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Subscriptions are the New Black

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Re: Subscriptions are the New Black

#31

Post by maxklein »

DenisM wrote: post #22
maxklein wrote: post #20

Earlier quoted context omitted.

Actually - I have some data. I had a product priced at $2 per month subscription vs $50 one-time fee. More people paid the one-time fee than the subscription. From talks I've had with people, people prefer to pay a one-time fee than a subscription.

And among the people I talk to most prefer to live in Seattle. Is it representative of the people at large? Your generalization is completely unwarranted, at best you could derive that "among buyers of X most prefer one-time payment".

I think my generalisation is quite warranted. My sample size ran to about 30 people, who were not selected by me in any way.

If you are selling a product that is a one-time fee and you are happy with the model, then fine, let's agree to disagree. If you are building something and want to make subscriptions or have some interest in my statement being wrong, then you are approaching business with the wrong attitude.

In the absence of any information to the contrary, I like to work with the little info I have.

Re: Subscriptions are the New Black

#32

Post by jhancock »

davemc500hats wrote: post #29
jhancock wrote: post #27

Earlier quoted context omitted.

I understand what he's implying. His case is thin. PayPal is huge and can easily afford the customer service required by noobs forgetting their password. Can you think of another way to operate such a business? His solution implies that google, yahoo, facebook should be the next PayPal in this regard. OK, so now those organizations have to handle this type of support.

>>PayPal is huge and can easily afford the customer service required by noobs forgetting their password nope, wrong again. ARPUs for PayPal users are probably only around $5-25 per year (excluding the minority of fanatic eBay regulars), and you can easily eat up all of that cost or more in telephone customer support.

Really? Are you saying PayPal is not profitable and the lack of profitability is due to the costs of phone support for noobs forgetting their password?

Don't throw ARPUs at me. Either they are profitable or they are not.

I can certainly understand the argument that users of other sign-on systems "may" remember their passwords better than PayPal, but what evidence do you have of this? What extra margin of increased password remembrance makes for a more profitable model?

Re: Subscriptions are the New Black

#33

Post by maxklein »

terrellm wrote: post #21
maxklein wrote: post #20

Earlier quoted context omitted.

Actually - I have some data. I had a product priced at $2 per month subscription vs $50 one-time fee. More people paid the one-time fee than the subscription. From talks I've had with people, people prefer to pay a one-time fee than a subscription.

I think the answer is "it depends". $50 isn't a a lot of money to many people so your product could still considered an impulse buy. If you look at a product that runs $25/mo, a user would look at $625 one-time fee. I'd imagine the one-time purchases would be much lower.

But your statement is also making a generalisation. You say $50 is not much money to a lot of people. How do you prove that statement?

The one-time fee strategy is a way of pulling people in cheaply and then upselling them. You will not a $25 a month product $650 one time, you make it $99 one time payment, and you optimise your funnel to upsell them within the first 4 months.

A $25 a month product will have a LOT of cancellations compared to a $5 a month product.

Re: Subscriptions are the New Black

#34

Post by jhancock »

gte910h wrote: post #13
terrellm wrote: post #7

Earlier quoted context omitted.

I agree that people prefer a sense of ownership rather than renting, even if renting is in their best interest. However, the problem with a one-time payment is that the vendor loses incentive to continue supporting the buyer after the transaction. The primary way to generate additional revenues from that customer is, as you say "sell new innovations and features". This adding of new features can increase complexity w…

I honestly prefer fee-per-month software. It is MUCH cheaper than the equivalent valued software would be for the first 4-5 months, and most software is used infrequently, so I usually save money with the starting and stopping of subscriptions.

I like SaaS subscriptions as well. Most that hold my data as opposed to just providing a cool tool do not allow you to turn off your subscription for a few months without losing your data.

Re: Subscriptions are the New Black

#35

Post by davemc500hats »

jhancock wrote: post #32
davemc500hats wrote: post #29

Earlier quoted context omitted.

>>PayPal is huge and can easily afford the customer service required by noobs forgetting their password nope, wrong again. ARPUs for PayPal users are probably only around $5-25 per year (excluding the minority of fanatic eBay regulars), and you can easily eat up all of that cost or more in telephone customer support.

