How to Make the Most Profitable Pricing Plan for Your Subscription Business

How to Make the Most Profitable Pricing Plan for YourSubscription Business Lars Lofgren Marketing Analyst - September 2012 info@kissmetrics.com - Confidential - Do not distribute

@larslofgren #KISSwebinar

We’ll cover...1 How to get your SaaS pricing right2 Q&A3 Demo time!

HOW DID YOU PICK YOUR Price?

Most people just guess.

What should we charge each month? If we charge $10/month and get 100,000 customers, that’s like $1,000,000 each year!

Picking the wrong price can shut you down

IT’S ALL ABOUT THESubscriptions

Single-purchase software is DEAD

Even Microsoft and Adobe are jumping in

Why is subscription so profitable? 1 Only need to acquire a customer once 2 Higher customer lifetime value 3 Lower price points 4 Stable cash flow

What about the actual prices?

ALWAYSAnchor

People are not calculators We do not perceive ABSOLUTE value, only RELATIVE value.

To judge a price, we make a comparison

How do we encourage the right comparison?1 Pick the right product category2 Offer a more expensive product

1. Pick the right product category We compare products by putting them into similar categories.

If you’re an ecommerce platform...

If you say you’re a project management app...

If your category sucks, build a new one

Learn how to POSITION your product

2. Offer a more expensive product

The Williams-Sonoma bread machine = no sales $279

2 bread machines = mucho sales $279 $429

Offer at least two prices

STRUCTURING YOUR Plans

Let’s recap1 Subscription = win2 Anchor our prices with the right category and include more expensive plans

But what do we include in our plans?

SHOULD WE DOFreemium?

Freemium needs scale

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.

Freemium is much easier with mass market

Freemium users take forever to upgrade You’ll need customer analytics to figure out which marketing leads to sales.

Don’t be too generous with your freemium plan

HOW TO BREAK UPFeatures

Target features for different customer types Basic users don’t need advanced features. Advanced users do and they’re willing to pay for them.

Find the features that separate your customers

Reach out and talk to your customers.

Name your plans correctly Make it easy for different customer types to find their ideal plan.

Start with 3 plans (most pick the middle one)

Even if you have more, hide them

Only show the differences in your plans

HOW TO TRACK PRICE Changes

A/B testing tools only measure the next step Great for testing copy, photos, and layouts. Terrible for bigger tests like pricing.

Measuring impact of new prices takes months

Use an A/B testing tool OR

Hook it up to KISSmetrics for long term tracking

Q&A Time! Lars Lofgren llofgren@kissmetrics.com @larslofgren

How to Make the Most Profitable Pricing Plan for Your Subscription Business

by KISSmetrics on SlideShare on Sep 27, 2012

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