Subscription billing can be a daunting task when trying to make a profit. Here are some steps to determine the best subscription-pricing model for your ecommerce:
1. Research the market
How does your product compare with your competitors? You don't have to be the most economical product or the most expensive—but you need to offer something of value to a customer that no other brand can offer.
It’s crucial to know where you rank against your competition to get a clear picture of how to appropriately price your product.
2. Find the right value
You should calculate direct costs per user to indicate the absolute price for your product. What kind of pricing model is best for your product? Are you offering multi-level models or a single purchasing option? Consider these items before deciding on your pricing model.
Tiered Pricing—this approach allows you to appeal to a larger customer base with different budgets. You can offer three levels of your product each at different price points. The first tier can be a freemium, free trial or even a lower priced basic version of your product. The second tier can be a mid-priced version with more benefits or features than the lower tier. Finally, if you want to add a premium or third tier—make sure the value is significantly higher than the lowest tier.
If you go with a tiered pricing model for your subscription, remember to position each tier with its value drivers. This gives you the opportunity to upsell. However, be mindful that more options doesn’t always mean better. You don’t want to overwhelm your customers into not buying at all. Stick with three tiers or less.
Unlimited—another pricing option that is very simple and requires minimal products is a simple single price subscription. Everything is included in this one price with unlimited access to your product for a specific period of time – for example, one year. It’s simple for your customers and for you!
3. Trial and error
After measuring sales for a few months, you need to review your product price. You may find that your product is undervalued or overpriced. Continue to gauge your product price with customers by monitoring your conversion rates.
In order to keep your customers happy and coming back for more, you must always be aware of the trends around you and shift your market approach as needed. Subscriptions are a trend that caught many ecommerce businesses off guard. Stay on top of the shift and be prepared to adjust your business in order to gain market share!