Increase Application Revenue through Feature-Based Software Licensing

Let’s get started by exploring what feature-based licensing is, why you need it, and how you can implement it.

What is feature-based licensing?

Feature-based licensing is the division or breakdown of your application into separate features. Each of these features can then be accessed through your unique licensing packages. With this approach, you offer a basic version of your software or application, then give each customer the ability to upgrade and add features as they deem fit, for an additional cost.

Like in the automotive industry, feature-based software licensing lets you break your product down into tiers such as a base, base plus, and luxury edition. This way, you can provide each consumer with an affordable version of your application that suits their needs.

Now that you understand what feature-based licensing is, you may already be starting to see its benefits.

Why feature-based licensing?

Feature-based licensing has been effective and continues to produce great results throughout a broad range of industries, including healthcare, imaging systems, gaming, gambling/casino software, mining, and space and defense. There are many reasons for this success; here are five of them.

1.      Stronger application security
 

• By licensing your software, you can prevent hacker accessibility, illicit distribution, and unauthorized use. You’ll ensure that only you profit from the sale of your product and give your users peace of mind.

2.      A wider range of product offerings
 

•  By unbundling your application’s functions, you can potentially achieve wider market penetration at a more cost-effective rate. Separating parts of your application that serve secondary purposes gives you the opportunity to sell them at individual rates. It also lets customers filter out the features they don’t need for a more streamlined user experience.
• By allowing your customers to choose the features they want or need, you can offer a customized product and boost customer satisfaction. Customers love to have control of what they’re buying.

3.     Higher product revenue

• By licensing your application rather than selling it as one big purchase, you can continue receiving revenue throughout the life of the customer. A common strategy is to combine your tiered feature-based pricing with a subscription plan and encourage users to upgrade as they scale up.
• By giving users more choices and adding new features regularly (at an additional cost, of course), you can achieve wider market penetration, leading to more revenue.

4.     Lower initial cost to new customers

• By reducing initial costs for new customers, you can provide a product that’s more relevant to a greater target market. Although you’ll make more money over the customer’s lifetime, the amount they will have to pay to get started will be much less than if you maintain a one-time-purchase model, which will attract more users.

5.     Greater manageability

• By incorporating features that automatically shut off and prevent unauthorized use, you can minimize the need for human capital with applications that are tracking uses or are on a time frame of use. Features like these let you maintain control of your intellectual property and regulate its use without having to keep a close eye on it.

The simple truth is that feature-based licensing works because it offers outstanding benefits to both the application developer and the user. If you’d like to experience those advantages, too, you can get started in a few steps.

How to implement a feature-based licensing strategy

To implement feature-based licensing, begin with the development of the read-and-write operations within your application. In these operations, you outline the conditions that must be met upon startup and tell the application which features the end-user does and does not have access to.

At a high level, these are the steps in implementing feature-based licensing:

1. Decide which memory location(s) will be used to control the feature
2. Assign value(s) to represent the specific features enabled on each license
3. Implement the read function prior to the feature’s execution

As an example, let’s consider a simple calculator application. Suppose you decide to offer it in three different tiers.

• Basic: allows the most basic uses of the calculator (addition, subtraction, division, and multiplication)
• Premium: allows for the basic functions as well as additional uses such as square and square roots
• Professional: allows the end-user access to all calculator functions

Here’s how the application would behave, corresponding to the value of the read function.

At each tier, users gain more functionality, which means you can provide an extensive array of options and let users pick the one that best suits their needs. Think about it: nearly every kind of business has begun to adopt this model. If you want to add cheese but leave onions off your burger, no problem. If you want your car’s undercarriage washed, but no hand-drying, you’re in luck. Successful businesses understand that it’s all about giving customers what they want.

Following these steps leads to offering your users more products to choose from and greater customizability. You’ll help them solve problems and do business more efficiently while boosting your own bottom line.

A smart solution

Businesses in every industry are discovering the edge they can gain by implementing feature-based licensing. You can see the same benefits with a licensing plan that’s specific to your software.

Simply licensing your application provides you with basic but vital security advantages. However, you can go even further: enhance your competitiveness in the market by giving your customers more options and a lower start-up cost. They’ll enjoy exercising greater control of their user experience, and you’ll enjoy the increased revenue that ensues.