$50/year is too low. It's less than $5/month. I spend roughly that per day on coffee... and yet I'd still hesitate to sign up for something on the Internet for $5/month, just as much as I'd hesitate if it was $10 or $15 or $30/month.
Ask HN: How to calculate best subscription fee
11–20 of 27 posts
Re: Ask HN: How to calculate best subscription fee
#12Please don't just do yearly subscriptions, I will rarely (if ever) sign up for a yearly subscription at first. If you do offer only yearly, make sure you also have some sort of trial. Also StavrosK talked about subscription fees here: http://blog.historio.us/
For me, there isn't much difference in friction between a More than $20/year, however, and there has to be a compelling discount or a solid trial before I'll shell out for a whole year.
Re: Ask HN: How to calculate best subscription fee
#13Earlier quoted context omitted.
$50 seems like the better plan to me. Ofcourse, if I ask the users who haven't subscribed and still use the free model, they think $50 is too much and they would be more likely to pay $20 Of course they would rather pay less! But you also have to consider that when people start paying, they usually expect a higher level of service. If you can keep the number of people with high expectations to a minimum and still tur…
Danger : This has been the polar opposite of Patrick McKenzie's experience. Charge people one shiny nickel and they'll come to you with high expectations. In fact, lowering your prices pessimizes your customer base with the most high-drama customers.
I meant that when they start paying vs being free customers they start to have expectations. You're right, when they pay less, they seem to expect more. The lower price just attracts that kind of customer. I saw this at Kaplan Test Prep. The most demanding students were the NCLEX students who only paid $400-600, while the USMLE students who paid $6000-10000 never asked for anything.
Re: Ask HN: How to calculate best subscription fee
#14Pricing without knowing what you are selling is hard, but I guess you are charging too little.
There's a lot of history for so-called term subscription license (TSL's) in the business literature. I agree with the general comments about offering 3- or 6-month TSL's but price your fees around a 12-month TSL and charge more for shorter commitment periods. The 12-month TSL price calculation is as much a feature of your estimated churn and resulting life time contract value as market forces. In our market, salesforce.com is the benchmark and we price accordingly. Hopefully you can find a public TSL rate to compare, too.
Re: Ask HN: How to calculate best subscription fee
#15It's a website subscription service that I'm trying to pack as much value as possible into. I think it's worth $50. My question is what are the best resources on this topic? I suppose i need 2.5 as many times the members at the $20 rate to make generate the same revenue. I've got 100 users @ $50, but will I get 250 @ $20 ? If I did get 250 at $20, the revenue hasn't gone up. $50 seems like the better plan to me. Ofco…
So you gave them two offers and they chose the cheaper one? Of course they did.
Here's what you should do. Find more prospective users. Tell them that you're considering $50/year and $100/year (Btw, these would sound cheaper if they were $5/mo and $10/mo, plus it wouldn't require as much of a commitment.) and ask which they prefer.
If they all say that they wouldn't pay for either, you know that $50/year is actually too expensive. If they say that they prefer $50/year and that $100/year is too expensive, you know that $50/year is probably ok.
Then again, remember that your users will lie to you about what they want and what they're willing to pay for. So you don't really know until they're actually paying for it.
Re: Ask HN: How to calculate best subscription fee
#16Pricing is more art than science. It is based on many factors such as:
- perceived value
- competitor pricing
- your target market
- how directly your service let's people save mone or generate income (ie if your service does either it is more easily justifiable than a pure luxury)
- customer loyalty (eg some people are paying Dropbox when they don't need the space just because they love the service and want to support the company)
- supply (including the illusion of scarcity)
- cost structure
- luck
- etc
There is some theory and psychology around this but like all the social sciencesnit isn't exact.
Re: Ask HN: How to calculate best subscription fee
#17Please don't just do yearly subscriptions, I will rarely (if ever) sign up for a yearly subscription at first. If you do offer only yearly, make sure you also have some sort of trial. Also StavrosK talked about subscription fees here: http://blog.historio.us/
For me, there isn't much difference in friction between a More than $20/year, however, and there has to be a compelling discount or a solid trial before I'll shell out for a whole year.
The price isn't really the issue, if I can spend $20 I can spend $50, it's the perceived value. To me spending $50 upfront without any guarantee I'll use the product is bad, whereas $5/m seems much better even if it works out more in the long run.
I'd have no problem spending $20/m on a good product I like but I would have a problem spending $20/year on something I haven't tried, because I "feel" like I'm spending more and committing to a longer term with the product.
Maybe that doesn't make sense, but the issue for me isn't the money but how I see the value.
Re: Ask HN: How to calculate best subscription fee
#18$50/year is too low. It's less than $5/month. I spend roughly that per day on coffee... and yet I'd still hesitate to sign up for something on the Internet for $5/month, just as much as I'd hesitate if it was $10 or $15 or $30/month.
Don't undervalue your daily coffee. ;)
Re: Ask HN: How to calculate best subscription fee
#19Joel Spolsky wrote about this exact subject (with graphs, etc. as requested). very worthwhile read: http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...
Re: Ask HN: How to calculate best subscription fee
#20It's a website subscription service that I'm trying to pack as much value as possible into. I think it's worth $50. My question is what are the best resources on this topic? I suppose i need 2.5 as many times the members at the $20 rate to make generate the same revenue. I've got 100 users @ $50, but will I get 250 @ $20 ? If I did get 250 at $20, the revenue hasn't gone up. $50 seems like the better plan to me. Ofco…
If you think it's worth $50/y, you could price it there, and then offer a $5/m package as well. If the $50/y scares them off and they go with the $5/m package, then you're making an extra $10/y off them. If it doesn't scare them off, then you're making your $50/y.
I would hesitate to pay $50/y, but not so much $5/m.