Maximizing Subscription Revenue: How 3 businesses increased their subscription revenue by discovering the optimal pricing strategy

Maximizing Subscription Revenue: How 3 businesses increased their subscription revenue by discovering the optimal pricing strategy

• 1.
  Maximizing Subscription Revenue How 3 businesses increased their subscription revenue by discovering the optimal pricing strategy
• 2.
  We’re sharing onTwitter! #WebClinic
• 3.
  #WebClinic Today’s speaker Flint McGlaughlin—Managing Director, MECLABS Institute Flint McGlaughlin is Managing Director of MECLABS Institute. The organization has partnered with key market leaders including The New York Times, Microsoft Corporation and Reuters Group. McGlaughlin also serves as the Director of Enterprise Research at the Transforming Business Institute, University of Cambridge (U.K.), as the Chairman of the Board of Governors for St. Stephen’s University and as a Trustee for Westminster Theological Centre. McGlaughlin originally studied philosophy and theology at the University of London’s Specialist Jesuit College. Today, his primary research is focused on enterprise as transformative agent. His work has won multiple awards and has been quoted in more than 13,000 online and offline sources.
• 4.
  #WebClinic Experiment: Background Background: A software as a service (SaaS) company that offers membership access to their products online. Goal: Increase paying subscribers and increase revenue. Research Question:Which price point will increase subscribers as well as increase revenue? Test Design: A/B split test Experiment ID: TP 11074 Record Location: MECLABS Research Library Research Partner: (Protected)
• 5.
  #WebClinic Experiment: Control •Customers land on this page after choosing the Basic Membership Product to select length of service. *Anonymized
• 6.
  #WebClinic Experiment: Treatment •All subscriptions were discounted by 22% to attempt to drive more subscribers to longer subscription durations. *Anonymized
• 7.
  #WebClinic Experiment: Side-by-sidecomparison Control Treatment Audience Question: Which pricing strategy had the greatest results? ? *Anonymized
• 8.
  #WebClinic DesignTotal ConversionsTotalRevenue Control 3.6% Treatment (22% Discount) 4.3% % Relative Change 19.44% Experiment: Results Relative increase in total conversions 19% The treatment resulted in a 19.44% relative increase in total conversions.
• 9.
  #WebClinic DesignTotal ConversionsTotalRevenue Control 3.6% $19,425 Treatment (22% Discount) 4.3% $17,535 % Relative Change 19.44% 9.73% Experiment: Results Relative decrease in total revenue 10% The treatment resulted in a 9.73% relative decrease in total revenue.
• 10.
  #WebClinic DesignTotal ConversionsTotalRevenue Control 3.6% $19,425 Treatment (22% Discount) 4.3% $17,535 % Relative Change 19.44% 9.73% Experiment: Results Relative decrease in total revenue 10% The treatment resulted in a 9.73% relative decrease in total revenue. The discounted option increased conversions but decreased revenue.
• 11.
  #WebClinic Experiment: Background Background: Online sex offender registry service for parents concerned about neighborhood safety. Goal: To discover the optimal pricing point for the subscription. Research Question:Which pricing strategy will generate the greatest results? Test Design: A/B split test Experiment ID: TP4002 Record Location: MECLABS Research Library Research Partner: Protected
• 12.
  #WebClinic Experiment: Subscriptiondetails •Customers get instant access to the database, all reports and maps of offenders in the area. *Anonymized
• 13.
  #WebClinic Experiment: Subscriptionprice testing $6 a month for full access. Control $6 per month. + $20 activation fee Treatment Audience Question: How will the $20 activation fee impact results? ? *Anonymized
• 14.
  #WebClinic DesignTotal ConversionsTotalRevenue Control 2.4% Treatment ($20 Activation Fee) 2.4% % Relative Change 0% Experiment: Results No statistical change in conversions 0% The $20 activation fee did not have any statistical effect on conversions.
• 15.
