There are several ways to set subscription pricing. It can be cost-based, competitor-based, or value-based. The challenge, however, is not about setting the price or building the subscription business. The real challenge is all about making a successful one.
The world of subscription services is evolving rapidly, and to keep up, businesses must deploy effective strategies. How can you ensure your products appeal to all customers and encourage them to make a purchase?
In this blog post, we will discuss various strategies to optimize the growth of your subscription-based business. We will cover key areas such as offering diverse subscription plans, customer retention, and marketing and advertising. Read here to learn more about metering and billing software (https://www.togai.com/) for your subscription business.
What is Subscription Pricing?
Subscription pricing is when businesses charge customers weekly, monthly, or annually to use their services or products. This model differs from traditional pricing models in that the length of the subscription often determines the price. In many cases, longer subscriptions are usually discounted, making them the most economical option for customers. This pricing model is widely used by SaaS businesses, software companies, streaming platforms, and membership-based businesses.
Where Do Companies Go Wrong with Subscription Pricing?
Subscription pricing requires patience and a lot of groundwork before implementing and achieving the desired results. The amount you charge your customers for your services or products requires a nuanced approach, which, unfortunately, will not work when done in haste.
It is said that organizations spend only an average of 10 hours to decide their pricing model and price points. Business heads are often pushed to make these hurried decisions due to:
- Lack of adequate pricing expertise.
- Lack of inadequate customer data.
- Customer acquisition pressure
- Lack of adequate attention to retain existing customers.
- Relying solely on costs or competitor pricing to set price points.
The key to a successful pricing strategy is to ensure that your packages align with the value you offer and the needs of your target audience.
In the next section, we unveil some incredible recommendations by Togai, a highly reputed metering and billing platform to grow your business with subscription pricing.
4 Strategies to Run a Successful Subscription Business
1. Entice your customer with variety.
Customers dislike monotony, and pricing is no exception. Subscription businesses that offer multiple options for customers to choose from have a better chance of attracting loyal clients. Businesses can provide variety in terms of:
- Various pricing tiers.
- Type of product.
- Quantity of product.
- Frequency of delivery.
A good example of a variety-rich subscription business is Spotify. The music streaming service offers essential and high-priced family plans for users, so they can choose whatever suits their budget and needs. You can also rope in a wider target audience while allowing them to choose how they want to use your service. However, optimizing the subscription catalog is important by allowing customers to add multiple subscriptions to a single purchase. And provide subscription gifting options where applicable.
2. Consider upselling and cross-selling.
What is upselling, and how can you do it?
Upselling is when you encourage your customers to upgrade to a higher-priced subscription plan. A simple example is suggesting premium plans of a product or service to a customer who is already on the basic plan with limited features.
Amazon, for instance, uses upselling captions such as: “Relevant products.” or “Frequently brought together.”
To upsell to customers, you can:
- Identify potential customers who frequently purchase additional products outside their subscription.
- Make your customers aware of the value of the upgrade by highlighting additional features and benefits.
- Add perks for plan upgrades, such as discounts and promos, to make your offering more attractive.
What is cross-selling & how do you do it?
Cross-selling is when you offer complementary products or services to your customers. For instance, you are cross-selling when you offer a phone cover to a customer who buys a smartphone.
To cross-sell, you must:
- Identify cross-selling opportunities.
- Showcase the product value.
- Personalize the products.
- Offer discounts and promos.
3. Prioritize customer acquisition and retention.
Like every business, subscription businesses should prioritize customer acquisition and retention. To bring new customers into the fold, you should:
- Improve your brand presence by investing in marketing strategies like social media marketing, content marketing, and paid advertising.
- Improve your customer satisfaction rate.
- Provide a low entry plan to allow all customers to enjoy products.
- Offer free trials and money-back guarantees.
- Leverage the power of social media to attract potential customers.
- Optimize your website to handle customer conversions.
- Partner with complementary businesses to cross-promote your products.
Now, let’s focus on your existing customers- your biggest asset. Why should you retain your current customers? Here’s why:
- You can save up on customer acquisition costs.
- You can increase your revenue as your loyal customers are more likely to buy your products.
- It improves the overall lifetime value of your customers.
- It enhances business reputation through word-of-mouth marketing.
- Gives you a competitive edge over other customers.
4. Invest in a good subscription management software.
Subscription business is all about speed, growth, and scalability. To ensure all three factors, you need reliable subscription management software robust enough to manage recurring billing and invoicing. With dedicated software, you can:
- Streamline and automate your billing processes.
- Save time and reduce errors in billing.
- Provide better customer experience.
- Increase revenue by upselling and cross-selling.
- Collect valuable customer-related insights.
Subscription businesses require continuous improvement and iteration to remain relevant to the evolving technology and business trends. Get your strategies right and you can win the race in this business vertical.