[HN Gopher] Ask HN: My startup has more annual subscribers than ...
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Ask HN: My startup has more annual subscribers than monthly. What
to make of it?
I very recently realized that my product has more annual
subscriptions than monthly ones. This was very surprising because
it goes against everything I've read online. I offer only one tier
that gives you access to all features; it costs $X/month or
$10*X/year (the typical two-months-free-if-you-pay-annual thing you
see everywhere). The split in subscribers between the monthly and
annual plans is 44% and 56% respectively and I don't know how to
interpret this information. Does this mean I should simply
increase prices? Is it fair to interpret this as the majority of
the market saying "I'm happy to pay the highest tier your product
offers"? I'm know that HN always suggests increasing prices all the
time, but I'm wondering if my situation is an even stronger signal
to increase prices. Does this mean I should offer more than one
tier and segment the market with different features for different
prices? My product isn't very niche or anything like that. It's a
typical internet/web SaaS, so I believe most advice should be
generally applicable.
Author : throwaway_23124
Score : 71 points
Date : 2021-04-15 14:59 UTC (8 hours ago)
| jimnotgym wrote:
| > Does this mean I should simply increase prices?
|
| Does anyone else hear patio11's voice in their head shouting
| "YES"
| 147 wrote:
| Please watch this video at this time stamp:
| https://youtu.be/otbnC2zE2rw?t=815
|
| Jason Cohen goes into why annual prepays are great for
| bootstrapped SaaS.
| ajaimk wrote:
| 2 months off for paying annual pricing is a very good deal for
| someone who plans to use you product on the long term. I
| personally have a few items I pay for annually because I don't
| see myself stopping from using it AND there is no obvious
| replacement.
|
| I would NOT recommend changing the 2 months off; you'll annoy
| your most loyal customers.
| DamnYuppie wrote:
| He can keep that pricing tier/billing plan for existing
| customers and create a less generous one for new customers. I
| would keep reducing the discount until sales fall way off.
| atat7024 wrote:
| What metric confirms that correlation?
| radley wrote:
| It's basic pricing strategy:
|
| Kevin Hale - Startup Pricing 101
|
| https://youtu.be/jwXlo9gy_k4?t=578
| skrebbel wrote:
| you can grandfather existing customers into old plans and still
| experiment with pricing.
| throwaway_23124 wrote:
| I absolutely don't plan to change any existing subscription;
| everybody always gets grandfathered in forever. The early
| adopters' invaluable feedback + potential bad rep from raising
| prices is reason enough. I'm mostly looking for advice on how
| to price things for my future customers :)
|
| >2 months off for paying annual pricing is a very good deal for
| someone who plans to use you product on the long term.
|
| I too pay for some things on an annual basis (e.g. email). I
| guess never expected my product to be sticky enough for people
| to want to go annual straightaway. To be very blunt because I'm
| anonymous, how do I monetize this stickiness to extract maximum
| value from future customers?
| nextaccountic wrote:
| > how do I monetize this stickiness to extract maximum value
| from future customers?
|
| Don't. Focus on acquiring more customers instead.
| ipaddr wrote:
| If your product is priced well putting a year down makes
| sense. I only want to worry about you once a year.
| jimkleiber wrote:
| I've often thought about giving a one month option and a
| three month option (quarterly) and yet I haven't really
| seen this in SaaS... do you think there might be some
| people who would prefer to only worry about it once every
| three months?
| prox wrote:
| A company I bought a plugin from, had a one fixed price for
| all time. They kept all the old customers in that bracked,
| but new customers have to buy a yearly fee.
|
| So I would create a new subscriber role and simply let your
| new customers pay a bit more.
|
| It is wise to be upfront with existing customers : say you
| have need for more funds or more investments, relay that to
| your existing customers, say you are keeping their price
| (indefinitely if possible) and that new customers going to go
| into the new tier.
| hluska wrote:
| Two things:
|
| 1.) My first (and most imminently actionable) conclusion is that
| you should immediately stop what you're doing and give yourself
| some deserved praise. You've accomplished something unbelievably
| cool and achieved what I'd consider the ultimate in validation.
| Not only have you found some form of product/market fit, but your
| clients commit.
|
| 2.) What does data tell you?? How is your pricing relative to
| competition? Do you have clusters of users inside of the same
| organization? Do annual users have anything interesting in
| common? What does support/suggestion volume look like between
| monthly and annual? Pick four users who you would like to smoke a
| joint/have a beer with - are they annual or monthly users??
|
| Basically, figure this shit out - you might be running into
| pricing theory (charge more) or this might be real serious
| insight into your customer base.
| dumbfoundded wrote:
| If it's not broken don't fix it. I would focus on the top of your
| funnel to increase sales.