  #WebClinic DesignTotal ConversionsTotalRevenue* Control 2.4% $15,792 Treatment ($20 Activation Fee) 2.4% $31,488 % Relative Change 0% 99.39% Experiment: Results Relative increase in total revenue 99% Adding a $20 activation fee had a 99.39% relative increase in total revenue. *Average lifetime customer value
• 16.
  #WebClinic DesignTotal ConversionsTotalRevenue* Control 2.4% $15,792 Treatment ($20 Activation Fee) 2.4% $31,488 % Relative Change 0% 99.39% Experiment: Results Relative increase in total revenue 99% Adding a $20 activation fee had a 99.39% relative increase in total revenue *Average Lifetime Customer Value The increased price had no impact on conversions but had a huge impact on total revenue.
• 17.
  #WebClinic Price testingproblem 1st Experiment 2nd Experiment Conversions Revenue Conversions Revenue Discount Added $20 Activation Fee
• 18.
  #WebClinic Marketers Ask: “With so many different factors at play, how do we discover the optimal pricing for our subscriptions?”
• 19.
  #WebClinic Price testing 11% Revenue 36% In Paid Subscriptions 609% Capture Rate 112% In Conversion 41% Revenue/Conversion 43% Conversion Rate 163% Revenue 99% Revenue 12% Click Through Rates 69% Revenue Today, we will walk through three major price testing pitfalls we’ve observed from over 15 years of optimization researchto help you discover your optimal pricing offering.
• 20.
  #WebClinic Pitfall #1: Beware of metric isolation
• 21.
  #WebClinic Background: Alarge media company offering various subscription options. Goal: To determine the optimal pricing point after the introductory rate. Research Question:Which price point will generate the greatest return? Test Design: A/B split test Experiment ID: TP 1739 Record Location: MECLABS Research Library Research Partner: (Protected) Pitfall #1: Metric isolation
• 22.
  #WebClinic Experiment: Pricetest background $0.99 Introductory Price: After the introductory price ends, the customers incur the regular rate. *Anonymized
• 23.
  #WebClinic Experiment: TreatmentDesignTestPrice Variable Price 1 $0.99 Price2 $1.99 Price 3 $2.99 Price 4 $3.99 Price 5 $4.99 Audience Question: Which price generated the greatest results? ?
• 24.
  #WebClinic Experiment: KeymetricsDesignTest Price VariableInitial Conversion RatesCancellation Rate After Introduction PeriodRevenue Per Subscriber Price 1 $0.99 2.18% Price2 $1.99 1.95% Price 3 $2.99 1.80% Price 4 $3.99 1.65% Price 5 $4.99 1.47% Conversion rates
• 25.
  #WebClinicDesignTest Price VariableInitialConversion RatesCancellation Rate After Introduction PeriodRevenue Per Subscriber Price 1 $0.99 2.18% 41% Price2 $1.99 1.95% 51% Price 3 $2.99 1.80% 56% Price 4 $3.99 1.65% 57% Price 5 $4.99 1.47% 60% Experiment: Key metrics Cancellation rates
• 26.
  #WebClinicDesignTest Price VariableInitialConversion RatesCancellation Rate After Introduction PeriodRevenue Per Subscriber Price 1 $0.99 2.18% 41% $36.46 Price2 $1.99 1.95% 51% $61.73 Price 3 $2.99 1.80% 56% $82.54 Price 4 $3.99 1.65% 57% $112.13 Price 5 $4.99 1.47% 60% $130.42 Experiment: Key metrics Revenue per subscriber
• 27.
  #WebClinic The metricnarrative 0% 10% 20% 30% 40% 50% 60% 70% 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 1 2 3 4 5 Cancellation Total Revenue $0.99 $1.99 $2.99 $3.99 $4.99
• 28.
  #WebClinic The metricnarrative 0% 10% 20% 30% 40% 50% 60% 70% 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 1 2 3 4 5 Cancellation Total Revenue $0.99 $1.99 $2.99 $3.99 $4.99 When price testing for subscriptions, we must be careful not to focus on only one metric such as conversion. It is not about a metric; it is about the metric narrative.
