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Ask HN: What payment model should I adopt for my new site?

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Re: Ask HN: What payment model should I adopt for my new site?

#11

Post by tezza »

patio11 wrote: post #2

I strongly suggest either monthly billing with a thirty day trial or monthly billing with a single free plan which is not adequate for the core user of the app, but shows it will be adequate if they go to paid. Single payments have much to irk you as a businessman four years from now. Trust me. :(

  "Single payments have much to irk you as a businessman four years from now."
I'm sorry Patrick... I don't quite understand this. What is it about single payments you find that are troublesome?

I'm planning to sell a desktop application and accept single payments... and that works for other companies like TechSmith.

Re: Ask HN: What payment model should I adopt for my new site?

#12

Post by auxbuss »

sw1205 wrote: post #9
ankeshk wrote: post #7

>The first question is do users prefer to pay a one off fee >(even though that fee could be quite large) or do they >prefer to pay a set of smaller monthly fees? Some prefer one off fee. Some prefer paying in installments. You should offer both if you can. Monthly payments is better for long term cash flow management of your startup. But it comes with some admin hassle. Single large payments are better for the short…

That's great thanks. You are right - I prefer to pay a one off fee but I know of people who are happy to pay small monthly sums and so I think it is logical to offer both.

Yes, I'm a one off payment person too. Different strokes, I guess.

I dislike the accumulation of small payments. I'm usually happy to pay for 12 months without a discount.

Of course, this thinking does not stretch to taxes, which must always be paid at the last moment.

Re: Ask HN: What payment model should I adopt for my new site?

#13

Post by michael_dorfman »

sw1205 wrote: post #10
tommizzle wrote: post #6

Obviously it depends on what you're offering, but for a generic model i'd suggest a monthly freemium model - Max traction on launch with regular passive income in the future.

Yes that sounds the way to go - see above for the type of site I am offering. You are right - freemium seems the buzz at the moment. I was even thinking of a novel payment model like Radiohead (the music band) have done in England whereby they have said the customer can pay what they like for the album. I thought of doing something similar for my site - pay what you want for an account, it's risky but it is quite nic…

"Pay what you like" is a terrible business model for most applications.

Remember that Radio had an established fan-base who was already sold on the quality of the product. If a previously unknown band had tried that, nobody would contribute before hearing the music-- and then, after hearing the music, I imagine only a very small percentage would remember to go back to contribute.

As for freemium, there are significant drawback to that, too, that you need to keep in mind.

First of all, you need to make sure that your "paid" version has enough added benefit that it will get users to actually convert. If not, you end up (in the best case) with traction but no revenue. In the worst case, you end up with a lot of very demanding users, placing a support burden on you, with no realistic hope of conversion. If you're not sure if support on your app scales, be careful offering a free version.

In short: figure out what your product is worth to your customers, and charge for it. Don't be afraid to price it high, if it actually provides sufficient value.

As Patrick already pointed out, recurring revenue is a god-send, so a subscription model is brilliant, if your product lends itself to that kind of purchase.

Remember: the goal is to maximize LTV, and minimize CAC.

Re: Ask HN: What payment model should I adopt for my new site?

#14

Post by michael_dorfman »

tezza wrote: post #11
patio11 wrote: post #2

I strongly suggest either monthly billing with a thirty day trial or monthly billing with a single free plan which is not adequate for the core user of the app, but shows it will be adequate if they go to paid. Single payments have much to irk you as a businessman four years from now. Trust me. :(

"Single payments have much to irk you as a businessman four years from now." I'm sorry Patrick... I don't quite understand this. What is it about single payments you find that are troublesome? I'm planning to sell a desktop application and accept single payments... and that works for other companies like TechSmith.

I imagine Patrick was lamenting the fact that one-time payments seriously limit the "lifetime value" of a customer, once acquired.

Passive income is a wonderful thing, and subscription models lend themselves very well to this.

If your app doesn't lend itself to a subscription model, are you able at least to charge for an annual support contract?

Re: Ask HN: What payment model should I adopt for my new site?