Really? Are you saying PayPal is not profitable and the lack of profitability is due to the costs of phone support for noobs forgetting their password? Don't throw ARPUs at me. Either they are profitable or they are not. I can certainly understand the argument that users of other sign-on systems "may" remember their passwords better than PayPal, but what evidence do you have of this? What extra margin of increased pa…

no that's not what i'm saying. PayPal explicitly chose to not answer telephone support in order to keep costs down for low-value avg users (which is most non-merchants / non-eBay fanatics).

it was deemed to be "cheaper" to just not deal with a minority % of password recovery cases (that might also occasionally be fraud) than to provide high-cost customer support for low-value average users.

think about it: if you can cut a minority % of your customer base that causes a large % of the cost (or simply just more than they are worth) then you can make more money.

this wasn't such a big mistake in itself, except that PayPal probably didn't consider the network effect of negative brand damage due to not providing very good customer service for such a large # -- though still minority -- of users.

i'm saying this: 1) telephone support is expensive, and doesn't offset low-value ARPU 2)

Re: Subscriptions are the New Black

#36

Post by davemc500hats »

jhancock wrote: post #30
davemc500hats wrote: post #23

just to clarify: the post was trying to highlight both subscriptions AND transactions, not vs. each other... they aren't mutually exclusive. in fact, most likely a common model would be: 1) free for most users 2) low-cost txn for first paid use 3) convert initial txn users into frequent use / regular subscription later, but continue txnl model as well. perhaps in mid-rant I failed to explain this clearly; possibly du…

If your point was that businesses need to start charging for their services/content, ok fine, no argument there. But much of your rant is in finding a solution for password friction by pointing out what a major cost it is to PayPal. You make no case as to how google/yahoo/facebook will solve password friction better than PayPal other than to say that users log into these sites more frequently and therefore remember t…

a) people certainly use social networks (Facebook) and email and game / entertainment sites more than they use E-Commerce sites -- one is daily (or hourly!), the other is weekly or monthly

b) even if they don't type their passwords in "much", they certainly do so relatively much more frequently.

whether or not my post was a rant, this is a fairly simple point based on simple frequency of use.

Re: Subscriptions are the New Black

#37

Post by davemc500hats »

Mc_Big_G wrote: post #12

I'm curious if the password problem is really as big as he says or if he's just biased because of his experience at PayPal. I don't always remember my password, but I've never encountered a site that didn't offer one of the following: 1) Password retrieval/reset by email 2) Password retrieval/reset by secret questions Also, don't most browsers these days ask you if you want it to save your password? Then there is pas…

so 2 items to explain this further:

1) financial sites have more secure / higher-friction password recovery techniques than non-financial sites

2) more inside-baseball point that i didn't get into -- PayPal security questions weren't in the acct signup flow, they were in the after-txn flow of email confirmation. HOWEVER, since many people either a) intentionally or accidentally didn't provide the right email, or b) even if they entered the right email, they didn't go thru email confirm, then

result: MANY MANY people -- i estimated at least 10%, possibly up to 25-50% -- never entered their security reminder Q's. this subsequently resulted in limited ability to recover password info without having to FAX IN driver's license or other paper info, which most users screamed about.

in short: it's a long story, but password recovery for financial sites is much harder than non-financial sites, and for PayPal is even harder still than other normal financial sites due to the way we had implemented mandatory acct creation workflow and security reminder Q'n workflow.

needless to say, this was a fucked-up situation that resulted in a lot of customer service hassle... which i got to experience first-hand on many occasions.

(sorry for the long-winder explanation, but you asked, so... but it's not your fault. even many people who worked there didn't understand this very well. it used to frustrate the hell out of me)

Re: Subscriptions are the New Black

#38

Post by davemc500hats »

callmeed wrote: post #8

It sure took the author a long time to get to his main points–I almost gave up. Maybe reading Williams Zinsser should be the new black ...

sorry, i'm sure with less insanity and a better editor i could have gotten there much quicker...

but between sleepless redeye blogging and my usual retardedness, "i didn't have time to write a short letter"

my apologies, and thanks for hanging in there if you got to the end. my condolences if you didn't

Re: Subscriptions are the New Black

#39

Post by Splines »

jhancock wrote: post #18

McClure gets close to a good point but fails to convert. Here's his solution to password friction: "Make a brain-dead simple, frequent-use product. If users login a lot, then they don't forget their password." He then lists the following examples that solve this better than PayPal: Social Networks, Email, IM, Games, Music, Entertainment. I can't recall the last time I needed to use my password to login to Facebook, S…

Could you eliminate passwords altogether and validate via a back channel? Have a service that ties a phone number and a credit card number together, and allow people to confirm purchases via SMS.

It looks like purchase notifications via SMS is already in play, not so sure if anybody has tried purchase authorizations yet.

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