• 29.
  #WebClinic Design TestPrice Variable Initial Conversion Rates CancellationRate Revenue Per SubscriberTotalRevenue Price 1 $0.99 2.18% 41% $36.46 $17,172.54 Price 2 $1.99 1.95% 51% $61.73 $26.048.01 Price 3 $2.99 1.80% 56% $82.54 $31,611.53 Price 4 $3.99 1.65% 57% $112.13 $45,189.15 Price 5 $4.99 1.47% 60% $130.42 $39,386.81 Experiment: Results Relative increase in total revenue 163% Price 4 had a 163.1% relative increase over the highest converting option (Price 1).
• 30.
  #WebClinic The metricnarrative 0% 10% 20% 30% 40% 50% 60% 70% 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 1 2 3 4 5 Cancellation Total Revenue $0.99 $1.99 $2.99 $3.99 $4.99
• 31.
  #WebClinic The metricnarrative 0% 10% 20% 30% 40% 50% 60% 70% 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 1 2 3 4 5 Cancellation Total Revenue $0.99 $1.99 $2.99 $3.99 $4.99
• 32.
  #WebClinic The metricnarrative 0% 10% 20% 30% 40% 50% 60% 70% 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 1 2 3 4 5 Cancellation $45,189.15 $0.99 $1.99 $2.99 $3.99 $4.99 By only focusing on conversions, you may miss out on other factors that impact revenue more directly.
• 33.
  #WebClinic Pitfall #2: Beware of value deflation
• 34.
  #WebClinic Background: Alarge media company offering various subscription products. Goal: To determine the optimal pricing point after the introductory rate. Research Question:Which price point will generate the greatest return? Test Design: A/B split test Experiment ID: TP 11087 Record Location: MECLABS Research Library Research Partner: (Protected) Pitfall #2: Value deflation
• 35.
  #WebClinic Experiment: Control •Customers are presented with an offer of “50% off Home Delivery for 12 Weeks with free digital access.” *Anonymized
• 36.
  #WebClinic Experiment: Treatment •If the order is not completed within a certain time, a pop-up appears with an incentive for an additional four weeks at 50% *Anonymized
• 37.
  #WebClinic Experiment: Side-by-sidecomparison Control Treatment Audience Question: Which treatment had the greatest results? ?
• 38.
  #WebClinic DesignTotal ConversionsRelativeDifferenceAggregateLOC Control 17.2% - - Treatment 16.5% -4.03% % RelativeChange: -4.03% 94% Experiment: Results Relative decrease in total conversions 4% The treatment resulted in a 4% relative decrease in total conversions.
• 39.
  #WebClinic DesignTotal ConversionsRelativeDifferenceAggregateLOC Control 17.2% - - Treatment 16.5% -4.03% % RelativeChange: -4.03% 94% Experiment: Results Relative Decrease in Total Conversions 4% The Treatment resulted in a 4% Relative Decrease in total conversions Discounting can dramatically decrease the perceived value of an offer. We must be careful not to damage the long- term value of an offer with a discount.
• 40.
  #WebClinic Pitfall #3: Beware of cost perception
• 41.
  #WebClinic Background: Anindependent vitamin manufacturer and distributor. Goal: Increase total revenue from the page. Research Question:Which page will generate the highest total revenue? Test Design: A/B multifactorial split test Experiment ID: TP 1903 Record Location: MECLABS Research Library Research Partner: (Protected) Pitfall #3: Cost perception
• 42.
  #WebClinic Experiment: Control •Products displayed in a horizontal matrix with the $77/month option preselected. *Anonymized
• 43.
  #WebClinic Experiment: Treatment •The treatment displays the products vertically. •This version adds “Most popular!” and “Best Value!” next to different options. •The best value option is preselected, which also happens to be the most expensive *Anonymized
• 44.
