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BackupBuddy Gold and unlimited updates

backupbuddy-goldThis week, the iThemes launched “BackupBuddy Gold” – a new pricing tier for their BackupBuddy plugin. They already had a $150 tier, which included a license to use the plugin on unlimited sites, as well as support and updates for one year. The only difference with the Gold tier (currently priced at $297) is that it includes lifetime updates.

By now, many people in the WordPress community have become wary of anything with the words “unlimited” or “lifetime” in the title, for good reason. A lot of times, that’s a pretty strong indicator that the company marketing the plugin, theme, or service is simply trying to make a cash grab, and not planning for the long term. Heck, even Cory Miller himself talked about the dangers of “unlimited” back in August:

We all know there’s nothing truly unlimited in life. And nothing lasts forever, particular in business. Quality, availability, price … they change.

Saying you can have unlimited of anything forever has got to mean something else suffers. There’s got to be a catch. Fine print somewhere.

With this announcement, however, I think Cory and the iThemes team are making a good move, and I think it’s one that aligns incentives for them and their customers. Cory covers a few key points in his post, and I’d like to explore those points a little more here.

Support

As Cory notes both in his post today and the one last August, support is the real killer when it comes to offering unlimited anything (at least in terms of plugins, themes, etc., as opposed to hosting). By capping support at one year, iThemes is attempting to limit their exposure to support costs for any given customer. However, I suspect that if they were to track their support interactions by customer (and I hope they already do this), they’d see that most support requests occur early on in a customer’s lifecycle, with little to no support requests after someone has been a customer for over a year. Because of that, the one year cap on support probably wouldn’t matter for most customers.

On the other hand, there does exist the possibility of a “problem customer”, so to speak – someone who just can’t be satisfied, and is always coming back with another problem. This is where I think capping support at one year will pay off; it essentially functions as an insurance policy against those problem customers, while not negatively impacting “normal” customers.

Renewal rates

This is where iThemes will benefit the most, in my opinion. Cory notes that although they do have some loyal customers who renew over and over, most simply purchase a one year license, and fail to renew after that. The aim with BackupBuddy Gold is to entice some of the people who would have become one-time customers and never renewed to instead pay for lifetime updates up front, and thus boost the overall customer lifetime value for BackupBuddy. This is a win-win for those aforementioned loyal customers, because they can now pay one time, and, assuming they don’t need much in the way of support, get free updates from now on.

Another factor, that Cory didn’t mention, is that not only will they be able to boost the LTV for some customers, they’ll be capturing all of that revenue up front, essentially adding a small multiplier effect when accounting for the time value of money.

The problem with this model

So far, I’ve been heaping the praise on, but I don’t think this move is without some potential pain points down the road for Cory and the iThemes team.

Most commercial plugin and theme shops in the WordPress world officially sell support for their product, due to the nature of the GPL license their products are sold under. The smart shops sell that support on some type of recurring basis – typically annually. However, despite this fact, the reality is that some of that annually recurring revenue goes to support continued product development, not just support. While a plugin can survive on simple growth in customer base early in its’ life, that isn’t necessarily the case later on, and recurring revenue becomes vital to support added features, bug fixes, etc.

With this Gold tier for BackupBuddy, iThemes risks killing off some of that recurring revenue. Granted, in their case it doesn’t sound like they risk losing too much, since, as Cory explained, most of their customers only stick around for one year. It’s certainly possible that they’re thriving partly because of the overall growth in the WordPress ecosystem, which, in reality, could continue to provide plugin shops with a glut of new customers for many years, and my concerns could be completely unfounded. Either way, as Cory noted, this is an experiment for them, and it’s one they can always end if they don’t care for the results.

Regardless, I think any plugin shops considering copying this model, especially ones with a narrower target market, would be wise to consider how it might impact them differently than it does iThemes.

At the end of the day, I’m happy to see this experiment take place. Kudos to Cory and the iThemes team for taking this risk, and more importantly, for being transparent with the thinking that went into it.

