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Automatic license renewals: twenty months later

About twenty months ago, while sitting on a couch in Auckland, New Zealand, my team and I flipped the switch to enable automatic renewals for AffiliateWP. Two months later we did the same thing for Easy Digital Downloads and Restrict Content Pro. This was a move that we had been working towards for nearly a year and it’s one that we believed would fundamentally change the position of the company over the next one to two years. Now that it has been twenty months, maybe we can answer the question: were we right? Did it make a significant impact for us or was it all futile hopes?

Historically we, like many other online product companies, have struggled with low renewal rates. All of our products are sold with annual licenses that should be renewed each year so long as the products are in continued use. Renewal revenue is a critically important part of growing any online business because it reduces the expensive process of customer acquisition. Your revenue isn’t purely a factor of how many new customers you obtain, it’s a combination of your new customer acquisition and your existing customer retention. If you have great customer retention, you can grow your annual revenue year after year without having to rely on increasing the number of new customers acquired year over year.

Our goal with implementing automatic renewals was three-fold:

  1. Reduce friction and effort for customers. Easy systems == happier customers.
  2. Increase renewal revenue by reducing the number of “forgotten” renewals.
  3. Provide a predictable revenue stream we could rely on and adequately forecast against.

Let’s start determining if we were successful by looking at some previous year stats.

Easy Digital Downloads

Here are some quick stats on our previous years with Easy Digital Downloads:

  • Total revenue in 2014: $474,622.54
  • Total revenue in 2015: $561,269.06
  • Renewal revenue 2015: $80,799.26
  • Total revenue 2016: $597,352.61
  • Renewal revenue 2016: $139,850.03

In 2015 we brought in $80,799.26 in renewal revenue. That’s revenue from existing customers that renewed their license keys. This number means only 14.4% of our total revenue in 2015 came from renewals. Ouch. While $80,000 isn’t a small number and is a nice addition to our annual income, it’s abysmally small when you recognize how few customers were coming back and purchasing renewals.

Our 2016 renewal revenue was higher at $139,850.03 but still only accounted for 23.41% of our total revenue that year.

AffiliateWP

For AffiliateWP, we have pretty similar patterns between 2014 and 2016.

  • Total revenue in 2014: $119,651.50
  • Total revenue in 2015: $379,078.36
  • Renewal revenue 2015: $19,774.60
  • Total revenue 2016: $491,890.90
  • Renewal revenue 2016: $62,827.80

For 2015, our renewal revenue accounted for only 5.22% of our total annual income. This is super drastic, though it does look worse on the surface before realizing part of the reason the renewal revenue was so low was because 2015 saw incredible growth for AffiliateWP. We more than tripled our 2014 revenue by bringing in a lot of new customers so our new customer acquisition was rapidly out pacing our existing customer base from 2014.

In 2016, we saw $62,827.80 in income from renewals, accounting for 12.77% of our revenue that year.

Restrict Content Pro

Again, Restrict Content Pro shows pretty similar patterns of abysmally low renewal income ratios.

  • Total revenue in 2014: $67,211.75
  • Total revenue in 2015: $83,806.60
  • Renewal revenue 2015: $10,460.30
  • Total revenue 2016: $157,486.89
  • Renewal revenue 2016: $21,706.60

In 2015, we brought in $10,460.30 from renewals, accounting for 12.48% of the year’s revenue. And in 2016 we saw $21,706.60 in renewals, or 13.78% of the total revenue that year.

Easy Digital Downloads in 2017

Automatic renewals for Easy Digital Downloads were enabled on March 30, 2016, which means the first payments to be processed by the resulting subscriptions would occur on March 30, 2017. This is important because it means the first three months of 2017 had the same manual renewals as previous years. Based on speculations, automatic renewals should dramatically increase the amount of revenue that comes from renewals.

Did it?

  • Total revenue so far in 2017, January 1 to August 1: $463,835.92
  • Renewal revenue so far in 2017, January 1 to August 1: $166,716.98
  • Revenue from auto renewals in 2017, March 30 to August 1: $90,297.20

Thus far, 35.94% of our Easy Digital Downloads revenue has come from renewals. That’s 12.53% more than in 2016, so a really good sign that automatic renewals are having a significant effect.

Of the $166,716.98 in renewal revenue, $90,297.20 of it was from automatic renewal payments processed with subscriptions. So 19.47% of our total revenue in 2017 has come from automatic renewals. That’s pretty good on the surface, but actually it’s really good. Why? Simple: automatic renewals didn’t start processing until the beginning of the second quarter of 2017 and yet it has already accounted for nearly 20% of our total yearly revenue.

