Hardware margins, profitability, and bootstrapping

On the podcast, I talk with Michael and Mark about the boom in hardware-enabled subscriptions, why nothing worked until they stopped optimizing and started building a better product, and how they doubled their price to $79 even though the data said they could charge more.

Top Takeaways:

📱 Hardware-enabled subscriptions need daily usage to work 
Devices that sit unused make subscription value harder to justify, but products that become the heartbeat of daily routines (like a family calendar) naturally create subscription demand.

🎯 Stop optimizing when you should be building
Limited resources force careful prioritization, and sometimes the biggest wins come from building genuinely valuable features rather than running endless conversion experiments.

💰 Price based on customer emotion, not just data
Testing showed $99 would maximize revenue, but qualitative research revealed $79 felt fair while $99 approached "disgust territory," so they chose the lower price for long-term goodwill.

🏗️ Build a great product before scaling marketing
Skylight tried to scale Calendar in 2021-22 but the product wasn't ready, leading to wasted marketing spend and false negatives until they focused on getting to 40+ NPS first.

🛍️ Retail partnerships are the ultimate influencer
Being in Costco and Best Buy provides a stamp of quality that can't be underestimated, and multi-channel distribution drives higher overall growth despite lower subscription attach rates in some channels.

About Michael Segal & Mark Ungerer:

🚀 CEO, Skylight

📱 Michael Segal is the CEO of Skylight, a family tech company best known for its digital frames and calendars. Michael, a former venture capitalist, brings a unique perspective to Skylight’s growth strategy, focusing on balancing growth with profitability. He shares anecdotes about Skylight’s journey from hardware to subscription models, the importance of understanding customers' emotions about pricing, and how the team navigates the challenges of scaling both hardware and software.

👋 LinkedIn

🚀 CPO, Skylight

📱 Mark Ungerer is the Chief Product Officer at Skylight, where he leads product strategy, development, and design. With a keen focus on creating seamless user experiences, Mark discusses Skylight’s approach to subscriptions, how they test and refine features based on user feedback, and the key role retail partnerships play in building trust and credibility. 

👋 LinkedIn

Follow us on X: 

• David Barnard - @drbarnard
• Jacob Eiting - @jeiting
• RevenueCat - @RevenueCat
• SubClub - @SubClubHQ

Episode Highlights:
[0:00] The balance between growth and profit: Making decisions based on business goals
[3:22] Timing the introduction of subscriptions: Skylight's early adoption and consumer reception
[5:35] The hardware-enabled subscription boom: Market maturity and Skylight’s position
[8:00] Unique challenges of marketing hardware-enabled subscriptions: Overcoming consumer skepticism
[10:52] How Skylight integrates hardware with daily family life to drive subscription value
[12:47] Pricing strategy: The magic behind Skylight’s price increase and minimal subscriber loss
[17:43] Challenges in scaling growth: How Skylight navigates its multi-channel strategy
[24:15] Shifting from free trials to subscription: The evolution of Skylight’s approach to testing
[27:35] The importance of talking to customers: Using qualitative feedback to guide decisions
[30:00] Retail partnerships as a growth strategy
[33:45] Subscription dynamics: How pricing and subscription models shape Skylight’s business
[36:25] Scaling with limited resources: Skylight’s approach to growth without a dedicated growth PM
[38:40] Navigating hardware, software, and subscription moats
[42:00] Biggest win: The success of the $79 subscription price increase
[44:05] Biggest fail: Learning from free trial experiments and the need for more growth testing
[46:01] Growth would be easier with more resources and strategic price adjustments for wider market reach
[48:30] The importance of reducing friction in onboarding for increased conversions
[52:30] The challenges of balancing customer acquisition with retention efforts
[55:02] Skylight's vision for long-term customer value and growth
[57:45] The impact of reducing friction in purchasing: How simple changes can dramatically increase conversion rates
[59:10] Closing thoughts on growth strategy: Aiming for long-term success, not short-term wins