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

2   Q&A

3   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 THE
Subscriptions
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?
ALWAYS
Anchor
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 category

2   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 recap




1   Subscription = win

2   Anchor our prices with the right category and
    include more expensive plans
But what do we include in our plans?
SHOULD WE DO
Freemium?
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 UP
Features
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

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