If we look at March 30 to August 1, the time period that automatic renewals have been processing, we see that renewal revenue accounted for 38.72% of our revenue.

Here’s a graph that shows monthly license renewals for 2017. Can you see the point when automatic renewals began processing?

AffiliateWP in 2017

Automatic renewals for AffiliateWP began processing on January 21, 2017, so most of 2017 has included automatic renewals, unlike Easy Digital Downloads and Restrict Content Pro.

  • Total revenue so far in 2017, January 1 to August 1: $443,996.90
  • Renewal revenue so far in 2017, January 1 to August 1: $101,453.35
  • Revenue from auto renewals in 2017, January 21 to August 1: $89,686.40

22.85% of our 2017 revenue has come from renewals, and 20.2% was from automatic renewals. Just 2.65% came from manual renewals.

In 2017 we have had $101,453.35 in renewal revenue. In 2016 we had just $62,827.80. We’ve nearly doubled our renewal revenue and there are still four complete months left in 2017. Obviously some of that increase is due to natural growth, which we’ve continued to see for AffiliateWP, but it’s still a significant increase that I believe is largely attributed to automatic renewals.

If we exclude the first 20 days of January, we find that renewals have accounted for 24.20% of our revenue in 2017.

Here’s a graph showing license key renewals over time for AffiliateWP:

I don’t think I need to point out when automatic renewals were enabled.

Restrict Content Pro in 2017

The numbers for Restrict Content Pro in 2017 do share similarities with the other two products but it has one significant difference that needs to be noted. Throughout 2016 and 2017, one of our primary focuses has been to revitalize Restrict Content Pro and bring it back to a strong position within our product portfolio. I’ve written about these efforts and the results so far previously. I mention this because much of the growth Restrict Content Pro has seen in the last 20 months can be attributed to automatic renewals and extensive revitalization work.

  • Total revenue so far in 2017, January 1 to August 1: $184,686.45
  • Renewal revenue so far in 2017, January 1 to August 1: $28,503.85
  • Revenue from auto renewals in 2017,  March 30 to August 1: $16,165.80

In 2017, 15.43% of our revenue has come from renewals. 8.75% of that was from automatic renewals. This is an increase over previous years but not too terribly drastic. It is, however, still significant when we recognize that automatic renewals did not begin processing until the beginning of the first quarter of 2017.

If we look at March 30 to August 1, the time period that automatic renewals have been processing, we see that renewal revenue accounted for 19.22% of our revenue.

The graph below shows the growth of license renewals overtime. There is a pretty distinct increase in April that continues through the end of July. That increase is the result of automatic renewals.

Wrap up

I think the numbers mostly speak for themselves and really show that automatic renewals are having a significant impact on the financial state of the company. I look forward to seeing whole-year numbers after we’ve had automatic renewals processing for more than just a few months.

Restrict Content Pro’s 2017 revenue has already passed that of 2016, AffiliateWP is less than a month away from beating 2016, and Easy Digital Downloads is two months away from surpassing 2016. There are still four complete months left in 2017 and one of those includes our historically best month: November.

We need to make an important note here regarding the price increase we did at the end of 2016 and early 2017. The price increase did not affect any existing subscriptions, so the majority of the renewals we’ve seen so far in 2017 have been at the previous, lower price. So even though our renewal revenue is mostly at a lower price point than new sales, the percentage of the total that renewals account for is still significantly higher that it was previously. Once we are seeing the majority of renewals come in at the new, higher price, we’ll see even more significant results.

There are a number of really excellent effects automatic renewals have contributed to, but there are two in particular that I would like to highlight.

First is the ability to reliably forecast our expected revenue month-to-month. We now have a reliable data set that provides us with much more accurate predictions for future revenue, and that is incredibly valuable, especially when making decisions about company investments and weighing risks.

Second is our profit margin. One of downsides to increasing revenue through new customer acquisition is the added support and development burden that entails. The burden of adding $10,000 per month from new customers is not minimal at all. In fact it can be a real challenge. One of the reasons companies hire new employees is to help meet the demand brought on by the new customers. This often creates an endless cycle of growing your expenses as quickly as your revenue. Adding $10,000 to your monthly income doesn’t make much difference if you also add $10,000 in new expenses each month simply to help manage that new $10,000 you brought in.

