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You Can’t Make Money Charging $1 Per Month

softwarebyrob.com

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Re: You Can’t Make Money Charging $1 Per Month

#11

Post by jawns »

My site, FAB Apps Bundle (http://www.FabAppsBundle.com), charges $1 a month for individual subscriptions (paid annually).

I think it's possible to make that work, with some caveats.

First, you have to have modest expectations. Maybe you've got a service that you developed for personal use (as in my case) or as a hobby, but you figured it might be useful to other people as well. Maybe you'd be completely content with it making just a couple hundred bucks a month, with no aspirations of making it be anything more than that.

Second, you can't sink a lot of money into advertising your service, at least not at the outset. Which, of course, means you have to come up with more inventive ways to get the word out. Tough, but not impossible.

Third, you've got to primarily target people who understand that for $1 a month, they're not going to get very robust technical support.

And fourth, you're more likely to be able to pull of a $1-a-month price point if you also offer higher price points for premium services. In the case of FAB Apps Bundle, the premium service is targeted to small-business owners and people who manage their organization's Facebook Page.

Re: You Can’t Make Money Charging $1 Per Month

#12

Post by clark-kent »

You can still charge $1/month for the basic service with limited support and then charge $5/month for full support.

When you start a new SaaS, a low price point can help you acquire a lot of customers/credit cards on file. Your customers will often tell you more services you can add, that they will be happy to pay extra for.

Re: You Can’t Make Money Charging $1 Per Month

#13

Post by akat »

Serious question - Wonder how LastPass makes money then? (free or $1/month)

Or can we say that once you have acquired x number of customers at %5-7/month, it may then be easy/feasible to switch over to $1/month model since you already have a "traction" at this point

Re: You Can’t Make Money Charging $1 Per Month

#14

Post by JacobAldridge »

eggbrain wrote: post #7

Isn't there a point where the service isn't worth the monthly cost though? For example, I was looking for a service to do something very specific. It was something I could probably code in a weekend or so, but I figured there was some free or cheap site out there that could do it better. I did find a site that did exactly what I wanted, but it charged $5/month, or $50/year. Now for me, the service was at best a novel…

"It was something I could probably code in a weekend or so"

I think that's a key point. You look at the solution, think about the effort required for the value it gives you, and $10 feels about right.

For someone who can't produce it themselves, the value is usually much higher - and related to the size of the problem solved, not the amount of effort required to solve it. I don't know whether that applies in your specific case (for example, selling a 'one use' service on a subscription basis may not be the best plan), but it's a useful general point I thought of reading your comment.

Re: You Can’t Make Money Charging $1 Per Month

#15

Post by mikeryan »

akat wrote: post #13

Serious question - Wonder how LastPass makes money then? (free or $1/month) Or can we say that once you have acquired x number of customers at %5-7/month, it may then be easy/feasible to switch over to $1/month model since you already have a "traction" at this point

LastPass does it the usual way - they've got a premium (enterprise) product which they sell for $12-$24 per user per month. They can then write off any losses from the free product.

https://lastpass.com/enterprise_roicalculator.php

Re: You Can’t Make Money Charging $1 Per Month

#16

Post by falava »

I really liked the Pinboard.in pricing scheme: start with very low prices (something like $1 subscription for life) to get passionate users talking about you and progresively make that price higher based in the number of users you get. No free plan to fight link spam. And a premium yearly plan that archives the content of your links.

Re: You Can’t Make Money Charging $1 Per Month

#17

Post by gacba »

clark-kent wrote: post #12

You can still charge $1/month for the basic service with limited support and then charge $5/month for full support. When you start a new SaaS, a low price point can help you acquire a lot of customers/credit cards on file. Your customers will often tell you more services you can add, that they will be happy to pay extra for.

This mentality kills most businesses. Will it help you acquire customers? Maybe. Will it give you low-end, pain-in-the-butt customers whose support burden is far higher than the value they supply to you? Yep, most likely.

Better for you to actually VALUE your product from the get go, get customers who also value it, and work together to make it better.

Think I'm crazy? Ask Groupon businesses how much repeat business they get from their cheap promos. It's the same problem.

Re: You Can’t Make Money Charging $1 Per Month

#18

Post by plamenv »

mikeryan wrote: post #15
akat wrote: post #13

Serious question - Wonder how LastPass makes money then? (free or $1/month) Or can we say that once you have acquired x number of customers at %5-7/month, it may then be easy/feasible to switch over to $1/month model since you already have a "traction" at this point

LastPass does it the usual way - they've got a premium (enterprise) product which they sell for $12-$24 per user per month. They can then write off any losses from the free product. https://lastpass.com/enterprise_roicalculator.php

That's $12-$24 per year, not month. And they can do it simply because of sheer volume. Everyone has to deal with passwords so their market is humongous. If you sell to teachers that's not the case.

Re: You Can’t Make Money Charging $1 Per Month

#19

Post by clark-kent »

gacba wrote: post #17
clark-kent wrote: post #12

You can still charge $1/month for the basic service with limited support and then charge $5/month for full support. When you start a new SaaS, a low price point can help you acquire a lot of customers/credit cards on file. Your customers will often tell you more services you can add, that they will be happy to pay extra for.

This mentality kills most businesses. Will it help you acquire customers? Maybe. Will it give you low-end, pain-in-the-butt customers whose support burden is far higher than the value they supply to you? Yep, most likely. Better for you to actually VALUE your product from the get go, get customers who also value it, and work together to make it better. Think I'm crazy? Ask Groupon businesses how much repeat business…

I don't mean $1/month as a cheap promo, I'm referring to a situation were the costs of running your SaaS is very low, were you can break even with a few hundred customers a month. And adding new customers doesn't significantly increase your cost. In this case you can afford to charge $1/month and take advantage of the volume.

You can provide limited support for basic accounts and charge much more for full support like $5-$9/month. The idea is to give your customers the only-pay-for-what-you-need model which is very realistic on the web.

If your cost increases significantly with each new customer you acquire then find what will increase your costs and charge extra for it, maybe bandwidth, computation, disk space etc.

Re: You Can’t Make Money Charging $1 Per Month

#20

Post by jdunck »

patio11 wrote: post #2

It is exceptionally difficult to run SaaS businesses with low price points, principally because you'll often be cash flow negative with regards to marketing spend. e.g. even if the LTV of a customer is a few hundred dollars, to scale the business, you may well be paying $200+ in customer acquisition costs. (Check the price for AdWords clicks on e.g. project management or invoicing sometime. Oofdah.) If you quickly re…

One rule of thumb I read here ( http://www.forentrepreneurs.com/startup-killer/ ) is that CAC should be recoverable within 12 months of use, regardless of LTV.

Do you think that's appropriate, or it needs to be even faster?

I get the point cashflow limits rate of growth, of course.

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