Setting Your Price: One Time VS Subscription

This post is for newbies who are wondering about pricing.

An expert platform I'm a member of has been discussing transactional (one time) vs subscription options.

I figure people are wondering about the same question here.

Now a lot of people know how to use spreadsheets, and they make fancy simulations where the money comes in and they're millionaires.

Reality doesn't work that way unless you have the resources to scale up quickly. We'll be looking at why in a minute.

But first, I saw some confusion and muddy thinking about pricing.

If you want any transactional buyers, which means you get paid in full up front, you can't just say your price for that option is 12X your monthly subscription rate.

You need to make it "two months reduced" or "20% Off" to have the transaction price be valuable to the buyer. Anything lower doesn't look like a substantial discount.

My accounting prof beat it into our heads over three years: "A dollar today is worth more than a dollar tomorrow."

This is because of the interest rate, and also a concept called "opportunity cost"--you could have done something else with that money that could have earned you more money...or lost you less.

So getting paid in full today is better than waiting 12 months on that principle alone.

But there's more.

It gets worse.

The reality of subscription payments is that they don't smoothly chime in every time they come around.

Buyers run out of cash and are not able to pay you.

They forget to fund their payment method.

They decide to buy beer instead of pay for your program.

The truth is, every time you ask for that subscription payment is another opportunity for a breakdown in the process.

And now YOU have to be the bad guy. Turning off access. Having to send follow up emails, or make collection calls. Ick.

So use subscription payments if you must, but expect things not to go smoothly. A number of buyers will fall by the wayside. And a year is a long time. Scrunch that payment schedule down if you can.

I've run a few subscription-based offers and there are always hassles. Did I get more buyers than I would have? Can't say for sure. And that's a big warning right there for me not to do it again. A free trial and then one-time billing is a possibility.

Best to get paid in full up front. Then you can concentrate on providing great customer service. They've committed.

One time I think the subscription model did work well was a membership site product for which we had a Facebook group. I rolled it out over four weeks. The first week's content was already done, but the next three were based not just on what I wanted to talk about but the real world issues that came up in the group discussions.

That way, the buyers had genuine involvement. Still a number of subscription failures, even at the single digit price point, though. (Remember, it takes just as much effort to make a $5000 sale as a $5 one...and I believe it's actually easier to make the $5000 one because that buyer already has money on hand.)

Dan Ariely has a video I've returned to time and time again since discovering it early in 2012:


You'll want to watch, even if it's in review (we think we know this stuff, but the truth is we rapidly forget details) because he explains a three-option offer.

You can't do this with just two offers--transactional and subscription. You need a third to help people make up their minds. Have a look at the video and you'll discover what I mean.

For subscription models to work, a key seems to be buyer involvement. If they're simply consuming content, it's unlikely they'll pay in full after they're done consuming. With involvement, however, they perceive something more "in it for them".

Each time you come back cap in hand looking for a payment, you have to make that sale again whether you know it or not, and whether you're actually present or not. So get paid in full up front if you can.