  #WebClinic Experiment: Side-by-sidecomparison Control Treatment Audience Question: Which treatment had the greatest results? ?
• 45.
  #WebClinic DesignTotal ConversionsTotalRevenue Control 2.31% Treatment 2.88% % Relative Change 24.68% Experiment: Results Relative increase in conversions 25% The treatment had a 24.68% relative increase in conversions.
• 46.
  #WebClinic DesignTotal ConversionsTotalRevenue Control 2.31% $12,877 Treatment 2.88% $21,737 % Relative Change 24.68% 68.8% Experiment: Results Relative increase in revenue 69% The treatment produced 68.8% more revenue than the control.
• 47.
  #WebClinic DesignTotal ConversionsTotalRevenue Control 2.31% $12,877 Treatment 2.88% $21,737 % Relative Change 24.68% 68.8% Experiment: Results Relative Increase in Revenue 69% The Treatment produced 68.8% more revenue Price is one of many factors that contribute to cost. To decrease perceived cost, we may alter material factors (e.g., price), mental factors (e.g., friction) or both.
• 48.
  #WebClinic The principleof sequence Protocol ID: TP1811 Not this But this Service Detail Page: Moved monthly fee from bottom to the top of the table to enhance clarity 38% in conversions *Anonymized
• 49.
  #WebClinic The principleof elimination Protocol ID: TP1169 But this Product Matrix: Eliminated the different premium options from the control 36% paid subscriptions Not this *Anonymized
• 50.
  #WebClinic The principleof suggestion Protocol ID: TP1774 Not this But this Pricing: Moved to a preselected “Recommended Option” and emphasized monthly price 15% Increase in Orders *Anonymized
• 51.
  #WebClinic What youneed to know: Your customers determine the price they are willing to pay. It is the marketer’s responsibility to first establish value then guide the customer to the ideal price.
• 52.
  #WebClinic Maximizing subscriptionrevenue Warning —Common pitfalls 1.Beware of Metric Isolation: When price testing for subscriptions, we must be careful not to focus on only one metric, such as conversion. It is not about a metric; it is about the metric narrative. 2.Beware of Value Deflation: Discounting can dramatically decrease the perceived value of an offer. We must be careful not to damage the long-term value of an offer with a discount. 3.Beware of Cost Perception: Price is only one of many factors that contribute to the perceived costs of an offer. To decrease cost, we may alter material factors (e.g., price), mental factors (e.g., friction) or both.
• 54.
  Live optimization
• 55.
  #WebClinic Live Optimization:Indianapolis Star Primary Audience: Print & Digital Newspaper subscribers near Indianapolis. Page Purpose: Sell subscription access Landing Page
• 56.
  #WebClinic Live Optimization:Logic Monitor Primary Audience: IT professionals, Web Based Companies, & Cloud Providers Page Purpose: Visitor sign-up for a 14 day free trial Top of Page
• 57.
  #WebClinic Live Optimization:Stamps.com Homepage Primary Audience: Companies and individuals looking for on demand postage Page Purpose: Visitors to begin the account creation process and purchase membership
• 58.
  #WebClinic Live Optimization:Medical Care Alert Primary Audience: Seniors looking for a home monitoring solution for emergencies Page Purpose: Purchase a quarterly, semi- annual, or annual membership Product Matrix
• 59.
  #WebClinic Live Optimization:Who2Start.com Primary Audience: Fantasy football enthusiasts Page Purpose: Purchase a membership to receive weekly fantasy football picks and advice Homepage
• 60.
  #WebClinic Interested inoptimizing your online business? MECLABS conducts rigorous experiments in the new science of optimization. We apply our discoveries tohelp leaders optimizethe financial performance of theirsales and marketing programs. Learn more about how you may be a fit for a MECLABS Research Partnership: •Select Research Partnership Opportunities on the post-webinar survey •Contact us directly: info@MECLABS.com 1-877-635-0565 x