|
| Also, you want to have more annual subscribers than monthly. It's
| almost certainly more profitable. You're essentially giving up
| 1/6 of revenue in exchange for guaranteed 0% monthly churn. A
| simple estimate of what your breakeven monthly retention is:
| 98.5% = (5/6)^(1/12). So if you're losing less than 1.5% of your
| customers monthly then this would be unprofitable.
| orasis wrote:
| I sooo disagree. Mispricing could be leaving massive value on
| the table plus increased margin can allow you to pay more for
| user acquisition.
| astrocat wrote:
| Your approach sounds like the mindset of chasing growth
| instead of sustainability. Short term gains over long term
| value.
| dkubb wrote:
| One idea might be to focus on trying to convert monthly
| subscribers to yearly.
|
| You could offer a subset of monthly subscribers a one-time
| upgrade to a yearly subscription at a prorated discount.
|
| So people one month into their subscription could get the
| remaining 11 months for the annual cost minus the 1 month fee
| they already paid.
| irscott wrote:
| I think it means you're dialed in just right.
| znpy wrote:
| Two things:
|
| 1. you could keep you customers happy by changing nothing.
|
| 2. if you have a money-back policy on your annual plan (eg: pay
| in january, cancel in june, get ~50% back on what you paid) that
| effectively means that you're giving a discount for an only
| apparently sure earning. I'd give a look into that.
| graeme wrote:
| Number 2 is actually pretty common. Maybe not as an advertised
| policy but if you write to cancel reps will often give a pro
| rates refund.
|
| This may happen more in businesses which figure you may be back
| someday.
| nicolas_t wrote:
| What I've seen that can be effective is to not have a pro
| rated refund but have the ability to pause the account. This
| means that the discount for the 1 year commitment still makes
| sense but shows that you're willing to work around the
| customer's life or issues.
| xemdetia wrote:
| I would go further and expect number 2 to be the norm. If I
| pay for a service and I'm allocated and the service is up and
| available for 6 months and I have 6 months left I would
| expect the refund to be 6 months and not from the beginning
| of the contract. They've already spent the money and you've
| already earned the money at that point.
| carstenhag wrote:
| But then it doesn't make sense to have the yearly
| subscription (and 12 months of contract duration at a
| time). Then you can just have the monthly subscription.
| xemdetia wrote:
| I think you are approaching it from a different place
| than I am. If I get into an annual contract I have the
| expectation that I would be paying the full amount up
| front to secure the discount and that I would be
| utilizing the full amount of the term. If after six
| months I stop then that's for some new reason that was
| not there in the start. At that time I would expect a
| rebate for the services that would not be rendered. I
| could be a six month customer or a ten year and six month
| customer and have the same expectation. Things change.
| barry27 wrote:
| So use the monthly subscription then. It's preposterous
| to expect someone to refund you simply because you
| changed your mind. If you bought a microwave, for
| example, and then subsequently decided you preferred to
| use your stove, you wouldnt take it back, would you. You
| bought access for a year. That is the indivisible product
| you now own.
| krallja wrote:
| Charging someone's credit card 12 times a year has a
| definite cost. Having the funds ahead of time is also
| worth more than earning the funds one month at a time.
| andy_ppp wrote:
| Sounds like people rate your product, time for an enterprise
| version at a higher monthly tier level I would think...
| weaksauce wrote:
| personally I think it causes the least amount of bad will if you
| leave the existing plans at $10*X/year for the people that are
| grandfathered into those contracts. If you increase the price
| only on new signups you will keep your happy customers... this
| goes well with an email that says something like "we are raising
| the yearly fee on the SAAS however the good news is that you're
| grandfathered into your current pricing for as long as you
| maintain your subscription"
| digi59404 wrote:
| Here's my two cents.. I would first off send your customers a
| survey about where they find value and why they picked yearly
| over monthly.
|
| Next - I would not increase prices. I would add value, and
| increase pricing on that. Add more features, and add another
| pricing tier that people can find valuable with these new
| features.
|
| Continue to do that until you have multiple pricing tiers; (if
| you don't already). Then add value into those tiers and increase
| cost to reflect that extra value add as needed.
| matco11 wrote:
| Because the discount rate of the yearly plan is financially very
| attractive (17% off), there are really two main reasons people go
| for the monthly option: 1) they are unsure if they are going to
| like your product enough to be willing to go for the bigger
| commitment of the yearly subscription 2) they can't afford the
| yearly payment upfront (this is especially valid for very
| expensive subscriptions)
|
| On the yearly subscription, do you charge for the entire year
| upfront? If not, you are eliminating reason 2) above to go for
| monthly
|
| How is the distribution of vintages of your user base? Depending
| on your growth (and churn) rate, the distribution of old (>1 year
| old) vs. new (<1 year) users might drive more yearly
| subscriptions: the slower you grow, the more old users you will
| have in your mix of paying users. Old users already know they
| like your product and are much more willing to take the
| commitment of the yearly subscription to get the financial
| savings.
