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Ask HN: How to calculate best subscription fee

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Ask HN: How to calculate best subscription fee

#1

Post by WadeWilliams »

I'm trying to determine which is a better membership pricing structure; $20 / year versus $50 / year.

The lower price will increase the number of subscribers but lower the revenue per customer (obviously). The higher number will do the opposite.

Is there some information somewhere (not many good search engine results) on ways to compare these two pricing structures? Perhaps some graphs and mathematical explanation of what the advantage of the lower price with more members is versus the higher price with fewer members?

Thanks to any responders.

Re: Ask HN: How to calculate best subscription fee

#3

Post by WadeWilliams »

It'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. 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.

I'm sure there's lots of discussion on this topic out there, but as soon as you type in "membership subscription" at google you get garbage like pay pal and netflix, and not any nerdy discussion on the topic.

Re: Ask HN: How to calculate best subscription fee

#4

Post by inetsee »

I believe a better pricing model in many cases is to offer your product as a monthly subscription with discounts for longer subscriptions, e.g. $5 per month, $10 per quarter, $30 per year. The drawbacks to this model are that managing subscriptions may require more effort, and you need to be sure that your service provides enough value to get people coming back.

I also think your pricing plans are too low. If your service is for businesses (even small businesses) and it provides an obvious value to them, you should be able to charge more; like $10 - $20 per month (or more), again with discounts for longer terms. Even if your service is for individuals, $10 per month is not excessive. People pay $60 - $100 or more per month for cell phone service; $10 - $20 per month is not excessive for a valuable service.

Re: Ask HN: How to calculate best subscription fee

#6

Post by byoung2 »

WadeWilliams wrote: post #3

It'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…

$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 turn a profit, you'll be in better shape.

Start with the higher price, and see how it goes. If you aren't getting enough customers, you can always offer limited-time discounts (e.g. "Regularly $50/yr, but sign up during December and get your account at $40/yr for life!").

Re: Ask HN: How to calculate best subscription fee

#7

Post by WadeWilliams »

byoung2 wrote: post #6
WadeWilliams wrote: post #3

It'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…

$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…

wicked good idea on the limited time discount. Thanks.

Re: Ask HN: How to calculate best subscription fee

#10

Post by tptacek »

byoung2 wrote: post #6
WadeWilliams wrote: post #3

It'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…

$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.
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