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How To Test A Pricing Conundrum?

by mkitchen
8 replies
I run a very niche membership site where people basically pay to get access to content and I add new content each month. I currently have two membership options that sell at almost a 50/50 (on average) comparison. 2.99/mo recurring or 19.99/yr nonrecurring (please no comments on if price is too low it makes sense for the niche).

The main issue I'm very concerned about is if I am leaving money on the table w/ the $2.99/mo option. I originally put it on there to get people who would not be willing to pay $20 upfront. [NOTE - I am selling to people in a niche who often are not used to paying for what I offer] I am averaging around $9-12 for people who susbcribe monthly (they usually stay around 3-4 months). This data is fuzzy though as I still have a lot of people around this range who have not unsubscribed yet.

With the math, they have to stay at least 7 months to make it on par with a yearly subscription. If they are only staying 1-5 months then it would have been more profitable for me if they only had the yearly to choose from.

What I just don't know is the percantage of these people that only bought because they could jump in for $3. If they never would have considered the $20 then I'm to continue on like everything is going. But if they would have payed the $20 then I'm doing myself a major disservice.

Does anyone have any ideas how to test and figure this out?

Hopefully this wasn't too confusing.
#conundrum #pricing
  • Profile picture of the author Micah Medina
    3 bucks a month can be an invisible charge that people keep on their books for years. 20 can be examined more closely. You could set up an a/b test, but I would leave it as is.
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  • Profile picture of the author MaxPowers
    A/B testing...test,test,test

    Run a few days, week, or month (depending on sales volume) and show 50% of visitors your $20 offer only, and 50% get the monthly option, you could run a third test where you offer monthly recurring only and split it with 33% of visitors for each version.

    Google Website Optimizer is free and works well. There are many other free and paid split testing options.

    In my experience, many tests come up nearly even with one slightly better than the other, but some gems make a HUGE difference that I wouldn't have guessed, even after doing this for almost 15 years.

    What works in one niche may not work in another... always test more.
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  • Profile picture of the author Cheryl Low
    Seems to me that you'll really only get the most definitive answers with long-term data (at least with many of you monthly sign-ups passing the 7 month mark).

    Then you can solve the conundrum with simple maths. What proportion opted for the annual? How many for the monthly? What's their average duration of stay?

    If say, 70% opt in for monthly now and on average they stay 7 months - you're much better off maybe even just doing monthly? Or you may stick with your current price points.

    On the other hand if 90% choose monthly but on average they stay 4 months - then you will need to tweak the prices.

    But if 30% choose the monthly and on average they stay 4 months, again you may want to tweak your offers - but this time you may consider leaving out the monthly offers and offer say 6 and 12 month offers instead.

    I also agree with Micah Medina that there are probably many people who wouldn't want to commit to the lump sum, preferring to test it out with a smaller upfront payment first. Then they forget or don't bother to cancel or upgrade because of the small amounts.
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  • Profile picture of the author mkitchen
    Really good replies guys - thanks.

    In fact you echoed a lot of what was in my head which helps me cement.

    Cheryl, I do think I need more data. I'm coming up on 12 months of running this (next month) and I still have lots of users subscribed that have been with me for 3-11 months. So i think I need to see how things go for maybe even one more year to get the best data to judge by.

    Micah & Cheryl, I think customers forgetting about the $3 price and letting it continue to roll is absolutely spot on. The last couple of months have really proven that as I am in the education space and here in the U.S. most teachers are on summer break, yet I am still around 90% retention since summer began - so that helps to prove your theory. It will be interesting to see how many people let it roll past 7 months...

    Max, I have thought about A/B testing but I am concerned as my traffic isn't large - 30-50 uniques a day (all organic) so i would need to let the A/B test run for a very long time to get good data. And I am not sure how I feel about leaving my site in flux that long. Now that I have revenue built up though I am thinking about running a significant CPC campaign which might be worthwhile to test against that.

    Good thoughts guys - thanks.
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    • Profile picture of the author Lance K
      Have you tested the $19.99/year option with a $1 trial for x number of days?

      So they get charged $1 and if they don't cancel before the trial period is up, the other $18.99 is automatically charged.
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      • Profile picture of the author mkitchen
        Originally Posted by Lance K View Post

        Have you tested the $19.99/year option with a $1 trial for x number of days?

        So they get charged $1 and if they don't cancel before the trial period is up, the other $18.99 is automatically charged.
        I haven't tried this because they are buying access to basically download files (PDFs). I thought that with a small upfront cost but a big cost coming down the pipe that they would be more incentivized to buy small - download all they can and then cancel before the big payment hits.

        I feel small continuous payments don't do this because a *majority* of people don't fear another $3 coming down the pipe so they are less inclined to download all at once and cancel before the next payment. Over the last year i've only had 2-3% of my customers do this.

        This is of course in theory as I have not tried what you are suggesting - it something for me to think about though.
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        • Profile picture of the author Claude Whitacre
          You have received some very good advice here about testing. One thing I would add. If you know that your average monthly buyer stays 3 or 4 months, I would suggest offering a monthly program that ends in 6 months, and then they stay forever for free. That "light at the end of the tunnel" really keeps them on the books. Almost nobody will leave if they only have 2 or 3 more months until they get free access forever. I've used this idea to almost double a client's "per customer value".

          After they sign up for the $20 a month (or whatever figure you like), for 6 month, you can then send an e-mail offering to drop a month or two if they just pay upfront. Most will jump at that offer.

          I hope you use this idea, it really works.
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          • Profile picture of the author mkitchen
            Claude, small world! You are in my home town! I only live 45 min away.

            That is a really interesting idea I definitely would not have thought of and might play really well to my audience if I tweak the figures just right. I'll have to put some deep thought into that one.
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