Blog Entry

Nov 20
2012 

Moderation: The Key to Successful Software Monetization Solutions

Just a few short weeks ago, the US Presidential election was held. No matter your beliefs, the real message the electorate sent to our Government representatives could be summarized in one simple word – “moderation.” When 115 million voters are separated by a mere 3 million, it is fairly obvious that people are done with extremes.

If you think about it, “moderation” is a term that we hear in other contexts as well. Your doctor has probably told you a few times, “It is okay to indulge in (insert your favorite unhealthy diet habit here), as long as you do it in moderation.”  On Halloween night, I could almost hear parents pleading (or, in some cases, demanding) moderation from their children in terms of how much of their candy loot they could consume before they went to bed.

Yes, “moderation” is a key to success in many walks of life. And the software industry is no exception. When it comes to software monetization, “moderation” is exactly what we recommend to our customers.

There are many aspects to software monetization: how features and products are packaged and licensed, how the usage is controlled, how software monetization is tracked, and how the whole solution is managed. But it all starts with packaging – and that is where moderation is most critical.

Software product and feature packaging is typically the most exciting part of license deployment, and this tends to get Sales, Marketing, and Product Management departments over zealous. Using a robust packaging solution (like Sentinel from SafeNet), you can literally go crazy creating software packages that range from having one feature to having many features  and business models that vary from per-seat to subscription to usage-based models. But as you do so, it is important to think about your customers’ experience. In fact, offering multiple packages to your customers can actually back-fire!

We recently had the pleasure of having IDC’s Amy Konary speak at LicensingLive event in Cupertino, and one of the lines from her presentation that has stuck in my head was an actual customer quote referring to their software vendor.  The customer explained,    “This [complexity] has gone from ridiculous to just plain stupid on the part of [the software producer]. This does not encourage me to spend more with the company.”  The last thing you want is to go so extreme in your packaging that you create too many options and business model choices and you actually lose your customer to that complexity,  the opposite of what you intended to do!

So, what is the solution? Moderation. Here are five tips to keep you on track.

  1. Observe
  2. Test
  3. Educate
  4. Provide Transparency
  5. Stay Connected

To determine the ideal packaging for your solution, you have to start by testing what your customers really want.  Rather than going with your ‘gut’, start with analytics.

Observe by collecting data on what your users actually consume. Does your software packaging solution already do that? Data you should expect to obtain from your solution include what features are used most, or what features are used together, and so on.  Based on the analysis of that data, create some simple packages and offer them to targeted customers to test your theory.

Testing means: try before your buy – i.e., create the packages but give your customers the opportunity to try before you start charging them per new models. Gather their feedback and tweak what needs tweaking.  Once this is done, go ahead and implement the packages that are most likely to succeed with your customer base.

As you implement new packages, keep in mind two best practices to follow: educate your customers on your packaging, and be transparent with them. Education is primarily about demystifying the packaging, and if you have gone through a testing period, you have already done much of the work. Educate the customer as to what the changes are and why.  Transparency can come in many ways, including sharing usage data with your customers, and, if possible, creating post-pay models that allow them to associate consumption with payment.

Oh yes, there is one final thing.  Just like the elections, stay connected with your customers. Don’t forget to check back with them appropriate times to confirm you are on the right track. Subscription or usage based software licensing models yield naturally to feedback, but by following the tips above, you will have options to collect information consistently on what your customers actually want.

In the end, you will find moderation helps you not get caught between the two extremes of software monetization: simplicity, where customers may have no options and feel helpless, and complexity, where too many options leaving users overwhelmed and confused.