You probably think I'm 100% against lifetime or unlimited plans for WordPress plugins.
I'm not against them.
The reason I'm not against them though may not be what you think.
You see, I'm 100% for sustainability and most unlimited plans undermine a business' ability to build a healthy business model.
But just because a lot of people do it wrong doesn't mean it, in and of itself, is wrong.
If you use “unlimited” when you really mean “large” then I suggest you call it large and cap it (like support for 25 sites).
But sometimes you mean unlimited as really unlimited, and if the economics make sense – and that's the real point here – then there's nothing scary about it.
Let me tell you a quick story (or summarize one).
The first time I bought a house I was young and clueless. So I had no idea that the loan I was taking out was for way more money than the price of the house (interest over 30 years).
I freaked out and called my dad. Who was calm.
“That's how it always works. Don't worry, you won't be in that house 30 years anyway, so it's a bit immaterial.”
At that point, again because I was young, I thought, “Dad's wrong – this is going to be my house forever.”
I loved that house.
And loved when I sold it 4 year later at a nice profit.
Why am I telling you this story?
Because if you're anything like me, you won't stay in a house for 30 years even if you finance it with a 30-year fixed mortgage.
And you won't use that plugin on an unlimited set of sites for the rest of your life.
Here's the bottom line.
You're a business. And because you're a business you need to think about money. And the faster you can bring money in the door, the better.
And if you can do the math, (catching that theme?) and you have the right product and the right market, then creating an unlimited, lifetime plan can make sense.
The issue is the math.
I'll give you my rule of thumb. But it may vary depending on your plugin.
Here's how I help plugin companies think about it.
We first look at their renewal rates. What's the average?
If they have a license key and have data about activations, on average, how often and for how long do they keep activating?
This gives us a sense of the average lifespan of a customer.
We compare that with the average renewal rate (which could be different because some people will use your plugin long after they pay for renewed support).
That ends up giving us a good sense of the lifetime value of a customer (initial fee + x renewals at y fee).
So the big question is, is it worth trying to bring all that value to the table more quickly for your own company?
Well, the revenue side may suggest it's worth a try.
But revenue is only one side. You have to look at the support dynamics for cost.
But if you can ascertain that a customer's cost is lower than that kind of revenue, over the lifespan of that customer, and by a good profit percentage, then an unlimited, lifetime plan may be worth it.
On average I find that companies with great plugins and good renewal rates get customers to stay active for 3 – 4 years. Which means if you can accelerate that revenue by offering lifetime unlimited plans, you should consider it.
Pricing Unlimited Plans
Again this approach means you have to do all that math and evaluate things, but my short rule of thumb is then 2-3x your initial list price.
That means you accelerate your revenue and you mitigate the potential that the renewal didn't happen (even if they like your product).
That's why I wrote this tweet:
— Chris Lema (@chrislema) November 25, 2014
Now Pippin is a nice guy, so I expect that his math turned out to be cheaper than mine because he took into account discounts during the renewal periods, but I wouldn't do that. Because clearly, I'm not as nice as Pippin.
All that said, this may be a good time to go check out AffiliateWP.