Monthly Membership vs. Annual Members???

19 replies
I'm working on a new project.

It's a membership site. I've gotten to the part of pricing the memberships.

Need your advice...

I have 4 levels of membership at the moment. And at the moment they range from:

$197 for 6 months,
$297 for 24 months,
$397 for 36 months or
$597 for 60 months.

I'm just debating the format as there's several factors to consider such as:

1) For an affiliate program it would look far more lucrative to prospective affiliates if I could show they would be earning sizable commissions per sale using this format.

2) Also based on my membership I'm really not sure how long members would stay, say if I did it month by month. My rational, is that if they pay for the full membership up front they might look at it as they have it for a long time in case they need it.

3) I've tested this kind of thing before and it seemed to work out okay but the refund rate is a lot higher. Like I think it was hovering around 10%.

4) I think the other factor is that on average I'm pretty sure the member will not stay for over 1 year in a typical month to month scenario. The reason is that this membership is part n parcel to something else they're doing. And the averages show that other hobby will only last less than 1 year.

But again the big advantage is getting the funds for the full membership in advance.

the alternative might be to price it monthly like: $29.95, $39.95, $49.95, $59.95, or whatever. I just hate the idea of someone joining for $29 bucks just to see what you have to offer and then not committing to it. Although I guess if you had it cheap they might be less concerned about any big hit to there budget and they might continue to buy month after month as it's not a big amount on there statement each month.

I'm just debating it all. What do you think of this situation???

Does anyone have any suggestions??? :rolleyes:
#annual #members #membership #monthly
  • Profile picture of the author nmcc
    Who in their right mind is going to commit to a 6 month sub until they've seen the quality of the material? Offer them a month to month package and a huge incentive to pay for longer timescales up front when they get to renewal.
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  • Profile picture of the author peteJ
    I don't think you can get around offering a monthly charge, too many people are going to skip on your product if they have to invest 6 months at a time. You can however try to entice them to pay for more by charging higher if they pay monthly.

    Especially if your service is not well know people are not going to want pay for months up front. You'll need to deliver an extremely good sales pitch and show that they're paying for quality. Even then your going to have people not want to pay for more than a month at a time, and then you have a choice to make:

    Do you let these people walk and make nothing while you hold out a higher price.
    or
    Do you let them pay for a month and at the least make something, possibly turning them into a more long term subscriber?

    In my opinion if your offering quality people are going to come back for more. Providing a month option is something I would definitely implement.
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    • Profile picture of the author IvoryPulse
      If I've understood correctly, your goal is to make people stay using your service and you're worried they won't if they have the ability to pay monthly?

      Trust me - there is nothing that will make people continue using the service they don't like, not even if they've paid a ten years membership. You should be ready to the fact that some people will come and stay, some will go away. I would allow monthly payments, unless it is the type of a service where is no much point in one month membership.

      If you really don't like monthly fees that much, you can always give the demo period after which your users will be able to decide if they want to continue with a membership plan bigger than 1 month or not.
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  • Profile picture of the author Gambino
    A 5 year subscription? Geez. I would go month to month, quarterly, 6 months, 1 year, and maybe lifetime.

    You said yourself that most people won't stick around more that 1 year because it's a gateway to something else.. So why even offer multi year memberships?

    I'd rather have someone sign up for $29 for the first month and realize they don't need the membership anymore, than not have them sign up at all because the membership length and price commitment is too high.
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  • Profile picture of the author Rod Cortez
    Originally Posted by aceshigh888 View Post

    I'm working on a new project.

    It's a membership site. I've gotten to the part of pricing the memberships.

    Need your advice...

    I have 4 levels of membership at the moment. And at the moment they range from:

    $197 for 6 months,
    $297 for 24 months,
    $397 for 36 months or
    $597 for 60 months.
    What niche are you targeting? Are your prospects used to seeing membership sites like this?

    I'm just debating the format as there's several factors to consider such as:

    1) For an affiliate program it would look far more lucrative to prospective affiliates if I could show they would be earning sizable commissions per sale using this format.
    Only if they weren't very bright or sucked at math. The affiliates that matter (the ones who can send you tons of traffic) are going to want to get paid as soon as possible and I'm not sure you set up makes that possible (unless you're going to pay upfront commissions right away or maybe after a 30 day period).

