactive are free. [0] https://get.slack.help/hc/en-us/articles/218915077-Fair-Billing-policy https://get.slack.help/hc/en-us/articles/218915077-Fair-Bill...

repple 9y ago
I love this about Slack. It puts me into a different mindset. I'm less defensive and therefore more creative, productive, and happy. Most other services put me on a constant lookout. How are they going to "get me"?

threeseed 9y ago

> Should we expect them to do this given that doing so may kill their entire business? Absolutely. Don't forget that these customers may just file a chargeback through their bank. I did this with a service called Classpass which misleadingly kept you signed up without any notice. I and my partner both filed chargebacks and overturned 6 months of subscriptions. That sort of thing can really harm a SaaS on a number of fronts and so IMHO they should ask the customer after one billing cycle and no activity.

Androider 9y ago
How is it not absolutely obvious on the Classpass pricing page that it's a monthly subscription? Chargebacks are a real dick move, and should be used as a last resort if the company gives you any trouble when cancelling. Otherwise you're literally stealing from the service, for example your patronage cost the company 15*6=$90 in just chargeback fees (Stripe) because you couldn't be bothered to cancel your plan online in a minute. I think most SaaS companies would be happy to not have you as a customer.

Joeri 9y ago

As a customer of a few B2C SaaS products I would say to not try to keep users on board too hard. From my personal experience, unsubscribing from a service I am not using may only be temporary, but the surest way for a company to make it permanent is to be clingy and make it hard for me to get out. The nicest exits are the ones where I leave on a high note, like how amazon prime refunded my last month because I hadn’t been using the service that month; makes me way more likely to sign up again.