|
| ...so that might explain why you have a majority of annual plans.
| It's always a good idea to experiment with your prices and
| segment the market, it's almost always a good idea to do it
| without disrupting (too much) your existing user base.
| aasasd wrote:
| > _On the yearly subscription, do you charge for the entire
| year upfront?_
|
| I mean, to my knowledge, that's the whole reason to give a
| discount for the yearly payment. Isn't it?
| carstenhag wrote:
| Also, but not only. Yearly subscriptions in itself guarantee
| that the user commits to 12 months and can't cancel during
| those 12 months
| leetcrew wrote:
| if it's not upfront, they can always stop paying. you don't
| want to sue your users for breach of contract over a
| $5/month subscription.
| aasasd wrote:
| > _can 't cancel_
|
| That's how you get angry posts on social media. See: Adobe.
| another-dave wrote:
| I think GP means "cancelling doesn't get you a pro rata
| refund" (which you wouldn't expect if billed annually)
| rather than you literally can't cancel :)
| B1FF_PSUVM wrote:
| I think the angriness was from Adobe refusing to cancel
| now effective at the end of the contracted year - i.e.
| making a simple "does not renew" note - more than 30 days
| before end of contract, or somesuch. Therefore catching
| forgetful customers paying for a second unwanted year.
| "Understandable", as they say.
| II2II wrote:
| I suspect that has a lot to do with billing monthly for
| an annual plan. That leaves people deciding whether to
| continue paying for a service that they are not using or
| paying out a penalty in excess of the monthly rate to
| terminate the service. Both options leave the impression
| that the company is trying to punish the customer.
| Contrast that to paying for a year upfront, where the
| customer is more likely feel foolish for paying for
| something they did not need.
| nielsole wrote:
| Yearly contracts paid monthly give a great income
| predictability already which mitigates risk. Also customer
| retention / CLV might be better, because users pay until the
| end of the 12 months despite stopping using the product
| earlier.
| kelnos wrote:
| There's more risk there, though, no? A customer could
| cancel before the end of the year and simply stop making
| the remainder of the payments. Sure, there's recourse, both
| through the credit card companies and courts, but that
| takes time and effort and possibly lawyers (aka money).
|
| If you require annual customers to pay the entire year up
| front, you get the money, and that's that, barring credit
| card chargebacks.
| throwaway_23124 wrote:
| >On the yearly subscription, do you charge for the entire year
| upfront?
|
| Yes. The annual subscription is < $250/year, so I don't believe
| it's expensive enough to stop people purely because it's a big
| charge.
|
| >How is the distribution of vintages of your user base?
|
| My startup is fairly new (12-18 months old), so I don't have
| much insight into such statistics. However, I will note that
| growth has somewhat stagnated (<4% MRR growth every month).
| While I'm not looking to grow rapidly and I don't have any
| external pressure to grow (no VCs :)), perhaps the stagnation
| is a good motivation to introduce segmentation, higher prices,
| etc.
|
| >it's almost always a good idea to do it without disrupting
| (too much) your existing user base.
|
| Absolutely. I always grandfather existing users and I have a
| few dozen very early users who are paying peanuts compared to
| the current pricing. I value their super early feedback a lot
| in shaping my startup, so I'm happy to grandfather their
| subscriptions forever. I even get emails every now and then
| from some early users asking if I could "upgrade" them to the
| current, higher pricing!
| matco11 wrote:
| Sounds great. Maybe, in addition to working on price
| segmentation, one way to leverage the behavior ("stickiness"
| as you call it) of your users is to create a mechanism to
| make them refer new customers to you: you can create an
| inexpensive growth engine, for example like Dropbox did with
| its referral program.
| holletron wrote:
| > Yes. The annual subscription is < $250/year, so I don't
| believe it's expensive enough to stop people purely because
| it's a big charge.
|
| One point to add - If I bought it for a month and liked in
| enough, I'd get annual for that price just to save me the
| hassle of getting invoices/receipts each month and having to
| run them through accounting. One payment, one invoice, done
| for the year.
| glacials wrote:
| Where are your customers in the world? Many non-US countries have
| little/no credit card presence, so if you don't have an
| international-friendly payment option like PayPal your customers
| may be using "gift card credit cards" purchased from a store.
| It's easier to do this once a year than once a month.
|
| Ultimately though, talk to your users! That's how you'll find
| out.
| traceroute66 wrote:
| > Many non-US countries have little/no credit card presence
|
| Was that statement accidental horrible wording or did you
| actually mean it ?
|
| If the latter, then you must be one of those many Americans
| that needs to travel more. The rest of the world are not
| neanderthals who've never heard of credit cards.
|
| Go to Kenya (Africa) and the only reason you might struggle to
| pay by credit card is if the merchant has decided to prefer
| payments via the M-PESA money transfer phone app instead which
| is what most of the locals use. So you could say a number of
| non-US countries are even ahead of the US !
