Free lifetime software upgrades are bad for customers

May 29, 2010

As a software developer, when you’re first starting out and working on releasing v1.0 of your product, it’s common to think that potential customers might be hesitant to buy it or, worse yet, might choose a competitor over you. You want to give them every reason to buy from you, so one of the first mistakes many developers make when they release v1.0 is they offer free lifetime upgrades for anyone who purchases a license. I made this mistake when I released ColorSchemer v1 back in October of 2000, and I quickly came to regret it.

The thinking is that for anyone that is on the fence about buying your product, or trying to decide between your app or the competition, the offer of free lifetime upgrades will surely get them over the hump and put extra money in your pocket. After all, you’re really sweetening the deal for potential customers, right?

Well, it turns out that this is actually a terrible idea. Not only for developers, but for customers as well. Here’s why:

  1. It’s bad for customers because developers have no motivation to significantly improve the product, and adding new enhancements will not directly translate to increased revenue through upgrade sales. Lacking the financial motivation for continuing to develop the product, developers will move on to other projects where the grass is greener, and the product will become abandoned.
  2. It’s bad for developers because they leave money on the table that customers are willing to pay. It’s completely expected for customers to have to pay for significant advances and major upgrades to software. You’re not offending them by charging for all the new features and improvements (not to mention the time and effort you’ve spent) added to your software that make their lives easier.
  3. You lose an opportunity to sell your future work to the group that is far and away the #1 most likely to purchase: your existing customers. They already trust you. They’ve already had a great experience with your product. Take advantage of this.

When we released ColorSchemer Studio 2 for Mac (a paid, major upgrade) in December, upgrade sales accounted for 63.5% of the total number of sales and 54.5% of the total revenue for the month. That’s a lot of revenue to leave on the table if we were offering free lifetime upgrades. And there’s no way that the offer of free lifetime upgrades would have increased sales of ColorSchemer Studio v1 enough to make up for just this one month of upgrade sales alone.

And you know what else? I can’t wait to get started on ColorSchemer Studio 3. The potential for future upgrade sales gives developers the motivation and business justification to continue to improve, support and build great products, and that’s a big win for customers too.