4 Smart Subscription Pricing Techniques

4 Smart Subscription Pricing Techniques

Pricing Techniques

Pricing Techniques Consciously and unconsciously, consumers always choose between options right in front of them. When assessing a good or service, consumers consider its value and price about available alternatives. Successful businesses know the need to proactively modify their options to affect nearby consumer decisions regarding what they purchase and how much tax they pay.

A reorganized portfolio can be very effective. Through an optimized portfolio and an improved price structure, the management consulting firm Simon-Kocher, for instance, assisted an online marketplace based on subscriptions to increase average sales per user by 88% and monthly recurring sales by 62%.

Restructuring your portfolio of underwriting pricing strategies can help you boost your income by drawing in more customers and raising your ARPU, as we have observed with numerous clients. The four most effective subscription pricing strategies will be discussed in this article to restructure your portfolio and benefit from relative pricing successfully. The term “packaging” is used in this article to refer to a group of product offerings with varying features and costs.

Get People Excited and More Accepting

One of the best ways to attract customers is with bait. Compared to the rest of the portfolio, the cost of this offer ought to be low. By doing this, you pique interest and convey to the potential customer that they are testing at a manageable risk.

For instance, Dish Network promotes that pay-TV packages start at just $ 19.99 monthly to increase orders and position DISH as a cost-effective cable TV alternative. However, in practice, only some customers purchase the package for $19.99, and DISH’s average monthly sales per customer exceed $80.

Because DISH limits its lure offer in three ways—concerning the content, the extras, and the sales channels—sports fans and families may find the $ 19.99 deal less appealing because it lacks some well-known TV channels (such as ESPN, USA, and Disney). HD and the DISH Hopper® DVR are not included for the extras subscribers to the $19.99 bundle. Furthermore, customers can only sign up for the package by calling a toll-free number. The salesperson tries to persuade the caller to purchase one of the higher-quality subscriptions.

We occasionally advise using free trial versions or freemium products as a seductive offer. It offers customers free to learn about the main advantages of operating a business. Based on the so-called “penny gap” phenomenon, this “free” price point is lovely for consumers and allows them to jump over the price barrier from 0 (free) to 1 cent more easily than from 1 to 2 cents.

The Golden Mean: Provide Exactly the Right Offer to Meet Your Market’s Needs

Regarding subscription pricing, potential customers are drawn to low prices. But as soon as the clients are approached and given a closer look at the options on offer, they tend to steer clear of the packages that veer too far to the extremes. The majority of customers prefer products that are “just right,” or neither too expensive nor too cheap (in behavioral economics, this is known as the “compromise effect”).

Consider the following circumstance:You can choose from two wines as you stand in front of the wine rack. Priced at $15 for one bottle and $20 for the other. Our observations show consumers are more likely to purchase the bottle for $15. The middle price point is preferred by customers, though, if a third, more expensive bottle is available.

Some businesses deftly highlight the “golden mean” in their offer and provide their clients with a point of comparison. They accomplish this by visually emphasizing the middle selection as the most well-liked item. For instance, Squarespace utilizes the tradeoff effect by emphasizing that other clients favor the middle choice.

Reach Your Customers With A Super Premium Option with Our Flagship Offer

You can significantly increase your sales by focusing on a particular market audience with a showcase. Consider the case where you have a premium version of your product or showcase offer that is more expensive than the other packages. In that case, a specific target market—consumers willing to pay—will be attained. Another benefit is that because the other suggestions in your portfolio are more affordable, this offer creates a sort of “bargain effect” that favors you.

There were initially three levels in the earlier example of an online marketplace. Each one included a list of the different extras available to subscribers. Who is looking to rent or sell products to consumers? Simon-Kucher discovered a need for a premium range that was more all-inclusive. As a result, we advise adding a super-premium tier (dubbed “Advantage”) at a higher price point.

Utilizing the newest Advantage tier. Thanks to subscribers with a higher number, the customer could produce more sales. Encourage customers to purchase the Elite or Deluxe levels by being willing to pay for them. Which otherwise would have been deemed to be too expensive.

The Kiss Rule: Keep It Brief and Simple

It would help if you refrained from providing too many pricing options when designing the portfolio structure with various packages. Customers are discouraged in this situation because they must contrast too many variants with one another. In the worst-case scenario, they migrate before deciding what to buy.

For instance, Simon-Kocher experimented with different methods for adding subscription-based when working with a telecommunications provider. Internet packages with usage limitations are available as a product line. This business previously only provided unlimited usage plans. Simon-Kocher discovered that fewer options produce superior outcomes.

According to our experiments, the second variant (capped at particular points) could boost market share and sales. Twenty different packages were ultimately available, with the first variant with all checked options. The second variant produced 15 packages and had a cap that was predetermined. Less customer confusion was one of the causes of this. Buying paralysis would be less common, another advantage of an oversupply.

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