|
| But of course I hope your wording was accidental, in which case
| I apologise for the three paragraphs above. ;-)
| AdrianB1 wrote:
| Availability and usage is not the same. In Europe credit
| cards are widely available, but in some countries they are
| not used for various reasons, it can be cultural (ex:
| Germany) or bad conditions from the banks (ex: Romania).
| r3drock wrote:
| In Germany for example, a lot of people have no credit card.
| JohnBooty wrote:
| We should always be on guard against such things, but is
| parent's statement really bad?
|
| It didn't imply that other countries are backwards, or that
| their people are "neanderthals who've never heard of credit
| cards."
|
| It's a fact that credit cards simply aren't equally popular
| in all parts of the world and naturally this is something
| that must be taken into account.
|
| This includes places that are arguably more advanced than the
| US. Of which there are many many many many.
| nikisweeting wrote:
| Credit cards are still pretty difficult to get in Colombia
| and some other countries in South America. You can get them,
| but you need a long relationship with your bank, and the
| process is expensive and time consuming for not very much
| cash back, so most people don't get them.
| ComodoHacker wrote:
| >which is what most of the locals use
|
| That's the point GP is making. It's not that people can't use
| credit cards, just don't have one available at the moment
| they are ready to pay for your product.
| watwut wrote:
| I am in EU and around me people use credit cards only if
| America requires it for some reason. I don't even own it.
| NikolaNovak wrote:
| Dunno, in a lot of europe, though credit cards are readily
| _available_ , most of my family (I have relatives in Germany,
| Austria, Slovenia, Croatia) doesn't have or want them. They
| have forms of payment which are strange to me but basically
| are some form of bank debit card, accepted everywhere. Or
| fancy phone / app payment methods we can only dream of here.
|
| I didn't read the OP as necessarily implying technical or
| cultural superiority; credit cards are big in US and may or
| may not be big somewhere else, as you point out as well, so I
| felt the quoted statement is quite plainly factual rather
| than layered with hidden or interpreted meanings...
| Graffur wrote:
| How do you know what cards your relatives in other
| countries have?
| NikolaNovak wrote:
| I mean, if genuine question, how do you know anything
| about your family? :)
|
| You talk, you notice when you go shopping together, etc
| :)
| hurflmurfl wrote:
| When a form on a web-site says CC (Credit Card) I can
| always pay with my debit card. (Unless you're talking about
| another sort of debit card that isn't what I call a debit
| card - "a MasterCard/Visa/etc with no overdraft).
|
| To me it seems like some people use the term "credit card"
| for any bank card, while some actually mean the "credit"
| part. While "credit" (non-debit) cards don't seem to be
| THAT popular in the European part of the world, I think
| that bank cards are pretty much ubiquitous.
| banana_giraffe wrote:
| For what it's worth, what you have is a Visa Debit (or
| Mastercard Debit) card, though the branding on them isn't
| consistent. Debit cards that can't interop with the
| Visa/Mastercard networks do exist, I have one .. mostly
| because I'm lazy and haven't asked for a change.
|
| Dunno how rare they are, I suspect rare, but I can't find
| any numbers with a quick search.
| frosted-flakes wrote:
| All of Canada uses debit cards that don't work over the
| credit network. Some banks allow you to request a VISA
| number that's linked to your chequing account (for online
| use only), but debit cards use the separate Interac
| system.
| banana_giraffe wrote:
| Interesting. I should have been clear:
|
| I suspect debit-only cards are rare in the US. Outside
| the US: No clue at all.
| gwillen wrote:
| I have heard debit-only cards in the US referred to as
| "ATM cards" occasionally, but that was a few years ago. I
| think if an account belongs to a minor child, it may not
| be possible to get a regular debit card (that also works
| with the credit card network), but an ATM card may be
| possible? That's the only reason I'm aware of to get one.
| NikolaNovak wrote:
| >>When a form on a web-site says CC (Credit Card) I can
| always pay with my debit card.
|
| Here in Canada, many debit/bank cards _now_ have
| affiliation with Visa or Mastercard (obvious with a logo
| in corner), and CAN be used as Credit Cards.
|
| But that hasn't been the case historically - debit/bank
| card would work on bank's ATM and related Interact/Plus
| systems. But until semi-recently would NOT work if you
| accidentally hit "Credit" instead of "Debit" on ATM or
| retailer's POS system, and would NOT work on websites
| requiring Credit card - completely different paths. And
| to my knowledge many bank/debit cards in Canada still
| cannot serve as credit cards - they just don't have that
| capability/afiliation baked in.
|
| Note - I speak as a semi-observant customer, I have no
| systems-based knowledge of these things :-)
| VonGallifrey wrote:
| There is another debit card here in Germany.
