The Lifetime Deal (LTD) fallacy
How are we going to get customers to pay to cover our costs and generate a profit?
One of the biggest challenges (since there are many more) that every business has to face is customer acquisition and revenue generation.
Starting an online business is relatively easy, especially if you already have the technical expertise. You can get a head start with existing open source technology to hack a solution but eventually, you still have to convince others to pay for your solution. This is where most businesses stagnate and spend most of their time and effort, as mind you, it is not an easy feat.
Even if you have done all the necessary research and market validation, even if you have started building a list prior to coming up with an MVP, even if you have discussed your solution with hundreds (literally) of potential clients prior to having a fully working prototype, it is still difficult to break into a market and get a constant feed of customers who are willing to pay for the SaaS you have built.
Why is it difficult to acquire new customers?
- There is a lot going on online – there is a lot of noise online. It is very easy to get buried under the ton of content generated daily. Basically, you will end up preaching to yourself or only to the converted.
- Competition – For one problem there are possibly tens or even hundreds of solutions competing for the same pool of potential customers. Most of the time potential customers won’t pick the best solution BUT the solution which is known to them or to their network.
- Budget restrictions – Some business (especially new ones) do not afford to spend thousands in online advertising with no guarantees on the returns! One mistake and their business will get blown away!
….and various others. Please feel free to add more in the comments section.
Lifetime Deal – the cure!
One promising solution to all of the above problems is the Lifetime Deal or in short LTD!
A lifetime deal is when a SaaS does a limited promotion offering a lifetime access for a fixed price. Usually, for a month’s worth, a user can have a lifetime access to a particular SaaS. Needless to say, such promotion will create a lot of buzz, especially when such a deal is promoted by influencers or platforms such as AppSumo and/or other similar communities. Such platforms can take you from ZERO revenue to a SIX figure revenue in under a week! For SaaS founders this is intriguing and rest assured I, as a SaaS founder, was intrigued!
Lifetime Deal – the simple logic!
After talking to various SaaS founders in my network who have been through the process of offering a LTD on various platforms, I got to know the following:
- you will get hundreds (and in some cases even over 2000) deals sold in days.
- you will get a spike in customers. For some founders, it was very difficult to keep up with support tickets and feature requests.
- you will get customers who buy a SaaS LTD with the intention of reselling it later on.
- you will get customers who do not need the SaaS at the moment but might need it in the future (FOMO).
After a busy launch, founders are happily smiling with a fat cheque:
Number of deals sold X a month’s worth of SaaS plan
1500 deals X $49
Lifetime Deal – the full logic!
Life is never simple! So are Lifetime deals! After further consideration and even yet more consultations with SaaS founders in my network, the real and full picture of a lifetime also includes the following:
- With hundreds of raging customers all pushing their feature requests
- Close to ZERO customers who are willing to upgrade to a subscription plan, even if the LTD plan is well planned ahead to be restrictive
- Very few customers who are willing to refer others on a monthly paid plan
- Platforms such as AppSumo charge up to 70% of the generated revenue, hence in the above example founders are left with a mere $22,050 from $73,500
Lifetime Deal – the fallacy
Even though a lifetime deal launch will generate revenue and acquire customers, after careful consideration of:
- the hours spent to prepare for such a lifetime deal launch
- the hours spent into supporting lifetime deal customers both during and post-launch
- the resources such as hosting, software requirements and most importantly human resources you need to support lifetime deal buyers for life
you will end up with a net loss for each deal sold. This means, that the more deals are sold during a lifetime deal the more loss you will make in the long run. I haven’t yet met a SaaS founder who has put a LTD together and proved to me that it was worth the effort and generated a profit in the long run. If you are such a SaaS founder please come forward! I want to meet you!