Smart and Effective Subscription Pricing Strategies

Last modified on April 23rd, 2021

Running a subscription-based business can be overwhelming. Getting new customers, retaining them, nurturing customer relationships, monetizing, you name it—all these things scream for your attention. Yet, too often, such businesses underestimate one issue—subscription pricing strategy. 

Too many subscription businesses do not think their pricing strategies through. They either copy their competitors mindlessly or set prices at random. However, market research suggests that giving a little more thought to your pricing can translate into better conversion, upgrading, and customer retention.

There are a lot of subscription pricing strategies out there. We’ve explored options and prepared a shortlist of a few smart strategies that can make a real difference for your subscription business.

Diversify Your Pricing

You’re probably familiar with this “don’t put all your eggs in one basket” rule. The same thing goes for a pricing strategy: don’t set a single price for all customers.

The value of your product is dynamic and, more often than not, personal. It has to do with how much the customers are willing to pay for your product. Some people will not go beyond $10, while others would readily pay $100. Why not offer both options with different sets of features?

You can also throw in a middle alternative for those who want some extra features but are not ready to pay the highest price. A twist on this strategy is to add an elite pricing option that will make your previous top-priced offer look reasonable while promising exclusive service to the customers willing to pay more.

Diversifying your strategy comes in tow with pricing localization. People from various locales can estimate your product’s value differently. Offering them pricing options that are closer to their expectations might significantly boost your conversion rates. Localizing prices is a must if you work on the international market, but it can be helpful on a smaller scale, as well.

Offer to Invest in the Future

Subscription businesses often provide their services over a defined period of time. Typically, the users pay a monthly fee for the product. Why not change your tack and offer them an alternative where they can invest in the future?

Annual fee is a great option. Cheaper compared to monthly charges, they have an extra value: they motivate your customers to keep using your product throughout the year. On top of that, the users might find it easier to pay once a year than go through the payment hassle every month.

Why Free Can Be Good

A short answer to this question is to give your customers a taste of your product. It’s a go-to strategy when you feel that your business could get an extra lift. A try-it-free option gives people a chance to see how great your product is and motivates them to become paying customers.

There are two basic ways of doing this. One of them, a free trial, is a well-known strategy that subscription businesses love. You set a time limit for a user (e.g., 14 days) and, when the limit expires, you offer the user to become a paying customer. This strategy works best if you want to show off the whole set of your product’s features to your consumers.

The other strategy is freemium. Unlike a free trial, it doesn’t have a time limit. Instead, it strips down certain features, leaving only the essentials on offer. The users who want full access have an option to pay to subscribe.

Neither of these options is better than the other. It all depends on your specific case. Look at your goals and decide which strategy will suit your business better.

Pay-as-You-Go

Another pricing strategy is when users pay for what they use. The customer is charged per unit (e.g., per 100 visits or 10 downloads). If they don’t use the product, they won’t be charged for a specified period (usually a month). The pay-as-you-go strategy is common for businesses offering content rather than multiple features.

An alternative to the pay-as-you-go scheme is having a basic fee and charges for extra usage. Known as overage, this strategy ensures that your customers don’t lose interest in your product too quickly.

Upgrade and Promote

Hunting for new users, don’t forget about your existing customer base. Promotional incentives will come in handy here. This subscription pricing strategy helps you upgrade your customers by offering them new features for an additional price, personal discounts, limited-time offers for the features they haven’t tried yet, etc.

As your business grows and you come up with new features, make sure to tell your customers about these changes. Adding this pricing strategy to your toolkit, you’ll retain more customers and reduce churn rate (read about top subscription business metrics and KPIs, including the churn rate in this article).

A Few Tips for Building a Successful Subscription Pricing Strategy

Have you found some fascinating insights in our list of smart pricing strategies? Well, that’s not all. We’d like to share a few more things to keep in mind when designing an effective strategy:

  • Try to avoid hidden fees. That’s a bad business practice that tells your customers you don’t trust them or you don’t believe that your product costs the money you charge.
  • Talk to your customers about the pricing issues. Don’t try to avoid this topic. Your customers came to you prepared to pay for your product. You can use this as a market research opportunity and ask the users what they think about the prices or what options they’d appreciate.
  • Make paying easy. A direct, no-fuss payment method can tip the scales in your favor when a user makes a choice between you and your competitor.
  • Re-evaluate your subscription pricing strategy. We live in an ever-changing world, and businesses evolve and improve. Don’t be afraid to ask more when your products get better. You can easily re-evaluate your pricing strategy every three to six months to see if it works the way it should.

Naturally, there’s no one-size-fits-all solution. How effective this or that pricing strategy depends on the type of business and a range of specific conditions. There’s no need to stick with a single strategy—you can use a combination instead. Whichever you choose, make sure the preferred option fits your goals like a glove.

If you’re still at a loss about how to create the right pricing strategy, we’re happy to help you out. We know what we’re talking about because Subbly also uses subscription strategies. You can try our services for free with our 14-day trial. We can also help you measure your performance before and after re-adjusting your subscription pricing strategy. Drop us an email, and don’t bother with technical details —we’ll gladly do the job for you!