|
| I have such a card and it is neither a MasterCard or Visa
| card. It looks like a Credit card with a Chip and
| magnetic stripe, but it has my IBAN on the front instead
| of a Credit Card number. These cards are the standard
| here in germany. If you have a german bank account you
| get one of these.
|
| You can use it pretty much like a Credit Card and you can
| even pay contactless with it, but I think you can only do
| so here in Germany. Though it does not work if you only
| support credit cards.
|
| Since these cards are standard and free some people do
| not bother with a credit card.
| alanpearce wrote:
| Yes, there's a different kind of debit card. I usually
| use a different term that's country-specific (like the
| cards themselves).
|
| For Germany, a German debit card (the "other sort", as
| you put it) isn't the same as any other. It doesn't have
| Visa or MasterCard co-branding like other countries'
| debit cards, nor a 16 digit number, so it can't be used
| online. I might also use the term "bank card" for this,
| because there are actual debit cards with Visa/MC co-
| branding which are available in Germany, but less common
| than other types.
|
| It's also common for Germans to use "Kreditkarte" to mean
| anything with Visa/MC co-branding, which probably spills
| over into English. This also leads to the hilarious term
| "echte Kreditkarten" (real credit cards) for cards that
| actually have a rolling line of credit attached (these
| are rarely offered).
|
| However, in the UK I recall that people are usually
| specific about whether they mean a credit card or a debit
| card.
| skinnymuch wrote:
| Those gift card credit cards don't have the first year free of
| service fees? I think In the US they do, but no idea how the
| market is world wide.
| gpas wrote:
| EU here. Credit cards are just a way to pay online. There are
| countless debit cards and every bank account comes with a card
| issued in partnership with a international service like VISA or
| Mastercard to enable online payments and money withdrawal at
| foreign ATMs.
| throwawayboise wrote:
| If it's B2B, it's easier for business customers to get a once-a-
| year expense paid than to get authorization for a monthly charge
| to a corporate card. Many organizations don't like having their
| corporate card numbers enrolled in open-ended recurring charge
| plans.
| throwaway_23124 wrote:
| I see. My product is somewhat in between B2B and B2C (i.e.
| plenty of regular folks subscribing for their personal use, but
| also plenty of companies using it). Perhaps this is a strong
| signal in favor of price segmentation to make future B2B
| customers more than personal users?
| stonesweep wrote:
| B2C random internet user here, it's more complex than that
| for me and not always about price. I'd say the thoughts go
| something like this:
|
| - is this a product that involves a lot of personal time to
| get started with and migrate away from? (example: cloud
| hosting for files and photos)? With this type of product, I'm
| going to spend more time on the initial 30 day evaluation,
| and if it suits my needs then I go right for the (multi)year
| contract. The personal investment is large (get all those
| photos uploaded, e.g.) so my chances of leaving after a few
| months are statistically unlikely.
|
| - is this a product that I can walk away from with no real
| loss? (music streaming service) well this a service which
| quality can vary month over month, I'm more likely to use
| monthly pricing just so I can cancel at any time if I don't
| like it. I have no real investment to your brand, yeah it's
| nice but there's 100 others out there I can move too easily.
|
| Usually with a multi-year discount, I'll buy the first year
| _just to be sure_ and if I still like it after the first
| year, I 'll buy multiple years. Just so I never have to worry
| about randomly missing a payment or somehow "losing" it (my
| login, my access, my files, etc.) but balance that against
| "how long will this company be around, really?" - it's a
| sense of security over time because I've invested a lot of
| personal time into the product. Walking away is not in my
| plans at the time.
|
| Third reason that doesn't fit for you but is also a thought:
| is this a donation to (open source project)? Will I give them
| more money - less recurring middle-man processing fees - by
| paying one lump yearly sum instead of donating monthly? I use
| Liberapay for some FOSS donations and they tell you to do
| this straightaway, one lump sum is better for the receiver
| than monthlies.
| bjornsing wrote:
| Yup. Also if you're in a more bureaucratic jurisdiction (like
| Sweden, where I am) then the bookkeeping of monthly charges can
| be more expensive than the SaaS.
| JohnBooty wrote:
| Is there a community aspect to your site? the
| typical two-months-free-if-you-pay-annual thing you see
| everywhere
|
| Anecdotal, but --
|
| When I ran a dating/social site back in the ancient mists of
| time, it was $4/month or $20/year.
|
| So, more like seven-months-free-if-you-pay-annual. I felt it was
| successful at driving people towards the annual subscription.
| Since the annual subscription was such an obviously "better"
| deal.
|
| In my case I was actively trying to encourage the network effect.
| I wanted long term community members, not monthly ones. After
| all, when paying for a site like that, you're really paying for
| access to the community.
|
| Is there a value to having your customers around longer-term?
| Community aspects? Promotional aspects? ("40,000 active
| subscribers for $PRODUCT_NAME!") For many businesses perhaps the
| answer is "no" but it's worth considering perhaps.
