Setting subscription pricing

1,058 views
910 views

Published on

In this presentation Fusebill CEO Steve Adams discusses how to evaluate price models as opposed to price points, review churn and its impacts, what to consider when selecting a price strategy and review some of the most popular strategies for subscription based businesses .

Published in: Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,058
On SlideShare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
30
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • Steve has over 20 years of experience in leading high-technology and software companies, most recently as VP and General Manager with j2 Global, which acquired Ottawa-based Protus. Steve helped propel Protus into one of the fastest growing companies in Canada, with over 555,000 subscribers, before it was acquired in 2010. Steve also worked at Spotwave Wireless, CrossKeys Systems Corporation, Corel and Nortel.Steve is a graduate of the University of Waterloo and the Ivey School of Business.
  • Experience counts:Vision – automate billing for all subscription businesses.People – we know how to run and scale subscription businesses.Technology - scale, reliability, quality.Product : Breadth – supports the entire organization from accounting and billing operations , through sales, marketing and management. Flexibility – we can tailor to meet your needs. Easy to use – Intuitive UI, no technical expertise required.Commitment to Service Available - Product experts available at all stages of implementation.Responsive – 24/7 phone, and email support as well as Twitter and FacebookFriendly – Your success is our success. We take the time to help you succeed.
  • Setting subscription pricing

    1. 1. Pricing in a Subscription World Steve Adams – CEOFebruary 1, 2013 1
    2. 2. Speaker Introduction Steve Adams, CEO stevea@fusebill.comwww.fusebill.com Friday, February 01, 2013 2Call Us at: 1-888-519-1425 Copyright Fusebill Inc. 2013. All rights reserved
    3. 3. Agenda• Evaluating Subscription pricing is different than 1-time sales• Key Points – Lifetime value – Churn – Impact of billing practices• Fusebill IntroductionFebruary 1, 2013 3
    4. 4. Key Takeaways• Measure customer lifetime value. Segment!• Pricing impacts churn, not just customer acquisition• Billing itself triggers churnFebruary 1, 2013 4
    5. 5. EVALUATING PRICE MODELS IN A SUBSCRIPTION WORLDFebruary 1, 2013 5
    6. 6. Price Testing in a Transactional World Sales volumes drop as $ price increases Sales volumes $ increase as price drops Choose the option that maximizes revenue Revenue = Unit Volume * Price_per_unitFebruary 1, 2013 6
    7. 7. A/B Testing• Split traffic between pages with different price points and compare A B Price: $10 Price: $20 Visits: 100 Visits: 100 Sales: 25 Sales: 15 Conversion rate: 25% Conversion rate: 15% Expected Revenue: $250 Expected Revenue: $300 • Conclusion: – B > A so set price at $20February 1, 2013 7
    8. 8. But…Subscriptions behave differently A B Price: $10 / month Price: $20 /month Visits: 100 Visits: 100 Sales: 25 Sales: 15 Conversion rate: 25% Conversion rate: 15% Lifetime revenue: $120 Lifetime revenue: $80 Annual Revenue: $3000 Annual Revenue: $1200 $25 $20 $15 $10 A B $5 $0February 1, 2013 8
    9. 9. A/B Testing• Split traffic between two pages and see what works best – Assumes cost of acquisition is constant – Assumes revenue (and margin) is the same• Works well for one-time sales – revenue is known at time of purchase• Fails for subscription sales – using initial revenue is not accurate• Does help measure price/demand tradeoffsFebruary 1, 2013 9
    10. 10. Model Lifetime Value Client Economics • (Lifetime revenue) – 150 (Cost of acquisition) Breakeven Profit 100 • Segment: 50 – Acquisition channel – Price plans - 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (50) • Use margin (100) • Don’t ignore churn (150) (200) Customer Acquisition Cost Cumulative ContributionFebruary 1, 2013 10
    11. 11. Client Economics - Considerations• Cost of Acquisition – Marketing Programs and Promotions – Sales (salaries, commissions) – Channels (commissions)• Contribution – Revenue – Costs• Costs – Cost of Goods – Customer Support – Data Center, Bandwidth… – Sales costs (incentives for upgrades, renewals)February 1, 2013 11
    12. 12. Impact of churn• Churn (% customers lost per time period) drives customer lifetime (and CLV)• Beware of averages – timing of churn impacts revenues 3 year revenue = $2200 100 90 80 70 60 3 year revenue = $1320 50 40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 3% churn 3% churn after 3 monthsFebruary 1, 2013 12
    13. 13. Typical Impact of Billing on Churn Free Trial Ends Monthly Plans Annual Plans 13
    14. 14. Billing & Churn• Card failures on initial signup – And/or no capture of client information for follow-up• Card failures on recurring billing Mechanical – Typically 25-30% of cards will fail but succeed on retries• Expiring cards – Cards last 3 years – 3% expire EVERY month• Passive churn – Card expiry, subscription expiry Behavioral• Surprise charges – especially for annual subscriptions• Oh! Am I still paying for that?February 1, 2013 14
    15. 15. Recurring Billing Systems Help!• Automate intelligent retries• Communicate: – renewal notices, – failure notices – Receipts?• Evergreen vs. term based subscriptions• Manage cards – online update of payment methods• Implement account status – not paying needs to have an impactFebruary 1, 2013 15
    16. 16. Implementation Issues• “Changing the billing system” is often the hardest part of price testing – Restricts flexibility of sales and marketing teams• Access to Information: revenues often buried in backend systems• Need for Automation – Manual processes don’t scale – leads to revenue leakage and unhappy clients Flat rate pricing is often used ONLY because it is easy.February 1, 2013 16
    17. 17. Fusebill Executive DashboardFebruary 1, 2013 17
    18. 18. Track Lifetime Value, ChurnFebruary 1, 2013 18
    19. 19. Fusebill Platform Overview Self- Online Swipe & Agent Lifecycle Service AnalyticsCheckout Subscribe Interface Management Portal API Layer – Customers, Subscriptions, Transactions Pricing Accounts Billing Invoicing Payments Products Subscriptions Rating Payment Credit CardPrice Plans Invoices Usage Volumes Terms Date ACHUsage Tiers Ledgers Pro-rating Control Storage Vault Discounts Reseller Taxation Review, Edit Gateways Coupons Tracking Coupons Aging Dunning Payments Currency Adjustments Retries Adjustments Adjustments Scalable Multi-Tenant PCI Compliant Security External Payment ProcessingFebruary 1, 2013 19
    20. 20. Implementation Issues• “Changing the billing system” is often the hardest part of price testing – Restricts flexibility of sales and marketing teams• Access to Information: revenues often buried in backend systems• Need for Automation – Manual processes don’t scale – leads to revenue leakage and unhappy clients Flat rate pricing is often used ONLY because it is easy.February 1, 2013 20
    21. 21. The Fusebill Difference Experience Product Commitment to servicewww.fusebill.com 21Call Us at: 1-888-519-1425 Copyright Fusebill Inc. 2013. All rights reserved
    22. 22. Try Fusebill Free for 30 days. No contracts, credit card, or surprises. Sign up at www.fusebill.com Thank You!www.fusebill.com1-888-519-1425support@fusebill.comTwitter: @fusebill 22

    ×