Subscription Pricing Tactics to Easily Grow Your Revenue
Experimenting with product subscriptions? Various subscription pricing strategies can help you easily grow your revenue.
At Upscribe, let’s look at our favorite subscription pricing tactics.
What Is Subscription Pricing?
Subscription-based pricing allows customers to purchase a product over a set time period on a recurring basis. In most cases, online stores charge customers on a monthly or annual basis as part of a subscription plan.
For example, the drinks-brand Brew Tea Company employs subscription pricing for tea deliveries every month, every two months, or every three months.
Customers can choose their blend and between 500g of loose leaf tea or 100 tea bags. Each subscription delivery allows customers to save 30% on what they would pay for these products if purchased alone.
Brew Tea Company also incentivizes customers to sign up for a subscription by offering a “Brew Coin bonus”. When customers have obtained enough brew coins, they’ll be able to reduce the cost of future purchases.
The approaches taken here are just some ways that an online store can approach subscription pricing to grow their revenue.
Why Is Subscription Pricing Beneficial?
With over 80% of American adults subscribing to at least one subscription service, there is an obvious demand for subscriptions.
Did you know that securing new customers can often cost up to ten times more than retaining current ones? Another fun fact: existing customers also spend up to 67% more than new customers.
A subscription-based business model encourages repeat purchase from the same customers. Along the way, you’ll have more chances of fostering their loyalty than those only purchasing your products once.
And here’s the thing. Pricing your subscriptions in creative ways can help you engage with these customers and grow your revenue.
What To Consider When Choosing Pricing your Subscription
Here’s what you must consider to find the right pricing model for your store:
- Current Customers: How do they use your product? Do they prefer customization or a one-and-done product?
- Product: What products do you want to bundle together?
- Competition: What pricing model do they use? What are they trying that you aren’t? Is it working?
- Operating costs: Does your pricing cover operating, fixed, and variable costs? Does it optimize your subscription revenue?
Devising a subscription pricing model isn’t easy. You need to consider different variables and be part of a new business model that you may not be necessarily familiar with. By now, you may have some additional questions about which is the best way to price your subscription service and how it will impact your potential revenue.
As such, you need a platform that can help you manage your product subscriptions and ensure that your strategy becomes a success. If you are looking to give your subscriptions the boost they need, consider signing up to Upscribe. We’re a subscription management platform that allows you to streamline your operations through a range of features:
- Powerful at-a-glance dashboards to manage your subscriptions.
- Payment retry/dunning management.
- Ways to automatically reduce subscription churn and improve retention
- Make it easy for customers to reorder, unlocking trapped revenue.
- Can let your customers manage their subscriptions by SMS or email.
For example, one online store that used Upscribe to succeed is Four Sigmatic. They managed to bring up their active subscriber numbers by 50% by using our service to reduce customer churn.
Creative Subscription Pricing Tactics
Here are some tactics to improve your subscription pricing strategy.
Anchor Different Price Points
A simple approach you can take to improve your online store is to grab the attention of potential consumers with “goldilocks price points”. Consumers tend to like products with the ideal pricing, neither too high nor too low. This is referred to as the compromise effect in behavioral economics.
You can achieve this by offering a range of products with different pricing, such that a medium-priced product will stand out. Price anchoring is a key part of the process. The more expensive product is there to anchor customers to the lower, middle-of-the-range price point. It’s a more intelligent approach than simply letting your products appear semi-randomly in your store. Also, if you wish, you can be more direct about this by visually highlighting the mid-range option.
Casper is an example of an online store that has leveraged price anchoring to increase the sale of expensive mattresses. Along with the approach described above, Casper has used color psychology to enhance their pricing structure.
With product subscriptions, you can anchor the price of a product subscription against that of a less affordable one-time purchase, or other subscriptions. This is a tried and true method used by many of our clients, including Four Sigmatic:
A product bundle is a collection of products that are sold together with a given discount applied. It can be a great way to optimize your online store and increase the average order of your products.
For instance, bundling a popular item with a less popular can help increase the value of the latter by piggybacking on the sales of the former!
Here’s a real-life example: one of our clients, Beekeeper’s Naturals cheekily mentions that their product bundles are 10% more affordable than if you purchased the products separately! You can add another discount for your subscription bundles to entice your customers even further!
There are different ways to bundle your products:
- A pure bundle, for instance, contains a range of products that customers can only purchase together as a bundle. Alternatively, a new product bundle specifically combines newly-launched products.
- Mix-and-max bundles, on the other hand, allow customers to combine a whole host of products and gain a discount as a result. For example, you may offer a mix-and-match bundle that specifies that customers can “purchase five items for the price of three” or “get 25% off (their) total cost when mixing-and-matching up to five products.”
If you run a Shopify store, you may want to try a bundling app. Such a service can bundle items for you automatically. The good news is that Upscribe offers automatic bundling as part of our comprehensive ecommerce service.
Include Different Pricing Tiers
You can offer product subscriptions tiers and anchor them against each other!
Tiered pricing is scalable and may help with customer retention. After all, customer needs change, so this will allow them to upgrade or downgrade their product subscriptions.
Customers must feel like they get their money’s worth as they move up tiers. This way, they will feel justified in upgrading their purchase to a higher price point.
For instance, subscription box FabFitFun sells two subscription boxes with a focus on fashion, beauty, and wellness. See how the higher-priced annual subscription is displayed in a much more attractive way than the seasonal one. The annual one:
- Provides the Best Value
- Is more affordable at $49.99 per box
- Gives you early access to alter the items in the bundle
You can suggest complementary products to your product subscribers. This lets the product scale with the customer, particularly if you offer incentives for them to buy more.
Giving members the option to add on items like sunscreen, hats, or perfume lets FabFitFun explore product add-ons. These pieces are complementary and, ultimately, increase the stable revenue of the subscription box.
Through this, each customer can choose their final price based on the product order they have customized for individual needs.
Offer Loyalty Programs to Your Product Subscriptions
Devising loyalty programs is a perfect way to extend the amount of time customers are subscribed to your products.
They are nothing new, but provide an excellent way to incentivize customer loyalty even further and reward your product subscribers who are already repeat customers of your online store.
As we have mentioned before, Brew Tea Company has monetized customer loyalty through its loyalty program, where you can earn points for doing certain tasks.
Last but not least, you may even wish to set different prices for different consumers. You could base price segmentation on:
- How much a customer tends to spend.
- Time of purchase.
- The sort of products a given customer tends to show interest in.
Whether or not price segmentation will work for any given store is hard to say. It is a complex solution to improving a subscription service. Unless you have the time required to get your price segmentation strategy right, it’s probably best to stick with simpler tactics.
Learn More Through The Upscribe Blog
Today we’ve looked at four subscription pricing models and the best subscription pricing tactics for online stores.