| jnwatson wrote:
| Yeah we have month-to-month and 0% of our customers use it. Most
| organizations (and personally I'm the same way) prefer to make as
| few payments as possible.
| brundolf wrote:
| Not sure from a business perspective, but from a user
| perspective, I sign up for the annual plan when I feel confident
| I'm not going to stop using the service any time in the
| foreseeable future. So I'd take that as a good thing!
| c1c2c3 wrote:
| Personally I hate monthly payments for things. If it is something
| I'm going to use I may as well get a bit of a discount and not
| have yet another payment coming out of my account each month.
|
| Additionally I'm in the UK, so this won't apply everywhere. Some
| (Many?) bank accounts charge a flat fee on top of the currency
| conversion rate - again a reason to make just one payment a year.
| Spooky23 wrote:
| I know at work I would never do a monthly bill. Too much
| reconciliation to do.
| tylermenezes wrote:
| If it's b2b and low pricing, could be that it's not worth the
| effort to deal with monthly payments.
| 908B64B197 wrote:
| Sounds like you are creating value, and customers are confident
| in doing business with you for a longer period of time.
|
| So good job!
| gnicholas wrote:
| > _Does this mean I should simply increase prices? Is it fair to
| interpret this as the majority of the market saying "I'm happy to
| pay the highest tier your product offers"?_
|
| Not necessarily. It indicates that people don't view your service
| as transactional, and that people like to feel like they're
| getting a deal.
|
| If you want to experiment with higher pricing, you might try
| gating some of your features establishing a premium tier. I have
| done this with my browser plugin, which is $22/yr if you just use
| one browser, but if you want to use multiple browsers it's
| $40/yr. That has allowed us to price discriminate between lower-
| intensity users and higher-intensity users. We also donate 5
| licenses to students in low-income schools for each purchase at
| the higher tier.
| vannevar wrote:
| If it truly represents the people trying to buy your service, it
| sounds like a great sign. But you should check that there isn't
| some UX issue causing you to lose customers trying to sign up for
| the monthly option.
|
| It might also reflect some order flow impediment that affects
| both paths, but since the annual subscribers are more determined,
| more of them overcome it.
| bthomas wrote:
| Are the numbers current subscribers or new subscriptions?
|
| Hard to speculate without comparing churn.
| devops000 wrote:
| It might be your pricing is too low. Try to better evaluate how
| much value / saving they have using your product.
| tln wrote:
| Are your customers individuals, small businesses, large
| businesses?
|
| Is there a usage component you might add? Gb stored, social posts
| per month, etc
|
| Have you reduced the risk for your users to choose annual, eg by
| emphasizing "cancel anytime"?
|
| Seems like your users expect to use your product for a long time,
| that's great.
| polote wrote:
| Nothing. Your price has probably nothing to do with the split.
|
| It just means people are with you for the long term and they like
| your product.
|
| Your price should be linked to the value you are offering. If you
| think your value is more than the price people pay today, then
| increase your price to a value you are comfortable with.
|
| What is your objective ? is it growth ? is it profitability ? is
| i number of customers ? do you have competitors ? are you selling
| to b2c or b2b ? I'm not sure we can give you any relevant advice
| without a lot more information
| IncRnd wrote:
| 17% off is a very good deal for the consumer when prepaying a
| year. Always remember the axiom that a sale happens when you sell
| something the other party wants at a price you both believe is
| fair.
|
| Whatever you do, be careful not to add or modify plans in a way
| that would lose existing paying customers. As the other saying
| goes, a bird in the hand is worth two in the bush. An existing
| customer is worth a lot more than a prospective customer.
|
| There are lots of changes you could make, but you may want to ask
| your existing customers first as to why they made the choice they
| made. Ask them how you can improve their existing service. That
| will go a long way to inform your future decisions.
| shoto_io wrote:
| There are so many things one could say about this.
|
| But, from my own experience I have to tell you to do this: Talk
| to your customers. But not randomly. Talk to them immediately
| after they have bought their product.
|
| Then go and "interrogate" them. Don't ask directly, but
| indirectly why they chose this or the other plan. The key is to
| really understand what the circumstances were when they decided.
| What made them flip into one or the other direction.
|
| You won't find that knowledge "online".
|
| If you want to know more about the interview style, watch this
| video: https://www.youtube.com/watch?v=blTNLVuRU6k - starts at
| around 14:30. I would watch the whole thing though.
| bArray wrote:
| Something I haven't seen in the comments is simply that some
| businesses operate on an annual budget allocation, usually older,
| larger companies.
|
| One thing I would suggest about pricing is not to get greedy -
| nobody likes to be charged more simply because they can be. If
| you're going to increase pricing, I believe the perceived value
| should also increase.
