5-Minute Primer on Software Monetization for Developers
For developers, software monetization is about increasing software profitability. One key way of making this happen is by establishing a set of licensing parameters that extract greater value from software than the traditional one-time licensing fee.
The best time to implement a monetization strategy is during the software planning phase, but if you are reading this after the planning phase, have no fear: Many solutions can be added retroactively.
These licensing parameters can represent new business models that create opportunities to receive recurring revenue while enabling users to avoid a large one-time capital expenditure. Users are able to pay annually, monthly, or at other intervals—and buy pieces of an application or choose a full feature set. Flexible options include licensing based on features, modules, usage, user quantity, subscriptions, trials, rentals, demos, and various combinations thereof.
In the past, software licensing was thought of as something only large vendors could afford to implement. With the ease of implementation and scalability of many monetization solutions on the market today, small software vendors can plan, implement, and enforce software monetization, allowing them to capitalize on their intellectual property.
Why Software Monetization Is Essential Today
Creative licensing and monetization solutions is important for a variety of reasons, including:
- Competitiveness: Licensing often gives software developers a competitive edge. Developers with very robust software are able to sell pieces of an application and compete more effectively. It enables you to stay current with new business models.
- Flexibility: Creativity in licensing enables you to rapidly change your product offering in response to competitors’ moves, marketing opportunities, economic factors, and an evolving product roadmap.
- Service: The optimal software monetization solution ends the perceived need to jam an entire software application down the throats of customers, so to speak. An improved ability to delight a wide range of customers creates a more diverse customer base and an expanded ability to reach new customer segments.
- Profitability: A software monetization solution that enables the right approach to “try before you buy” can dramatically increase the percentage of prospects who convert into paid customers following evaluation.
- Monitoring: By implementing a more granular product offering, you gain improved insight into demand and an enhanced ability to offer better products. The right licensing solution will also vastly reduce the risk of unauthorized use.
A well-thought-out monetization plan is mutually beneficial to the software developer and the software consumer. In today’s market, consumers don’t want to have large upfront cost to purchase software; they want to pay for what they use when they use it, avoiding “shelf ware.”
Allowing your customers to pay as they use creates consistent, predictable revenue streams. It can also help to grow your customer base by not alienating customers who use only small portions of your product.
Two Key Characteristics of Successful Software Monetization
Successful software licensing solutions generally contain these two characteristics:
When it isn’t terribly difficult to circumvent a software monetization solution, people will tend to do just that, and cause you to lose revenue. As for optimizing security, look at it this way: No rational person would secure the Hope Diamond with a bike lock—or secure a bike inside Fort Knox. Some developers have the “Hope Diamond” of software, and others have a bike, so it is important to choose a security level that suits your application. After you’ve implemented an appropriately secure licensing solution, it’s important to ensure licensing is enforced.
A software monetization solution should be easy to implement. When a solution requires more resources than its upside potential, and the cost exceeds the benefit, the solution clearly doesn’t make sense. It should also be easy for users. Alienating customers by making it difficult to use software is always a bad idea. On that note, in the evaluation stage, options shouldn’t create “analysis paralysis” among potential users. Trials should be as easy to act on as possible.
Summing Up Software Monetization Benefits
Software monetization has the power to grow your short- and long-term bottom line by raising demand and customer satisfaction via “pay as you grow” and other flexible licensing options while maximizing your ability to monitor usage and optimizing your percentage of authorized users. It can be a source of competitive advantage.
Often overlooked or implemented at the last minute, many software monetization solutions of today can be implemented in a matter of hours or even just a few minutes. If you’re not sure where to start looking for a solution, Capterra has already compiled a list complete with reviews on different solutions.
No matter what stage of development your application is in, you can always integrate a solution to increase your revenue, control, and ultimately grow your product to a wider user base.