Alex Gudilko is CEO of AJProTech, an award-winning AI hardware product development studio based in Los Angeles, California.
A few weeks ago, a hardware founder came to me with a device idea. Solid concept, real problem, genuine passion. Then we got to the business model: “We’ll charge a monthly subscription for the app.”
I asked a simple question: “What does the subscription actually give the user?”
In this case, the app controlled the device, so the subscription was only collecting rent on features the customer already bought. This founder is far from alone in this model. When investors want recurring revenue, founders hear “subscription,” so the app paywall becomes the plan by inertia.
We spent the next session digging into what his device could continuously do for the user, something worth paying for every month. That conversation is the reason for this article.
Imagine the moment every hardware customer dreads. They unbox a product they paid good money for, download the app and are hit with a screen: Unlock full functionality for $19.99/month.
Their frustration is understandable. The device is holding features hostage, and the subscription feels like a penalty for buying a desirable product. The result: one-star reviews, churn and warnings to friends.
But it doesn’t have to be this way. Plenty of hardware companies run subscriptions customers actually like, renewing year after year without complaint. What separates them? A handful of design principles anyone can apply.
1. The device must be sufficient without the subscription.
Want to spoil a customer relationship fast? Sell them a product that’s deliberately turned off until a monthly fee turns it on.
A thermostat that can’t hold a schedule without a subscription. A camera that won’t show live video. A fitness tracker that refuses to track HRV. Customers experience that fee as a repurchase because, functionally, that’s exactly what it is.
Here’s the rule I recommend: The device should fully deliver on the promise that made someone buy it. The subscription should deliver something beyond that promise.
Customers reward companies that respect this line, and punish companies that blur it. Don’t believe me? Go read one-star reviews of any subscription-gated hardware product. Count how many times “hostage” shows up.
2. Sell what the customer couldn’t do themselves.
A subscription earns its fee when it delivers ongoing work the customer can see and couldn’t replicate.
Consider storage and processing of months of video history, or analysis that turns raw sensor data into “your sleep quality has dropped 20% this week, here’s what changed in your routine.” Other examples include a report that your insurance company accepts without a follow-up call, or a security team calling you the moment your camera catches something wrong at 3 a.m.
Notice what these have in common: They’re services, not switches. Nobody resents paying for genuine ongoing work. Everyone resents paying for a feature flag someone toggled off in firmware.
3. Deliver value the customer notices.
Here’s an uncomfortable truth: Customers forget why they’re paying, as other industry leaders have pointed out. Then the renewal notice arrives, and they evaluate the charge with zero memory of the value received. That’s exactly when cancellations happen.
Well-run hardware subscriptions engineer visible value delivery:
• A monthly report showing what the system caught, saved or prevented.
• A quarterly summary: “Your energy optimization saved $214 this quarter, your subscription costs $60.”
• New capabilities shipped via updates, announced clearly, so the product keeps getting better.
The goal: When the renewal email lands, the reaction should be “obviously,” not “Wait, what am I paying for again?”
4. Price against a real alternative.
Customers evaluate your subscription price against one thing: what solving the problem another way would cost them in money, time or risk. Your costs never enter the equation.
A $10/month leak-detection subscription sounds expensive in the abstract. Compare it to the $8,000 water damage claim it just prevented; suddenly, it’s trivially cheap. A $15/month home security monitoring service feels steep until you realize it replaces the cost of a break-in or the peace of mind of checking your phone when you hear a noise at 2 a.m.
The practical move: Name the alternative explicitly. In your marketing. In your renewal emails.
If you struggle to articulate what the customer would have to do or pay without your subscription, that’s a value problem that pricing adjustments will never fix.
5. Don’t trap your customers, but outvalue their exit.
Build an experience compelling enough that they return to your app anyway. That’s how a company earns a place in a customer’s routine: by staying the best place to actually use the data.
Consider a wearable fitness tracker. Users who’ve logged years of steps and workouts within a device’s ecosystem rarely migrate away, even though their data syncs seamlessly to a broader platform. The ability to leave exists. The incentive rarely follows, because their history lives there.
A sleep-tracking ring tells a similar story. Data syncs to a general health platform too, yet users still check their scores in the original app. The interface simply presents it better, and that’s reason enough to stay.
6. NEVER take away what customers already had.
The single most destructive move in hardware subscriptions: Ship a product with free features, then move those features behind a paywall later.
To the customer, this feels like theft: losing functionality they already paid for. The backlash is predictable, public and permanent.
My wife is a case study. She’s used the same sleep-tracking ring for years and refuses to upgrade. Why? The new generation requires a subscription for features her current ring already gives her for free. Staying on old hardware became her way of avoiding a new paywall.
If the business model needs to change, grandfather existing customers at their original terms. Yes, you sacrifice some revenue, but it’s a rounding error compared to the trust you preserve.
The Bottom Line
Trust burned in a public subscription scandal stays burned. An apology blog post won’t bring it back. Ask yourself: Do you want to charge for what the device already does, or get paid for what you keep doing for the customer?
One of those is a paywall. The other is a real business.
Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?