12 Responses

  1. Mike

    I like the old fashioned software pricing. Charge a price, offer .x upgrades for free and and upgrade price for x. upgrades. In addition, offer tiered support.
    While it is more complicated it is also more simple because the customer knows what’s being purchased.
    Other ideas involve undefined risk. While my idea has some risk, if the developer screws the users there will be no income stream.

    1. Carl Hancock

      The model used for other types of software where you provide .x upgrades but not new versions simply isn’t ideal for WordPress plugins.

      In our case, Gravity Forms, is just like WordPress. It’s constantly evolving. It’s never “done”. It’s not like a publicly released version of Photoshop from back in the day when you were limited to releasing software via DVD, CD’s, and before that disks. This isn’t boxed software.

      Managing multiple branches, which is effectively what you’d be doing, would be a logistical nightmare.

      It’s the same reason WordPress doesn’t release updates for WordPress v3.8.x after WordPress v3.9 is released. It’s simply not the way software designed to power web sites is designed.

      When WordPress makes changes or implements features it can necessitate changes in Gravity Forms. There is no way in hell we’d go back and update all prior feature releases of Gravity Forms each time a WordPress update occurred.

      We don’t look back. We only look forward. We tackle development on Gravity Forms as if it were a hosted web based app. It’s constantly evolving. We don’t have time to worry about updating old versions and creating a branching nightmare. No thanks.

      Once upon a time that worked. But now even companies like Adobe and Microsoft tackle things this way with there subscriptions to Photoshop and Office that means it’s users get updates and features and there support team isn’t supporting numerous branch versions of the product.

      Most WordPress theme and plugin development companies are small-medium business that need to be very agile and the old way of selling and supporting software simply doesn’t meet that criteria.

  2. Mike

    I agree with your points. But there is a clear risk reward relationship. I started buying software in ’86. I have learned that good developers develop relationships with users and bad ones don’t. And eventually software becomes outdated. I have rarely been burned by a software purchase before an upgrade. Usually they offer a generous free upgrade date.

  3. Sandra

    I’ve been a long time customer of BackupBuddy. I would disagree that most problems are in the first year. I generally see a spike in backup related problems after major updates.

    I would like to know if they have any plans to offer purchased support after a year.

    I have no problem buying premium plugins, developers should be paid for their work. But the reason I buy premium products is specifically for support. I spend a lot of time troubleshooting on my own so I don’t use it often, but when I need it…I need it.

    If your selling a plugin I believe support in some form should be made available. Even if paid. If your making money from your development, the flip side of deserving to get paid is you have an obligation to offer support in some form.

    And when I saw Gold lifetime offer, I have to admit my immediate reaction was “red-flag”. WordPress is continuing to grow as a platform so potential customers should be growing. Considering this is a flagship product this move doesn’t make sense to me if you plan to be around long term.

    1. Mark Root-Wiley

      Well put, Sandra. I’m having the same thoughts. One other person and I have asked the same question over on Cory Miller’s post linked above. I hope we’ll get an answer soon,

  4. Cory Miller

    Travis, thanks for taking the time to take a balanced, fair, honest look at what we’re doing with BackupBuddy Gold and potential upsides and downsides.

    We fully agree with you there are potential pain points and problems … and additionally, it’s not for everyone.

    Re: the comments asked here and on my blog about support pricing after the one year, we’re working on that and will get back to you on it.

    1. Mark Root-Wiley

      Cory,

      Thanks for providing some more details. Will you have an answer to that support question within the next two weeks? I’d love to move quickly.

      1. Cory Miller

        Mark, you bet – we’re going to talk about it this week.

        1. Bonnie

          2 days left to make our decision on Gold offer. Any news yet on support after one year?

          1. Mark Root-Wiley

            “FYI, if you need ongoing support, the best option will be to renew the traditional plans”

            https://twitter.com/corymiller303/status/466625133994840065

  5. Cory Miller

    Thanks, Mark …

    Yes, after some thought, this is the best option. BackupBuddy 2 site, 10-site and Unlimited plans include support with upgrades.

    The best option for those anticipating needing support is simply to renew. We offer discounts on those renewals.

    It should also be noted that we’re doing a limited time discount on BackupBuddy Gold, but it’s not going away anytime soon (at least that I can predict!).

    Hope this helps.

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