Subscription Model Viability for POS Systems

Requirements Clarification & Assessment

Objective:

• Evaluate the financial viability of transitioning from a one-time purchase model to a subscription-based model for POS systems.

Current Model:

• One-time Sale:
  • Price per unit: $5,000
  • Profit margin: 50% ($2,500 profit per unit)

Proposed Subscription Model:

• Initial Fee: $300 for the first month
• Monthly Fee: $100 thereafter
• Contract Duration: Considered over two, four, and six-year periods

Assumptions:

• Exclude servicing costs from analysis
• Lifespan of POS system: 6 years
• Costs are identical for both models

Questions to Address:

1. Retention rate needed to match profitability within the first two years.
2. Retention rate needed to break even in the subsequent four years if not achieved in the first two.
3. Retention rate needed to break even over the entire six-year lifespan.