| littlevache wrote:
| My 2 cents: I was once in your customer shoes, and I choose the
| annual plan because it meant encouraging the product, helping it
| not to go bankrupt. If your product/company is quite new, and
| provide something that people love and want to make sure stays
| available, they will help making sure it does. In your case, pay
| for the annual plan means pay more money to you in the short
| term, helping your balance sheet
| NikolaNovak wrote:
| Depends on your product.
|
| If service is something that seems superfluous, temporary, a lark
| - such as Reface or the myriad AI-repainters etc - most people
| will do the shortest period of time.
|
| If it's a business / utility tool that people find
| reliable/useful, most don't want the hassle of constant billing.
| Two months off is a great incentive for something you KNOW you'll
| use. And believe it or not, some people want to support scrappy
| startups with useful tools - I've personally gone through so many
| useful things that have disappeared, that I'll actively support
| new ones so I can use them for a long time :)
|
| As to what you should do, again, depends. Are you happy with your
| income, are your customers satisfied, is your growth what you
| expect? Don't feel like you _have_ to change anything :).
|
| Also, asking your customers may be a useful way to proceed to0
| ;-)
| AdrianB1 wrote:
| Don't take the idea to increase prices seriously, it is sometimes
| illogical: people talk about increasing prices and helping people
| to afford services in the same sentence. Keeping the prices
| constant and increasing the userbase may be a good way to
| increase your startup value, but extracting more money from the
| current users is not right.
|
| Anecdotal evidence: if I perceive something as good value long
| term I am paying yearly for 2 reasons, one is the discount for
| doing it and second for the convenience of not having to care
| about monthly payment. I had Netflix suspended because they
| messed up the payment (they took the money, 3 times) and I had no
| solution at 1AM when I had the time to watch a movie, a yearly
| payment is a lot safer for such cases. Maybe some of your clients
| are like me.
| dheera wrote:
| I think your discount is pretty fair for a 1 year commitment.
| Wouldn't change anything. If you do decide to increase prices at
| any point, consider grandfathering your current customers into
| the old pricing to not piss them off, as long as they are still
| netting profit for you. They're probably your best customers for
| adopting and committing so early and will probably be some of the
| best word-of-mouth spreaders and sources of free advertising for
| you.
| jsty wrote:
| If your product has a lot of corporate customers, and paying
| yearly doesn't put them above their personal expense
| authorisation threshold, I wouldn't be so surprised - filling out
| 12 expense reports is a lot more irritating than 1.
| pbreit wrote:
| I'm a little confused on how you are interpreting the majority of
| your customers opting for discounted pricing as an indication
| that you should raise prices.
|
| But, yes, in general a lot of SaaS service could probably raise
| prices.
|
| And also in general, annual billing is appealing.
| throwaway_23124 wrote:
| > I'm a little confused on how you are interpreting the
| majority of your customers opting for discounted pricing as an
| indication that you should raise prices.
|
| The way I see it, most customers are happy enough after a
| 30-day trial to commit to my product for at least a full year.
| That's a good signal for loyalty and the product being worth it
| for the price. While I agree that the discount aspect is a
| signal in the other direction, I think overall it _looks_ like
| people will continue to subscribe even if it 's pricier. That's
| why I'm leaning towards increasing prices. I don't know much
| about businessy things and I'm learning as I go, so take my
| opinions with a grain of salt.
|
| I've had some really good suggestions in this thread to talk to
| my most recent subscribers to really understand why they paid
| annually straight off the bat, so I'm going to do that first
| before taking any action.
| bombcar wrote:
| Do you offer annual billed monthly? Some business prefer that -
| offer annual billed monthly at a $11*X/year, see what happens.
| criddell wrote:
| Maybe change your pricing plans for new customers but tell
| existing annual customers that they can keep the current deal as
| long as they stay subscribed. Then you can compare the split for
| new customers and old customers and see how your price change
| affects it.
| carlhjerpe wrote:
| Didn't netflix pull that one once?
| paxys wrote:
| You need to look at a lot more data before drawing any
| conclusions. Are you selling to consumers or businesses? What's
| the split in monthly vs annual subscription for brand new users
| (vs those that changed plans on renewal)?
|
| IMO users switching to annual plans after using your product for
| a couple of months is amazing. It means that they see value in
| the product and decided to commit to it.
|
| Users opting for an annual subscription off the bat is still
| amazing - but also a tad suspicious. Maybe a combination of low
| cost and good marketing?
| PicassoCTs wrote:
| Reward early adopters by keeping there prices the same, up the
| prices for all who come afterwards, generate fear of missing out
| when it comes to word of mouth.
|
| After all, the early adopters got it for "practically nothing".
| Allow early adopters to bring in one friend a year at their
| price..
| spamizbad wrote:
| This is probably a signal you should raise your prices.
| throw14082020 wrote:
| Maybe you're defaulting to the annual billing on your website,
| like most companies do
| jitl wrote:
| I think it's working the way you want. Don't mess with it.
