Ask HN: Pricing Models for Subscription Services... Your Experience? | Hacker News Reader

Ask HN: Pricing Models for Subscription Services... Your Experience?

14 pointsdell900015 comments

A question for the HN community as it pertains to subscription packages and pricing...

1. As a consumer, are you more included to purchase monthly subscriptions at a slight premium (ie $3.99/mo) or purchase an annual subscription at a slight discount (ie $29.99)?

2. As a company charging subscription rates, do you find that users tend to opt for shorter term billing for cheaper monthly bills or prefer longer term packages for convenience?

3. One of my companies sells a one-time charge of $39.99... very successfully! Do you think it is wiser to charge slimmer annual rates (ie $24.99) and a lifetime charge at say $59.99? Or, for instance, some type of similar package?

View on HN

1. Monthly - I like the thought I can cancel whenever I want without a big hassle w/ refunds, pro-rating, etc.

2. Monthly subscriptions are really hitting their popularity peak right now. It seems to be the way to do business now - I've never attempted to offer an annual, not sure how it would perform. I would assume not as well though, knowing my target market.

3. I would never offer a lifetime package. The state of my application may change drastically where the standard featureset is worth much more than the lifetime user paid. If your application is "stagnant" and kind of operating itself, I don't see the harm though. Might get messy if you change the lower-level subscription prices.

In reply to 3.

If your application changes enough, then isn't it a different app, thereby allowing you to charge for a new feature set?

Seems like ideal price discrimination to me (good for producer/provider).

Well, think about Backpack. It made the transition from being a personal data manager to being an "Intranet" platform.

If you had charged a lifetime fee to start, and then done all of the work to make it the new Backpack, how do you convince your users that even though it has the same name, and same look, it's worth purchasing another license.

Seems like a premium way to lose users and have the blogosphere come at you Frankenstein style (burning torches and all).

Your point is well-taken.

What if I were to instead develop version X of my original product under a new name? I could bucket test the features I want to add, a few at a time. When I am "done" with the new version, I could then release as a new product and invite users to pay an upgrade fee -- with the caveat that the old version will stop receiving support/etc after a given date in the future (or perhaps even charge for support after that date in such a way it makes more economic sense to switch).

I may make an addendum to this post when I am slightly more lucid in the morning.

P.S. Come to think of it, isn't this what MSFT does with the Windows line -- and last I heard, they have been quite successful.

Yeah, I guess it really depends on what your product is. I am merely thinking SaaS in my posts, but I could see a lot of other applications (and have purchased some myself) that take a different route.

For instance, ExpressionEngine or the Torque Gaming Engine. When you purchase a license you are only purchasing a license for free updates to that version (let's say the 1.0 branch). When EE 2.0 comes out, you will have to pay an upgrade fee to use the new version (albeit, heavily discounted, compared to purchasing a completely new license).

It all comes down to what your product is, who your target market is, and what the trends within that niche are. Obviously you would take vastly differing approaches between building the next Backpack or selling an Enterprise grade Help Desk system to the Department of Defense. :D

It depends on what I'm buying. I like that when I buy Flickr I don't have to think about it every month I can just buy it and know I've made a choice for a whole year and it's done.

But on apps like Basecamp or Freshbooks I like the monthly since it isn't a huge chunk of money up front.

Is this just a price thing, then? Or, perhaps, something more?

If Basecamp/Freskbooks were $25/year, would you rather pay for the entire year up front, or would you continue to pay monthly?

If you'd pay for the entire year up front, at what price do you consider it to be too much? Where's the crossover point for you?

I tend to buy software and services in that price range by the year for both myself and clients. Expensing or invoicing a small monthly charge is too much hassle. Note, however, I am more hassle sensitive than price sensitive. I am also somewhat resistant to automatic charges, but that is probably just me. OTOH Neflix goes quite well with a small monthly charge. Maybe the yearly charge for them is a barrier.

Your charge is so small that I suspect the recurring charge will generate a lot more money than a one-time charge or the lifetime charge.

Terrific line:

Note, however, I am more hassle sensitive than price sensitive.

Do you have enough volume to consider A/B testing?

Given a large enough sample size, you should be able to determine an optimum pricing scheme.

I'm no expert on A/B testing, just my $0.02.

You should read both of these items that make a case for going with a monthly charge instead of annual.

http://www.braintreepaymentsolutions.com/blog/annual-credit-...

http://www.37signals.com/svn/posts/753-ask-37signals-how-do-...

First of all, you need to figure out whether or not you're building a consumer or business product.

"Would I give this to somebody as a gift?"

If Yes, you have a consumer product. If No, you probably have a business product.

For business products you want to think in terms of expense accounts. You can bet that ~$20-$30 is super easy on up to ~$300-$500. The problem with subscriptions is that it can scare some people off who only need to use the product once.

For consumer products, I have no idea. I just know that consumers are generally more discretionary with how they throw their money around.

Education customers will just give you a lot of buzz but not much money (from my experience).

I have found that pricing should be determined according to your audience but should various payment-options should be discussed and developed. Having a broad audience, it would be wise to open with a shorter bill term having a slightly higher rate than that of a longer-term (i.e. monthly vs. annual or annual vs. life-time). With the unsteady economy, each client will have their own perspective as to what may benefit their financial needs/flexibility. As it pertains to a customer preference, remain receptive of your audience.

When I was landscaping, I offered a yearly rate which was a 10% discount. 15% of my customers took me up on it which gave me the money I needed my first year to buy equipment plus a little extra capital.

Just be sure to have a cancellation policy in place and cash on hand to not piss off already unhappy users.

As for 1, it depends solely on price.

If it's say, like that? I'll probably buy a year. If it's more like $9.99 or more a month, then, I'll probably do it monthly to avoid that single large expenditure.

Reply on news.ycombinator.com