how to make the most profitable pricing plan for your subscription business
TRANSCRIPT
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How to Make the Most Profitable Pricing Plan for Your Subscription Business
Lars LofgrenMarketing Analyst - September 2012 [email protected] - Confidential - Do not distribute
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@larslofgren #KISSwebinar
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We’ll cover...
How to get your SaaS pricing right1
Q&A2
Demo time!3
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HOW DID YOU PICK YOURPrice?
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Most people just guess.
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What should we charge each month?
If we charge $10/month and get 100,000 customers, that’s like
$1,000,000 each year!
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Picking the wrong price can shut you down
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IT’S ALL ABOUT THESubscriptions
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Single-purchase software is DEAD
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Even Microsoft and Adobe are jumping in
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Only need to acquire a customer once 1
Higher customer lifetime value2
Lower price points3
Stable cash flow4
Why is subscription so profitable?
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What about the actual prices?
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ALWAYSAnchor
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People are not calculators
We do not perceive ABSOLUTE value, only RELATIVE value.
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To judge a price, we make a comparison
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Pick the right product category1
Offer a more expensive product2
How do we encourage the right comparison?
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1. Pick the right product category
We compare products by putting them into similar categories.
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If you’re an ecommerce platform...
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If you say you’re a project management app...
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If your category sucks, build a new one
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Learn how to POSITION your product
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2. Offer a more expensive product
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The Williams-Sonoma bread machine = no sales
$279
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2 bread machines = mucho sales
$279 $429
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Offer at least two prices
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STRUCTURING YOURPlans
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Subscription = win1
Anchor our prices with the right category and include more expensive plans
2
Let’s recap
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But what do we include in our plans?
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SHOULD WE DOFreemium?
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Freemium needs scale
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If you’re B2B or niche, be careful with freemium
Very few people will upgrade, you’ll need MILLIONS of users to hit the
$100 million revenue mark.
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Freemium is much easier with mass market
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Freemium users take forever to upgrade
You’ll need customer analytics to figure out which marketing leads to
sales.
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Don’t be too generous with your freemium plan
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HOW TO BREAK UPFeatures
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Target features for different customer types
Basic users don’t need advanced features. Advanced users do and
they’re willing to pay for them.
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Find the features that separate your customers
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Reach out and talk to your customers.
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Name your plans correctly
Make it easy for different customer types to find their ideal plan.
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Start with 3 plans (most pick the middle one)
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Even if you have more, hide them
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Only show the differences in your plans
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HOW TO TRACK PRICEChanges
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Great for testing copy, photos, and layouts. Terrible for bigger tests like
pricing.
A/B testing tools only measure the next step
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Measuring impact of new prices takes months
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Use an A/B testing tool
OR
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Hook it up to KISSmetrics for long term tracking