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Running Into Price Resistance - How To Handle It?

by Kirk Ward
11 replies
Hello All,

I am in a non-IM niche and have had a membership site up for over two years.

I started the site at $27 a month to get some members and debug the system. I was being advised by my IM mentors that the content was worth $97, so I made plans to increase the price over a period of time to at least $67.

This past January I made an interim increase to $47 per month with a goal of increasing to the $67 level in June.

My statistics so far are that at the $27 level I have a 90% retention rate for approximately one year membership, and 75% reaching the two year point. Member usage of the content is fantastic, with the download record indicating members are logging in and downloading product as fast as it is released to them.

Of the new members at the $47 price point, I have an 80% drop rate within a month of joining. The typical reason given is that the content is not worth the price to them.

I am thinking that there are two markets here. One of poor and driven, but cash-starved beginners, and another of more mature, and tight fisted know-it-alls.

I'm trying to figure out how to handle the situation. Find a way to develop two markets (not my favorite idea), or drop the price back to the entry level pricing.

Any of you folks got any advice for me?

Thanks,
Kirk
#handle #price #resistance #running
  • Profile picture of the author Dan Ambrose
    I would personally keep the price reachable to as many people. Like you, I also run a membership site and I want it to have as many members as possible.

    It is better in the long run to have 1000 people pay you $27 per month and then have backend sales to make more money than it is to have 1000 people pay you $47 but then have 800 people drop out a month later.

    ALSO, you want people to tell others. So having the price set at $27 per month and OVER DELIVERING, you have a good chance that people will tell others about your site. If however, they feel the price is "fair" or at worst, too high, then they will NOT tell others and maybe even tell others not to bother.

    Hope this helps,

    Daniel
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  • Profile picture of the author Neil Morgan
    Hey Kirk

    For me, this is the most telling statement:

    "The typical reason given is that the content is not worth the price to them."

    So it seems you need to drop the price (which you've tried) or up the perceived value (which you've not tried).

    So maybe you should try upping the perceived value and see if that improves your retention rate. If it doesn't then you've probably found the right price for your niche at the $27(ish) level.

    Cheers,

    Neil
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    • Profile picture of the author Kirk Ward
      That is a good point Neil, and something I'm working diligently on. Unfortunately it won't be until I get past my recovery from software woes related to using some high-powered membership software which the developer was abominable at teaching his customers how to use. Which, I might point out is something I've always liked about your support for Autoresponse Plus .... damn good support.

      Anyhoo, I am in the process of migrating from that guys complicated collection of Angstrom units and implementing a Wordpress membership site, with WPWishlist as the member management ... another piece of software with good support ... and the perceived value improvements should be very worthwhile.

      FYI - The lowest price I could find elsewhere for one of the monthly benefits I provide, a custom written client newsletter, is $54 per month, out of a pretty wide line of other benefits released over time with a custom built drip content script. So, I'm very comfortable with the value.

      FYI #2 - The industry is accounting, and the $27 users seem to be folks who are just starting up their practices, while the ones who drop out seem to have been coming from word of mouth, but because they were already established, I am thinking they feel like the stuff is "old hat." That seems to be a problem for many established local accountants, so insecure they get smug.

      Part of this inquiry is to help determine a pricing scheme for the new version. Low, high, or cafeteria style.

      Cheers

      Originally Posted by Neil Morgan View Post

      Hey Kirk

      For me, this is the most telling statement:

      "The typical reason given is that the content is not worth the price to them."

      So it seems you need to drop the price (which you've tried) or up the perceived value (which you've not tried).

      So maybe you should try upping the perceived value and see if that improves your retention rate. If it doesn't then you've probably found the right price for your niche at the $27(ish) level.

      Cheers,

      Neil
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      "We are not here to sell a parcel of boilers and vats, but the potentiality of growing rich beyond the dreams of avarice."

      Dr. Samuel Johnson (Presiding at the sale of Thrales brewery, London, 1781)
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      • Profile picture of the author Frank Donovan
        Hi Kirk

        Have you thought about a two-tier structure (e.g. gold and platinum) for your membership? It might be worth trying if you could create enough value for the higher tier.

        You mention that one of your target markets is established local accountants. In my experience, most of these firms talk amongst themselves and can also be highly competitive. It might be worth a try to give out a limited number of high-level memberships for free to the "top accountants" as an award for professional excellence. They could use the fact of their membership on their letterheads and advertising.

        This may stimulate the desire for your membership from the non-chosen accountants (only accountants with at least a basic membership would be eligible for an award, which could be reviewed periodically) and increase the perceived value across the board.

        You must be, at least, getting good access to the established accountants if they've been signing up, albeit temporarily, for the higher price.

        Anyway, best of luck with whatever you decide.


        Frank
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        • Profile picture of the author Kirk Ward
          Thanks Frank,

          I wasn't exactly thinking of two-tier when I mentioned cafeteria pricing as an alternative, but that does bring up a possibility. I am developing back-end products for my members to capitalize on, so that may be an upgrade option. For example, the client newsletter I mentioned led me to develop a newsletter service that the accountant can provide to his or her clients. I expect to have at least a dozen or so products of that ilk.

          All that being said, I do think I may need to explore the design or implementation of a two-tier plan, whether I sell single price or cafeteria plan.

          Thanks again!