    2) Also based on my membership I'm really not sure how long members would stay, say if I did it month by month. My rational, is that if they pay for the full membership up front they might look at it as they have it for a long time in case they need it.
    My own numbers and data doesn't support this at all. I've tested a lot of pricing models in more than one niche. Roughly 78% of the people are going to quit during the first 90 days, irregardless of they paid monthly, for 6 months, or for 12 months.

    3) I've tested this kind of thing before and it seemed to work out okay but the refund rate is a lot higher. Like I think it was hovering around 10%.
    I'm incredulous at this. How many members did you test on and for how long? I've been running pricing tests on different kinds of membership sites for years and the monthly membership fee structure usually won hands down.

    If you're running some kind of stock trading or forex trading platform and education, your pricing scheme might work.

    4) I think the other factor is that on average I'm pretty sure the member will not stay for over 1 year in a typical month to month scenario. The reason is that this membership is part n parcel to something else they're doing. And the averages show that other hobby will only last less than 1 year.
    My own testing shows that you actually get more net profits if you offer a monthly membership. Remember, the more options and flexibility you have with your payment options, you're going to increase sales.

    People are going to drop out, that's part of doing this kind of business model. You want to focus on signups and retention.

    But again the big advantage is getting the funds for the full membership in advance.
    Not necessarily, it depends on how much you're getting in aggregate versus a monthly membership. You'll get less signups at those higher prices, unless you're offering something that has more inelastic demand than your competitors.

    the alternative might be to price it monthly like: $29.95, $39.95, $49.95, $59.95, or whatever. I just hate the idea of someone joining for $29 bucks just to see what you have to offer and then not committing to it. Although I guess if you had it cheap they might be less concerned about any big hit to there budget and they might continue to buy month after month as it's not a big amount on there statement each month.
    That's why you drip feed your content if you're able to. This way a person can't join and see everything you have to offer during the first month or two. Set it up where they have start off with the basic or whatever and let them know upfront that this is how it's set up.

    Quit worrying too much about people joining and quitting, focus on new signups (sales) and retention (offering value).

    I'm just debating it all. What do you think of this situation???

    Does anyone have any suggestions??? :rolleyes:
    I have a suggestion. Run a split test with two different pricing models and compare which one does better. Make sure you do it long enough and have enough data for it be statistically relevant.

    RoD
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  • Profile picture of the author TiffanyK
    If your customers can not see your product they will not sign up for your site for two reasons. First, the large financial commitment. Second, the large time commitment. I would highly recommend offering a monthly charge, this will allow customers to see your product without a large money and time commitment. If your product is good, they will be willing to make the larger commitment and you will receive the full membership funds in advance.

    Another option is offering a free trail period. This would allow customers to see your product, fall in love with your product and be willing to make the financial commitment to your company.
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  • Profile picture of the author NewParadigm
    Your only "lock-in" is providing top notch value month in and month out. You'd be foolish to not offer monthly unless you are some high demand guru. There is a reason why many services are monthly w/ no commitment.

    Give them a good reason to continue paying you monthly. Be indispensible. That is your long term guarantee, not some lock-in pricing plan.
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  • Profile picture of the author yakim1
    I have found more success with membership sites when I offer a $1 7 day trial and then bill for the full membership. I have gotten testimonials of member who have stayed saying that they would not have even concidered the membership if it wasn't for the trial period.

    I hope this has been helpful,
    Steve Yakim
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    • Profile picture of the author IvoryPulse
      Originally Posted by yakim1 View Post

      I have found more success with membership sites when I offer a $1 7 day trial and then bill for the full membership. I have gotten testimonials of member who have stayed saying that they would not have even concidered the membership if it wasn't for the trial period.

      I hope this has been helpful,
      Steve Yakim
      I like this method. It's not free so users see it as more worthy and important than free trial programs, it's low enough so people will buy it, and if the service is good enough they'll most likely stay.

      If I were into membership sites, I'm sure I'd do the same.
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  • Profile picture of the author Max Greenflame
    I think you should probably charge them per month. Your members gonna feel safer. Many people just won't sign up if they have to pay for months upfront, you'll simply leave a lot of cash on the table. Giving them options to save money paying for 6-12 months upfront is great but nobody's gonna pay you for up to 60 months. Nobody can be sure your site will last that long. What if you shut it down without refunding them money? They won't be comfortable with that thought.

