How do you test your licensing assumptions?

1 Define your licensing hypothesis

Before you can test your licensing assumptions, you need to have a clear and specific licensing hypothesis. A licensing hypothesis is a statement that describes how you expect your customers to use and pay for your software, based on your understanding of their problems, goals, and behaviors. For example, your licensing hypothesis might be: "Our customers will pay a monthly subscription fee based on the number of users and features they access, because they value flexibility and scalability." A good licensing hypothesis should be measurable, testable, and falsifiable.

2 Identify your key metrics

Once you have your licensing hypothesis, you need to identify the key metrics that will help you measure its validity and performance. These metrics should reflect the outcomes and behaviors that are relevant to your licensing model, such as customer acquisition, retention, churn, revenue, usage, satisfaction, and feedback. You should also define the benchmarks and targets that will indicate whether your licensing hypothesis is successful or not. For example, you might set a goal of achieving a certain conversion rate, retention rate, or average revenue per user.

3 Choose your testing methods

Testing your licensing assumptions can be done using various methods and tools, depending on your stage of development, resources, and objectives. Surveys and interviews with potential or existing customers can provide insights into their motivations, expectations, and pain points. Landing pages or mockups showcasing your licensing options and features can help you track how visitors interact with them and test the appeal of your value proposition. A/B testing and experiments can be used to compare the performance of different licensing variations, while beta testing and pilots can help you evaluate the usability and functionality of your software. All of these methods can help you validate or invalidate your assumptions, measure demand for your software, optimize conversions, and identify any issues in your licensing model.

4 Analyze and iterate

After you have conducted your tests, you need to analyze the results and draw conclusions. You should look for patterns, trends, and anomalies in your data, and compare them with your hypotheses, metrics, and goals. You should also solicit feedback from your customers and stakeholders, and listen to their opinions and suggestions. Based on your analysis and feedback, you should decide whether to validate, invalidate, or refine your licensing assumptions, and make the necessary changes to your licensing model. You should also plan your next steps and actions, and repeat the testing process until you find the optimal licensing solution for your software and your customers.

5 Learn from others

Testing your licensing assumptions is not a one-time activity, but a continuous process of learning and improvement. You should always monitor your licensing performance and customer behavior, and look for opportunities to enhance your value proposition and revenue streams. You should also learn from others who have successfully tested and implemented their licensing models, and seek inspiration and guidance from their experiences and best practices. You can find many examples and case studies of enterprise software licensing and pricing online, or join communities and forums where you can exchange ideas and insights with other software developers and marketers.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?