#15

Post by rajeshamara »

Yar wrote: post #4

You should pay me $5 for each user that joins.

This should work. If they pay for whole year, give them discount. If they are charging monthly then don't give them discount. You should calculate your profitability when figuring out the discount

Re: Ask HN: What payment model should I adopt for my new site?

#16

Post by sw1205 »

michael_dorfman wrote: post #14
tezza wrote: post #11

Earlier quoted context omitted.

"Single payments have much to irk you as a businessman four years from now." I'm sorry Patrick... I don't quite understand this. What is it about single payments you find that are troublesome? I'm planning to sell a desktop application and accept single payments... and that works for other companies like TechSmith.

I imagine Patrick was lamenting the fact that one-time payments seriously limit the "lifetime value" of a customer, once acquired. Passive income is a wonderful thing, and subscription models lend themselves very well to this. If your app doesn't lend itself to a subscription model, are you able at least to charge for an annual support contract?

I am not sure we can to be honest. The site will run itself and will not need much in the way of support. We imagine the user may be willing to pay a fee for a number of benefits that they will get from the site. However, if I put myself into the user's shoes, then I would definitely pay a one off fee for the benefits that the site gives but I am not sure I would be willing to pay a monthly fee.

I am the type of user who is willing to pay $10 a year and gamble on something as I have only lost $10 - I can then forget about it if it does not work out. However a monthly fee I found off putting - the thought of money coming out of my account each month until I cancel (which I would probably be too lazy to do) puts me off. That's why I think app's work so well for Apple. I pay a one off fee and I forget about it.

Re: Ask HN: What payment model should I adopt for my new site?

#17

Post by michael_dorfman »

sw1205 wrote: post #16
michael_dorfman wrote: post #14

Earlier quoted context omitted.

I imagine Patrick was lamenting the fact that one-time payments seriously limit the "lifetime value" of a customer, once acquired. Passive income is a wonderful thing, and subscription models lend themselves very well to this. If your app doesn't lend itself to a subscription model, are you able at least to charge for an annual support contract?

I am not sure we can to be honest. The site will run itself and will not need much in the way of support. We imagine the user may be willing to pay a fee for a number of benefits that they will get from the site. However, if I put myself into the user's shoes, then I would definitely pay a one off fee for the benefits that the site gives but I am not sure I would be willing to pay a monthly fee. I am the type of user…

However, if I put myself into the user's shoes

This is trickier than it sounds. Don't assume that your target users are like you (unless that's the niche you've decided to target.)

That's why I think app's work so well for Apple. I pay a one off fee and I forget about it.

Apps work great for Apple, but lousy for the app developers. Apple makes some nice vigorish on every transaction, but it's a very small minority of apps that actually bring in enough revenue to support a business.

Without knowing your app's "value proposition" or what kind of niche you are targeting it is difficult to give more specific advice.

Re: Ask HN: What payment model should I adopt for my new site?

#18

Post by whyleyc »

sw1205 wrote: post #16
michael_dorfman wrote: post #14

Earlier quoted context omitted.

I imagine Patrick was lamenting the fact that one-time payments seriously limit the "lifetime value" of a customer, once acquired. Passive income is a wonderful thing, and subscription models lend themselves very well to this. If your app doesn't lend itself to a subscription model, are you able at least to charge for an annual support contract?

I am not sure we can to be honest. The site will run itself and will not need much in the way of support. We imagine the user may be willing to pay a fee for a number of benefits that they will get from the site. However, if I put myself into the user's shoes, then I would definitely pay a one off fee for the benefits that the site gives but I am not sure I would be willing to pay a monthly fee. I am the type of user…

"... the thought of money coming out of my account each month until I cancel (which I would probably be too lazy to do)"

I think you've answered your own question here. Recurring monthly subscription models work so well precisely because we're passive by nature. You'll earn more revenue by going monthly.

The other attraction of the monthly fee is the headline figure is less off putting to the end user - "Hmm, $9 that doesn't seem so bad" compared to the equivalent yearly charge ("$108 bucks, no way man.")

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