Ask HN: Pricing Models for Subscription Services... Your Experience?
A question for the HN community as it pertains to subscription packages and pricing...
1. As a consumer, are you more included to purchase monthly subscriptions at a slight premium (ie $3.99/mo) or purchase an annual subscription at a slight discount (ie $29.99)?
2. As a company charging subscription rates, do you find that users tend to opt for shorter term billing for cheaper monthly bills or prefer longer term packages for convenience?
3. One of my companies sells a one-time charge of $39.99... very successfully! Do you think it is wiser to charge slimmer annual rates (ie $24.99) and a lifetime charge at say $59.99? Or, for instance, some type of similar package?
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First of all, you need to figure out whether or not you're building a consumer or business product.
"Would I give this to somebody as a gift?"
If Yes, you have a consumer product. If No, you probably have a business product.
For business products you want to think in terms of expense accounts. You can bet that ~$20-$30 is super easy on up to ~$300-$500. The problem with subscriptions is that it can scare some people off who only need to use the product once.
For consumer products, I have no idea. I just know that consumers are generally more discretionary with how they throw their money around.
Education customers will just give you a lot of buzz but not much money (from my experience).
1. Monthly - I like the thought I can cancel whenever I want without a big hassle w/ refunds, pro-rating, etc.
2. Monthly subscriptions are really hitting their popularity peak right now. It seems to be the way to do business now - I've never attempted to offer an annual, not sure how it would perform. I would assume not as well though, knowing my target market.
3. I would never offer a lifetime package. The state of my application may change drastically where the standard featureset is worth much more than the lifetime user paid. If your application is "stagnant" and kind of operating itself, I don't see the harm though. Might get messy if you change the lower-level subscription prices.
I tend to buy software and services in that price range by the year for both myself and clients. Expensing or invoicing a small monthly charge is too much hassle. Note, however, I am more hassle sensitive than price sensitive. I am also somewhat resistant to automatic charges, but that is probably just me. OTOH Neflix goes quite well with a small monthly charge. Maybe the yearly charge for them is a barrier.
Your charge is so small that I suspect the recurring charge will generate a lot more money than a one-time charge or the lifetime charge.
I have found that pricing should be determined according to your audience but should various payment-options should be discussed and developed. Having a broad audience, it would be wise to open with a shorter bill term having a slightly higher rate than that of a longer-term (i.e. monthly vs. annual or annual vs. life-time). With the unsteady economy, each client will have their own perspective as to what may benefit their financial needs/flexibility. As it pertains to a customer preference, remain receptive of your audience.
You should read both of these items that make a case for going with a monthly charge instead of annual.
http://www.braintreepaymentsolutions.com/blog/annual-credit-card-billing-subscriptions/
http://www.37signals.com/svn/posts/753-ask-37signals-how-do-you-process-credit-cards