How to pair hardware with a subscription

1 The bottom line

Price hardware to win users, and let the subscription carry the value. Hardware pulls people in and keeps them longer, but it adds a whole e-commerce business, so plan for that cost.

2 Key takeaways

• Price the device to bring people in, not to make money. A low entry price puts the price where the value is delivered.
  • Visible30:59 sells its band for roughly $80 with no margin, then charges $20 a month or $14.99 on annual.
• Build the software first and let the hardware enhance it. Retention and the use case live in the software.
  • Life36038:47 finds that users with Tiles retain better overall than users without Tiles.
  • Plaud44:25, as described by Dris of Methods, pairs a $130 device with $20 a month software.
• Sell hardware on the web and attach the subscription there. In-app purchases cannot sell hardware, and your own site lets you control the offer.
  • Skylight42:19 turns the subscription on by default on its own site and discounts the device, which gives a much higher attach rate than retail.
  • Visible55:24 built a web payment flow that avoids the 30% store fee.
• Test the subscription price and the hardware discount together. The two change each other's results.
  • Skylight50:28 varied both at once, modeled the result in a spreadsheet and chose $79 over a $99 option that looked a little better on paper.
• Budget for the hidden e-commerce and technical work. Hardware adds far more than a device to an app business.
  • Luke Martin-Fuller, Visible29:12 says the technical work is an order of magnitude harder than pulling from an API.

The hardware should enhance the software and not the other way around.

Dris, Methods44:25

2.1 Decide what the hardware is for

Hardware is a way in and a way to keep users, so set its role before you set its price.

• Use the device as a top-of-funnel and retention tool. Giordano Contestabile, Life36038:47
  • Life36038:47 sells Tile and pet GPS devices to bring in users.
  • It also bundles free Tile offers into its subscriptions.
  • Users with Tiles retain better because the device adds to an existing use case. Life36038:47
• Build the software first, then give people a reason to add hardware. Dris, Methods44:25
  • Good software is what makes someone want the device.
  • Plaud's tiny device means you do not need the app open or always recording.
  • Plaud pairs a $130 device with $20 a month software and has one clear niche. Dris, Methods44:25
• Price the device at cost and let the subscription carry the value. Luke Martin-Fuller, Visible30:59
  • Visible30:59 sells its band for roughly $80 with no margin.
  • It then charges $20 a month, or $14.99 on annual.
  • This lowers the barrier to entry and matches price to where the value is delivered.
  • Oura charges a high upfront price and a low subscription. Whoop folds hardware into a pricier membership. Tractive keeps the barrier low and earns on the service. Visible chose the Tractive-like model. Luke Martin-Fuller, Visible30:59

2.2 Get the device made and plan the load

Partner for the sensor, and budget for the work that hardware adds.

• Pick a hardware partner for accuracy instead of building sensors. Luke Martin-Fuller, Visible26:53
  • Start by buying existing sensors and using the open SDK to prove the concept.
  • Then buy wholesale, and later co-develop a new version.
  • Visible26:53 co-developed for battery life, easier charging and accelerometer data.
  • Polar has built heart rate monitors since 1977, and 99% of devices can't support real-time heart rate alerts. Visible26:53
  • API aggregators fell short because sensors sample every 5 to 10 minutes and need a second app open. That is a poor fit for people with brain fog. Visible26:53
• Budget for the hidden e-commerce and technical load. Luke Martin-Fuller, Visible29:12
  • Plan for inventory, financing, fulfillment, boxes and refunds.
  • Expect hard technical work on Bluetooth, sync frequency, background operation and firmware updates.
  • Learn from benchmark e-commerce companies with great product pages and technical specs.
  • Free trial best practices do not apply to hardware. Visible29:12
  • In his words: "You bolt on what is essentially an entire e-commerce business to what otherwise could just be a subscription app business." Luke Martin-Fuller, Visible29:12

2.3 Price the device and the subscription together

Test the two prices as one system, and keep a cushion for shocks.

