CLV at Adobe Creative Cloud This is a case study about Adobe Creative Suite and Adobe Creative Cloud.

The full version of Adobe Creative Suite, with all the software, such as Photoshop, Illustrator, InDesign, Premier, and 12 additional packages, was sold for about $2,500 at a gross margin of 80% (these numbers are not real – we made them up). This is a hefty sum, potentially beyond the budget of the amateur enthusiast.

Adobe switched its business model to the Creative Cloud, where the customer buys a subscription for $50 per month or $600 per year to access the same software. This sounds more attractive. The gross margin is assumed to be much higher. For our purposes, let’s take it’s 95%. If we further assume a discount of 20% per year, the question is, after how many years is a “Cloud customer” for Adobe more profitable than a “Suite customer”?

Make the customer lifetime value calculations for both a Cloud customer and a typical Suite customer and then compare them. Do you think, based on those numbers, that the Cloud model is financially successful for Adobe?