Subscription-Product Fit, Part 2: Model/Product Fit and the Use vs Pay Distinction

Model-product fit

To understand this dual decision, it’s important to take a step back and explain model-product fit. Shortly after writing part 1 of this series, I came upon an excellent presentation by growth guru Brian Balfour on the ‘4 Fits Framework’. In it, he zooms out from the typical focus on market and product to include two additional primary elements any startup needs to grapple with — model and channel.

  • Product: Your product, of course
  • Market: The specific audience you are targeting for that product
  • Channel: How you acquire that audience (e.g. paid acquisition, salespeople, etc)
  • Model: How you make money off of that audience

Varieties of model-product fit

Clearly model-market fit extends beyond subscriptions — Pinterest isn’t a subscription business. Rather, Pinterest is ads-monetized, a category which includes content or social media products, with SEO (user-generated content and company-created content) and virality as their primary channel drivers, and broad consumers as their market — think Pinterest, Facebook. License-monetized companies are on the opposite pole of digital products. Usually B2B and often enterprise products, these have sales as their primary channel drives and larger companies as their market — think Salesforce or Oracle.

The Use versus Pay distinction

I detail all of this in order to establish a distinction that’s central to a successful subscription model — the Use versus Pay distinction.

The Use versus Pay distinction applied to your product

So how do you think about the balance between the subscription and the freemium product, for your product? Start with the same exercise — think about the extremes of the balance. Let’s consider what happens if you put everything behind the paywall. It’s an easy way to get more subscribers, sure, but then you may lose much of your word of mouth. Can you afford that? You’ll also lose out on the opportunity to convert freemium users after a period of organic usage, and therefore is an especially bad idea for usage-limited models like Dropbox. Could you gate less essential features instead? Add usage caps so freemium users can experience the product, but will it hit a ceiling if they keep using it? How do you do so in such a way that you drive engagement?

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