Renewal revenue, however, doesn’t require the same maintenance that new revenue does. In other words, if we earn $100 from a new customer, it is likely that we will have to spend $80 helping that customer. If, however, we earn $80 in renewal revenue from an existing customer, we most likely won’t spend more than $20-30 helping them, if that. The reasoning is simple: renewing customers cost significantly less because the maintenance for them has already been done.

Existing customers are so much cheaper than new customers, so it only makes sense that we should do the very best we possibly can to increase the revenue generated from those existing customers. If we do that, our profit margins will get better and better, and that is precisely what we have seen.

Our previous years have all been profitable in the end, sometimes not very profitable but profitable nonetheless. 2017, however, has seen a completely new trend. We are not only showing profit every month, we are showing monthly profit that is greater than all previous annual profits, and we’re seeing it every single month but one so far. Which month didn’t see that level of profit? January, right before automatic renewals began taking place. Coincidence? Absolutely not.

I’ve previously mentioned that I believed transitioning to automatic renewals would likely be one of the best things we ever did. Today I’m more confident of that prediction than ever.

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Rebuilding a dying product

Four and a half years ago, I released Restrict Content Pro on Code Canyon.net. It was not my first big plugin, nor even the second, but it was the first one that I developed a more intimate relationship with. I heavily relied on the plugin for my own site and thus had a greater commitment to it than the large plugins that came before. For the first two years, the plugin thrived. I updated it constantly and continued to push it further and further. In 2014, however, I began to lose touch with the plugin as my other two big projects, Easy Digital Downloads and AffiliateWP, dominated more and more of my time.

I continued to let Restrict Content Pro dwindle for nearly two years before making a decision. I had several options. I could let it die a slow, drawn out death, I could sell it, or I could work to bring it back to life and let it kick ass again.

I chose the last of the three options and, over the last five months, my team and I have been working to revitalize the product that was once the majority of my monthly revenue. It has a long way to go but we’re making significant progress and I’d like to share some of the journey with you now.

Among the very first steps was to set goals. What exactly did we want to achieve beyond just keeping Restrict Content Pro alive?

Ultimately, there were a few specific goals we had in mind.

First, we wanted to transform Restrict Content Pro from a good-but-simple membership plugin to a full-featured membership platform that is a top-contender among other membership systems. Doing this was to require a lot of work but, if done properly, should lead directly into the success of this project.

Second, we wanted to double or triple Restrict Content Pro’s monthly revenue within six months and then continue to grow it monthly from there. At its peak Restrict Content Pro was earning ~$7,000-8,000 per month. Once the project began to lose attention, that number steadily dropped each month, as should be expected with any project that doesn’t receive the attention it deserves.

Accomplishing these two goals would make the revitalization project a success in my eyes.

Addressing pain points in plugin features

In order to transform RCP into a full-blown membership platform that was as good as or better than the plethora of other options, we really had to add a few specific features that’d been missing. Since Restrict Content Pro was released in January of 2012, I had a huge list of pain points the customers often encountered. This gave us a very good idea of what we should focus on first in terms of development.

Some of these features included:

  • Pro-rated upgrade and downgrade support between subscription levels for members.
  • Expanded merchant processor support. PayPal and Stripe were the only two options for a very long time.
  • Dripped content to aide in member retention.
  • A full REST API to provide developers with a platform to build upon.
  • Improved WooCommerce integration.
  • More intuitive interfaces for configuring member-only content.
  • Umbrella memberships.
  • Improved administrator areas that are mobile friendly.

There were many other improvements (see some examples here and here) that we identified as well, but these were some of the primary pain points we wanted to address.

As of yesterday, every one of these features has been completed and is available as part of the core Restrict Content Pro plugin or as one of the many “pro” add-ons.

Many of these features are ones offered by other available membership platforms, but a few of them really help to set Restrict Content Pro apart. For example, RCP is the only membership plugin for WordPress that offers a full REST API. It is also only one of perhaps two or three that offers grouped (umbrella) memberships, which is fundamentally important to a huge number of organizations.

Part of building a successful product is offering the “standard” features. Another part is offering the features that set you apart through exclusivity. We have succeeded there and we will continue to succeed as we develop Restrict Content Pro further.

Increasing revenue by raising the average customer value

Research into revenue models has proven time and time again that it is easier and more profitable to increase the value of your existing customers than it is to acquire new customers.