    An interesting story. Once I subscribed to a membership site. It was updated every month with internet marketing content. The fee $27 per month. When I entered the premium vault full of good things I noticed it had all stuff collected during the year in one place. So the very first members if they were still on board the club had to pay 27 x 12 = $324 each to get hold of the same number of digital products as me for $27. I just downloaded everything I wanted and cancelled the subscription. In 5 months I came back and subscribed again. I grabbed all I needed from the whole library of new products added within this period of time. I was charged $27. If I didn't cancel I would have to pay 27 x 5 = $135. $108 saved. Not much but I bought an ad space on a cool blog for that buck and made sales.

    Be sure you give your subscriber what he's charged for. No more no less.
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    • Profile picture of the author JohnMcCabe
      Here's a compromise scenario for your test lab. In other words, I have no clue whether this would work for you or not, but it's something to consider.

      You want a long term commitment, prospects don't.

      You could offer them a one year membership, paid in 12 monthly installments. If they quit before the year is up, they don't make the last payments, but you offer no refunds for past months for which they have paid.

      That won't stop someone serious about a refund from asking for one, or trying a chargeback or something. If someone asked, I'd probably give the refund on the condition that they don't tell anyone about it. Make the refund the exception, not the rule.

      Look at the various ombudsman sites and "consumer watchdog" reporters. How many times have you seen "we don't offer refunds, BUT we'll make an exception in Mrs. Doe's case as a courtesy"?
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      • Profile picture of the author Lance K
        Annual rates are not bad if it's a B2B offer or if it's a B2C offer that represents a substantial savings over the monthly fee.

        Pricing based on affiliate wants rather than customer wants won't work.

        You have to price it at a level that gets people join. From there, you optimize lifetime customer value through testing.

        Then worry about affiliates.

        At the beginning, use whatever money you would pay out in affiliate commissions to drive your own traffic. If you optimize your offer on your own dime, attracting affiliates is going to be much easier.

        Don't think of affiliates as traffic faucets you use to validate your offers. Think of them as traffic faucets you use to SCALE your offers after you've already proven them.
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  • Profile picture of the author aceshigh888
    Well it is B2B. That's another reason. Plus I've done some testing on this type of thing in the past. And my experience was that the higher prices made far more money. My challenge is that I think from my experience I'd say the average customer is at most going to stay 6 months. I'm assuming a bit here but I'm fairly sure. So ideally I wouldn't mind trying to offer longer term packages to try and lock them in for longer. I don't know. its hard to say right now but Im pretty sure the money to money thing really won't amount to a whole hill of beans as I've done something similiar to this before and my experience was the higher the prices the more money was made. Also there was that perceived value like "it's got to be good if it's this pricy" sort of thing.
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    • Profile picture of the author Lance K
      Originally Posted by aceshigh888 View Post

      Well it is B2B.
      Good to know. Your wording in your OP made it sound like maybe it was a B2C audience dealing with hobbyists rather than B2B.

      I don't see too much wrong with your pricing structure since it's a B2B offer. Without knowing more about the offer, the only things I'd personally consider changing would be to drop the 36 month option and make the 60 month option into a lifetime subscription.
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      "You can have everything in life you want if you will just help enough other people get what they want."
      ~ Zig Ziglar
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      • Profile picture of the author MarketMaster13
        Its a great idea,I would go for a month to month subscription to start with.This will help to know the demand then you can adjust to include the other subscriptions.
        All the best!
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  • Profile picture of the author hustlinsmoke
    A member to a membership site if it's a decent site stays 3.5 months on average.
    I hope that helps you some.

    If you do offer an annual make sure your refund policy reflects the only refund they get is for the unused portion of the memembership. So if they they pay for a year then cancel after four months give them a prorated refund for 8 months.
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  • Profile picture of the author natebunger
    You can simply put yourself in the shoes of your customers and ask yourself this question. It's also easy to answer: If you don't trust it yet, you can go for monthly so if you don't like it, it wouldn't at least hurt because you are just paying it for a month.
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  • Profile picture of the author jazbo
    Monthly, quarterly, Annual and Lifetime. Add a free trial to gain trust and encourage trust.
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  • Profile picture of the author gcbmark20
    Get them in there first!

    Make it easy for them to get access and see how great the membership
    site is.

    Offer a low priced trial for 1 day to one week then increase the price.

    If you have tons of value there then it will make your members feel a lot
    easier about making a decision to stay on as members or not.

    Don't over think this!

    Get some members into the program then test different price points later.

    PERFECTIONISM = POVERTY!

    Regards
    Gavin
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