• Vary the subscription price and the hardware discount at the same time. Michael Segal and Mark Ungerer, Skylight50:28
  • The two prices together change hardware conversion, margin per unit and subscription attach.
  • Model the combined outcome in a spreadsheet before you choose.
  • The Skylight50:28 test landed on $79. A $99 price looked a little better on paper and was rejected.
• Keep some hardware margin as a cushion. Michael Segal and Mark Ungerer, Skylight28:20
  • Skylight28:20 did not run hardware at zero contribution.
  • That gave it dry powder against tariffs and the memory price spike.
  • It holds prices and gives up hardware profit this year.
  • A price cut stays available later to reach 20 million households. Skylight28:20

2.4 Sell it online and attach the subscription

Your own web checkout is where you control the payment, the offer and the attach.

• Sell the hardware on the web, not through in-app purchase. Luke Martin-Fuller, Visible55:24
  • You can't sell hardware via in-app purchases, so Visible55:24 built a web payment flow.
  • That gave it HSA and FSA payments and better attribution signals back to ad platforms.
  • It also avoids the 30% store fee.
  • Other companies could add localized payment methods or buy now pay later via Stripe. Visible55:24
• Discount the hardware when people sign up with the subscription on your own site. Michael Segal and Mark Ungerer, Skylight42:19
  • On skylight.com the subscription is turned on automatically, and the hardware is discounted if you sign up with it.
  • It looks like a great deal with a free month. Users can opt out, but most don't.
  • The owned channel has a much higher attach rate than retail. Amazon and retailers cannot make this offer. Skylight42:19
• Send QR code scans to Apple in-app purchase to cut checkout friction. Michael Segal and Mark Ungerer, Skylight56:31
  • Non-subscribed users on the Skylight56:31 device used to scan a QR code that led to a web checkout.
  • With in-app purchase, a mom could scan, subscribe and be done.
  • Conversion from the QR flow rose over 100%, measured on a smaller group of users. Skylight56:31
  • Web checkout costs more than the headline 30% saving suggests, because extra clicks and UI weirdness lose conversion. Skylight56:31

2.5 Widen the funnel with a free app and retail

Let people try the software before they buy, and use retail to build trust.

• Offer a free app tier to de-risk the hardware purchase. Luke Martin-Fuller, Visible1:00:44
  • Hardware cannot have a free trial, so a free app lets people feel the quality before they buy the wearable.
  • Visible1:00:44 barely promotes it, with a tiny section on the website.
  • The free app is still a really big chunk of acquisition, through word of mouth. Visible1:00:44
  • PMF survey scores for the wearable membership are far higher than for the free app, so the paid product stays the clear upgrade. Visible1:00:44
• Sell through your own site, Amazon and retail, and teach buyers after the sale. Michael Segal and Mark Ungerer, Skylight40:38
  • Skylight40:38 sells on its own site, Amazon, Costco, Best Buy and internationally.
  • Retail is the biggest influencer and a stamp of quality, and retailers typically take only one player in a category.
  • Subscription attach is lower in retail, so post-purchase education matters more.
  • Being everywhere has driven higher overall growth, despite lower attach in some channels. Skylight40:38

2.6 Where they disagree

How much margin the hardware should earn, and which side leads, depends on the product.

• Hardware at zero margin or hardware as a profit source.
  • Luke Martin-Fuller, Visible30:59: "We don't make any money on the hardware that we sell."
  • Skylight28:20 made about half its profit from hardware and half from software, while software is only 10 to 20% of revenue.
  • Life36038:47 sits between the two. It indexes toward reaching more users rather than maximizing device margins, yet its devices are not a loss leader.
• Software first or hardware first.
  • Dris, Methods44:25 says the hardware should enhance the software.
  • Many AI wearables do the reverse. They lead with hardware and use software to prop it up. Dris, Methods44:25