| xemdetia wrote:
| I'm with everyone else that I would prefer to pay annually up
| front if the cost is not too high and having the service contract
| up for that period makes sense. From a more basic business flow I
| would expect that if you offer a straightforward $10*X/year plan
| that your expenses are built around that cost. I would expect the
| monthly cost to be higher to reflect the risk of not having a
| committed customer base and the overhead of getting payment from
| those customers.
|
| As other people mention it would be assumed that $10*X/year would
| be billed upfront and that you would be 'paying' yourself out of
| that sum as each month is invoiced. Are you accounting for your
| liabilities vs. assets correctly and are still sustainable? Are
| you profitable month to month? Are you meeting your target income
| after expenses from whatever $10*X/year was supposed to be? Are
| you sure you are calculating all your expenses precisely from the
| prior calculations?
|
| If you have 'yes' to all of the prior questions maybe you need to
| decide where you want to take your business in other areas. It
| might make sense to just focus on overall growth and not sweat
| this signal. It would be good to establish the churn rate
| individually for annual and monthly customers by activity as well
| as cancellation.
|
| If any one is 'no' you might just have to raise prices because
| you have to raise prices because you're not getting out of the
| business what you expect. Raising prices to ensure that you are
| not just surviving but getting your piece is OK. At the same time
| maybe the price point is just a good price point and you could
| focus on growth.
|
| More philosophically how would you subscribe to your service as a
| customer? If you'd say annually maybe it's just a service that
| works better annually. I would say Netflix is better month to
| month because the moment I stop using it is the moment it stops
| providing value, while a DNS name I have multi-year agreements on
| because even if I stop actively using it, it's still worth having
| the arrangement because I am paying just to have it be there for
| me.
| alphabettsy wrote:
| I generally purchase annual for thing where I feel like the
| product is going to have the same utility for me the entire
| subscription period.
|
| Fastmail, which I've used for years, I'm willing to pay two or
| three years up front.
|
| The new thing I found last week I pay monthly was a disposable
| card.
|
| Maybe your customers believe your product is useful and they're
| not concerned about it failing to work in 6 months and maybe it's
| mostly used by businesses which typically think in terms of
| yearly rather than monthly when it comes to ongoing expenses.
| guillegette wrote:
| My opinion as someone who is running a SaaS business: - Annual
| contracts are better than month-to-month, because you will get a
| customer for a year in most cases, extending your LTV - Customer
| choose annual not only for the pricing discount but speaks to
| their commitment with your solution. I take it as a great product
| market fit indicator. - Your price should be aligned with your
| competition. You can increase prices for new users but don't
| increase the price for your existing pay customers. - Offer your
| monthly customers the option to upgrade to annual as well
| Arubis wrote:
| Your ARR is more predictable. Celebrate! You're living the dream.
| ChrisArchitect wrote:
| throwaway account?
| maxk42 wrote:
| What is the average tenure of cancellations? Do you have a lot of
| users canceling after just a few months? If so, you may consider
| switching to offering annual pricing only and/or trying to find
| out why your customers are leaving
| takinola wrote:
| I would recommend a couple things
|
| 1) Ask some of your subscribers why they chose one plan over
| another
|
| 2) Increase prices. It never hurts to find out where the balance
| of pricing vs conversion lies
|
| 3) Create additional tiers. It is hard to imagine any product
| where all users prioritize the same features the same way.
|
| 4) Celebrate. You are achieving something effortlessly that lots
| of other businesses try very hard to get.
| marto1 wrote:
| 1. This is really good. Your niche/customers/market is oriented
| towards the long-term. Might be time to go to some of these
| customers and try to find out if they are. Long-termness
| indicates more enterprise clients which means it's time to offer
| some sort of a "Business plan". These tend to sell for much much
| more at the price of some special support, exclusive access, etc.
|
| 2. You're too cheap and people don't want to do monthly penny
| pinching. You can do some A/B and experiment with rising prices.
| Depending on how you execute on this you might end up in a
| situation where you raise 2-3x for the exact same product without
| losing customers.
|
| Both can be true at the same time...or none. Knowing your
| customers is half the battle.
| fossuser wrote:
| I'm happy to pay annually if the product is good and the 2 months
| off makes it worth it.
|
| Without 2 months off I'd pay monthly because canceling is easier.
|
| With 2 months off the reasoning is I like the product and can
| save some and don't have to think about the monthly cost. If in a
| year I don't find myself using it I can then decide on renewal.
|
| Usually it's like $5/month or $50/year or something - I generally
| dislike tiny monthly subscriptions, it obscures costs and feels
| like death by a thousand cuts. With annual I can think about the
| value and decide and the 2 months savings makes it worth it.
| inopinatus wrote:
| Doing the accounts for monthly billed services is super annoying.
| I switch to annual at the earliest opportunity just to cut down
| on such drudgery.
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