Restrict Content Pro has had a fairly large number of customers over its lifetime. Between the time it lived on Code Canyon and the time it lived here on Pippin’s Plugins, RCP acquired some 5,700 customers. What this number really means is this: we can dramatically increase our monthly revenue if we can find a way to encourage those 5700 customers to renew and/or upgrade their existing license keys.

If we encourage just a small percentage of those existing customers to upgrade their license from the first level to one of the top tiers, we can meet our goal of doubling or tripling our revenue.

With AffiliateWP, we learned that using a model where add-on features are available free of charge to high level license holders, we could dramatically increase the average customer value, especially if enough pro add-ons were available to sufficiently justify the higher cost.

We decided to implement this same add-on model for Restrict Content Pro. By implementing many important features as add-ons available to top-tier license holders, we gave existing customers a significant incentive to come back and renew and upgrade their licenses, while simultaneously encouraging new customers to opt into a high level license instead of the basic license.

The concept of the pro add-ons was fundamentally important to the success of this project. Ever since Restrict Content Pro was made available on pippinsplugins.com in 2013, it was priced based on the number of sites supported by the license. For example, a single site license was $42 and an unlimited sites license was $132. Being that the only distinguishing difference between the license levels was the number of sites it permitted to be activated, the vast majority of customers purchased the $42 license. Now there is a significant difference between the Personal license and the Professional license; that difference being the access to the pro add-ons.

Getting more hands on deck

Restrict Content Pro, like nearly all of my original plugin projects, began as a solo project run purely by myself. I was the developer, the sales person, the support team, the tester, and (originally) even the accountant.

I’ve written about it before and I still feel the same today. Easily one of the best decisions I’ve made for the health of my business is bringing on other team members. Easy Digital Downloads was the first to get additional team members, followed by AffiliateWP shortly after. Restrict Content Pro, however, remained as a solo project all this time. I kept thinking about as my personal “pet” project. It was the project I worked on when I was tired of Easy Digital Downloads or AffiliateWP.

In order to accomplish the goals outlined above, however, keeping me as the only person working on the project wasn’t going to cut it.

John Parris joined the Easy Digital Downloads team full time in summer 2015. Later that year he began to express a lot of interest in working on RCP and membership sites so when the time came to put another team member on RCP full time, he was a logical choice. John is now working almost exclusively on RCP and has been fundamental in moving the project forward.

Michael Beil has been an unstoppable machine of efficiency in the AffiliateWP (and recently Easy Digital Downloads) support teams. Along with his prowess in support, Michael is a great tester and so getting him involved with Restrict Content Pro was an easy decision.

Andrew Munro is our site wizard and is wholly responsible for giving Restrict Content Pro a shiny new home at https://restrictcontentpro.com.

By involving these team members in the project, and staying actively involved myself, we’ve had great success in transforming Restrict Content Pro back into a vibrant and successful product that is here for the long game.

You can run a marathon alone but a relay takes a team.

Improving development activity

One of the many signs of a dying project is the cease of active development. Restrict Content Pro was no different. In the last two years, the plugin only received occasional updates and rarely, if ever, did those updates include anything beyond minor bug fixes.

To grow Restrict Content Pro into a strong product, we needed development activity to be constant. The same goes for non-development activity, such as marketing efforts and documentation improvements.

A lot of development work was required in order to get RCP to the basic level it needed to be at, but the development won’t stop there.

As shown by our blog, we’ve been very actively releasing updates and new add-ons for Restrict Content Pro. This is a trend that will continue for the next several months and beyond.

The results thus far

We have a very long way to go but so far the results are very promising.

In terms of increasing development activity, I believe we’ve been incredibly successful. Since April, when we officially began this project, we have released:

Several more pro add-ons are in the development and planning stages and the next major version of Restrict Content Pro (2.7) is in the planning stage.

Revenue wise, I feel we’ve done well. Our goal was to double or triple the monthly revenue within six months. In March, 2016, RCP brought in $7,700. Last month, July 2016, it brought in $11,400. August, 2016, is estimated to bring in a little over $12,000.

We’re at the five month mark and have increased monthly revenue by about 1.5. That’s not double yet, but it’s getting close. Within another few months, I expect we’ve surpass $15,000 in monthly sales. Even with just an increase of 1.5, we’re still looking at more than $100,000 in annual revenue, and the monthly revenue is higher than it ever was in the past, so we’re succeeding.

Overall the project has been a success and is something we will continue to work on for many months to come.

Restrict Content Pro will be one of the premiere membership platforms for WordPress.