Services and Subscriptions
Why subscription-based businesses promote the right incentives in order to deliver the best products and create healthier customer relationships.
Since the introduction of iomando 1.0 in the Barcelona area we’ve been incredibly busy attending customer requests and on boarding new partners as official installers, in order to ensure every new customer gets an amazing support and set up experience.
Overall, the service has been well received and we’ve been congratulated by both our customers and the press. There has also been a great deal of controversy around a particular issue and our customers have complained about an aspect of our business model: the pricing based on a subscription.
And to be honest, we saw that one coming.
For this reason we spent almost a third of the product announcement explaining our motivations and why we thought a subscription model was a better proposition in the long run.
We also knew subscription based models are not particularly loved in Spain and we spent a lot of time discussing alternatives or workarounds.
Long story short, we realized that to launch the product we wanted, the one that matched our quality expectations, we needed to lean on this business model. Otherwise it wouldn’t work.
But the reactions around the subscription model have been mostly negative and misleading information has spread on Twitter and other outlets. Because of that, I’d like to write a few words to address the situation and better explain the motivations behind our decision.
First of all, even before explaining why we opted for such pricing model, it is important to state what iomando stands for, why we built it. Our ultimate goal is to leverage technology to create the best access experience.
This statement has two direct implications:
- First: we rely on technology to enable and deliver the experience, and that’s a good thing because technology is the most powerful driver for innovation.
- Second: technology evolves extremely fast, and that’s also a good thing because if we can keep the pace, we’ll be able to come up with better products from which, ultimately, our customers would benefit.
These two premises work in combination to ensure that iomando will always stay — product wise, on the edge of the possible and it will also cost less than their traditional counterparts.
With the caveat that the same way our competitors have no means to replicate our product, we also can’t replicate their business model — and therefore their pricing structure. Our technological breed, for better or worse, doesn’t allow us to do so.
iomando works as an annual fee that it’s billed to the community — the customer, as other shared services, like the elevator maintenance or the cleanings staff, do.
With this annual fee we include:
- An unlimited amount of licenses: you can activate as many users as you want. We won’t charge you more if you have 2 or 2.000 of them. So feel free to invite your family and friends and let them use your parking space when they come over for dinner.
- A simple in-app admin tool that allows the owner to manage and grant permissions to users.
- The hardware equipment that goes with the door: doors do many things, but none of them is to “talk” to smartphones out of the box. Think of this hardware as some kind of translator so the smartphone can “talk” to (and open) the door1.
- The installation service from one of our network of official iomando-trained installers.
The price for all these services is 99€ / year, a small fraction of what traditional access system would cost.
The replacement of access system constitute a sunk cost in most communities. That’s because community members independently pay for their own lost or broken keys, but don’t syndicate the cost to a communal expense. Access system devices are not perceived as a direct community cost, because the buying happens behind the curtain.
It is reasonable to assume that when we ask for a yearly fee the entire community has to pay for, it is perceived as something extra, a cost they didn’t have before. In other words, community members don’t want to pay for the “other” neighbors access system.
We understand where this comes from, but the reasoning behind is flawed. It would be the same as arguing that people living in the first floor has to pay less for the elevator maintenance just because his rides are shorter.
If we surface all the sunk costs derived from each user iomando can save up to 80% of the community’s access control expenses.
The larger the community, the bigger the savings.
Think of an average place with 100 users. Suppose that the (optimistic) average lifespan of a remote is 2 years. This means the replacement rate for this community would be around 50 remotes a year. Since each remote costs more or less 40€, that adds up to 2.000€ per year.
The problem is that nobody “sees” this cost in their integrity, because when someone loses his own remote, he goes and buys another, nobody ever knows.
In short, we are trying to surface this sunk cost and offer a better deal: 99€ per year. Yes, it is a community expense. But it’s way lower than the sum of all the lost and broken remotes that community members replace on its own each year.
We are here for the long run. We truly believe in our mission and we want to build a sustainable business that focuses on delivering the best product.
A subscription based model creates a more truthful relationship between the customer and the company.
Since we’ll be paid in a recurrent basis, we’ll always be under the customer evaluation. Therefore, subscription based revenue forces us to always deliver the best possible service, because if you are not fully satisfied with our service you can easily opt out whenever you feel like it.
One-shot payments might seem more appealing for some: “because I own the product” or “because I’m not locked in”. We’ve heard them all, but we couldn’t disagree more.
One-shot pricing frees companies of further improvement upon existing customers, because no additional revenue is generated from them. So all the efforts are placed in acquiring new customers, not in taking care of the existing ones.
The subscription based model incentivizes us to place the same or even more resources to existing customers, generating a long term commitment and a healthier relationship between the parties.
Technology evolves, so do we. When you get a remote — or any other access system for that matter, you are acquiring a piece of plastic that’s not going to change any time.
iomando gets better with time.
We release new versions periodically with new functionalities and improvements based on user feedback. We want every customer to be on the same page, enjoying the greatest and latest version of our service.
Every year there are major OS updates to each mobile platform. We’ll also update our apps in order to get the most of the new APIs, resources and capabilities available to developers. We want every customer on board with the latest technology, but we don’t want to charge “extra” for that.
Finally, think of 5 years ago: a service like iomando could not be possible. Technology looked like nothing we have today. An app was not “a thing”.
Now imagine 5 years from now.
5 years from now we may use some kind of new wearable technology, whatever, who knows. Unfortunately, we don’t know either. But we do know we will support whatever comes next because a subscription model will incentivize us to offer the best experience at any given time.
Keys and remotes have remained untouched for almost fifty years. We are now faced with an amazing challenge to approach the market with a fresh value proposition leveraging mobile technology.
We are convinced that mobile technologies offer an unique opportunity to build on top and create a better access experience that will delight our customers.
This is also good news for our customers, because they will not only benefit from a superior product, but also a cheaper one. To enable such product though, the pricing architecture has to follow and support the business.
That being said, we truly believe that this is for the best. We are here for the long run and we’ll continue to work in order to deliver the best product at the most competitive price.
- Installing a device to the door it’s not an exclusive feature of iomando. Any automated door that works with remotes or magnetic cards will also require this device.↩