          Kirk
          Originally Posted by Frank Donovan View Post

          Hi Kirk

          Have you thought about a two-tier structure (e.g. gold and platinum) for your membership? It might be worth trying if you could create enough value for the higher tier.

          You mention that one of your target markets is established local accountants. In my experience, most of these firms talk amongst themselves and can also be highly competitive. It might be worth a try to give out a limited number of high-level memberships for free to the "top accountants" as an award for professional excellence. They could use the fact of their membership on their letterheads and advertising.

          This may stimulate the desire for your membership from the non-chosen accountants (only accountants with at least a basic membership would be eligible for an award, which could be reviewed periodically) and increase the perceived value across the board.

          You must be, at least, getting good access to the established accountants if they've been signing up, albeit temporarily, for the higher price.

          Anyway, best of luck with whatever you decide.


          Frank
          Signature
          "We are not here to sell a parcel of boilers and vats, but the potentiality of growing rich beyond the dreams of avarice."

          Dr. Samuel Johnson (Presiding at the sale of Thrales brewery, London, 1781)
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  • Profile picture of the author Bruce NewMedia
    Well, Kirk my question would be, "Is going from $27 to $47 the only choice?" Have you considered doing a more modest price increase?...say to $35 or $37??....I just wondered.

    I was a member of membership site that over a couple years gradually raised the price $5 bucks per month, each year. I always felt it was such a small jump up that I kept renewing.

    But, if it had jumped $15 or $20 overnight, I may well have cancelled.
    _____
    Bruce
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    • Profile picture of the author Kirk Ward
      Good point Bruce,

      But my members use the recurring billing feature of PayPal and Authorize.net, and if they come in at one price, they stay at that price.

      Cheers

      Originally Posted by brucerby View Post

      Well, Kirk my question would be, "Is going from $27 to $47 the only choice?" Have you considered doing a more modest price increase?...say to $35 or $37??....I just wondered.

      I was a member of membership site that over a couple years gradually raised the price $5 bucks per month, each year. I always felt it was such a small jump up that I kept renewing.

      But, if it had jumped $15 or $20 overnight, I may well have cancelled.
      _____
      Bruce
      Signature
      "We are not here to sell a parcel of boilers and vats, but the potentiality of growing rich beyond the dreams of avarice."

      Dr. Samuel Johnson (Presiding at the sale of Thrales brewery, London, 1781)
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      • Profile picture of the author JohnMcCabe
        Kirk, I saw an interesting model the other day that you might consider. If I can dredge the link up from the mental muck, I'll send it to you...

        It was a hybrid of a tiered system and a cafeteria plan.

        All members had access to purchasing backend products, but each higher level of membership got different discounts.

        The membership levels were something like free, $25, $100, $500, all monthly.

        When I saw the site, they were just releasing a $1,000 product ( I think it was some kind of mastermind or bootcamp).

        Free members paid the $1,000.
        $500/month members got in for $100.
        I forget what the middle levels paid, but it was between $100 and $1,000.

        Naturally, as you moved up through the levels of membership, there were amenities added to justify the different price points. The longer you stayed a member at the higher price points, the more chances you got to "cash in" on the big discounts. Of course, by that time you'd provided significant monthly cash flow for a period of time.

        And I'm guessing that less than 100% of the top level members went for every offer, making their monthly membership an even higher value for the owner.

        Just some food for thought...
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        • Profile picture of the author Kirk Ward
          John,

          That's a very interesting model. Very interesting. PM me if you find the details!

          Thanks!
          Kirk
          Signature
          "We are not here to sell a parcel of boilers and vats, but the potentiality of growing rich beyond the dreams of avarice."

          Dr. Samuel Johnson (Presiding at the sale of Thrales brewery, London, 1781)
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          • Profile picture of the author Kirk Ward
            I started this thread because I had run into price resistance when I raised my price from $27 to $47 per month for all new member who subscribe to my membership site. The site has been up for two years, and I have an approximately 90% retention rate for one year and an approximately 75% retention rate for two years at the $27 level.

            I had posted because in the first three months of the year, I had an 80% drop rate from all the new members at the $47 rate, so I sent an email to my list, explaining that I had made the price increase as part of a planned program to raise the price to $67 in June, and hinting at a possible end target of $97 based on value of the products given to me by my mentors. I also mentioned some of the changes that were taking place which were enhancing the value ... like a world class editor for one of the prime products, a new specialty writer for another, and new backend products in the pipeline.

            In the month since that email, an interesting thing has occurred. My new subscriptions have more than made up for all the drops in the first quarter, plus, some who had dropped earlier at the $27 level, have rejoined at the $47 level. Go figure.

            I'm thinking it is the recognition that in this case, since the email was sent as an apology and explanation of an action that was taken, the prospects are realizing that the future price increase is real and will be implemented, and they had better poo or get off the pot.

            Just thought that was interesting enough to update this post.

            Kirk
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            "We are not here to sell a parcel of boilers and vats, but the potentiality of growing rich beyond the dreams of avarice."

            Dr. Samuel Johnson (Presiding at the sale of Thrales brewery, London, 1781)
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  • Profile picture of the author jeremiasmunn
    make price comparisons that will help validate the price, for example not saying for 10 bucks you this, you say for the equivalent of 1 or 2 starbucks coffee... you need to show value and what are you giving is much more than what you are asking in return.
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