Why Being Flexible and Adaptive With Your Subscription Pricing is Important

Knowing When to Update Your Pricing

Prices should never be static. They need to adapt to changing market and environmental conditions. For example, the pandemic forced many businesses to change their pricing structures. Some had to lower prices to stay competitive, while others could raise prices due to increased demand for their product or service.

  • You’re not hitting your revenue goals
  • Your target market has changed
  • Your costs have changed
  • The competition has changed their prices

Preparing for a Pricing Update

Earlier, it was mentioned that many companies spend only a handful of hours a year looking at their pricing. However, well thought out pricing is essential to any business. If you don’t put enough time into it or never change your prices, then you’ll likely leave revenue on the table.

Review your current pricing

The first step is understanding where you currently stand. This means taking a close look at what you’re charging and how that compares to the market. If you’re not sure where to start, try surveying your target market. You can also use online resources to benchmark your prices against competitors. Also, have a thought about the last pricing updates you were doing and what was the evolution of the market conditions since then, try to identify important events happening which could have driven price changes.

Define your goals

After reviewing your current pricing, it’s time to set some goals for what you want to achieve with a price change. Do you want to increase revenue by 10%? Drive more sales volume? Get more customers? Once you have a goal in mind, you can start developing a pricing strategy that’ll help you reach it.

Evaluating Customer Feedback

Customer feedback is essential in helping you understand if your pricing is working. If customers are constantly asking for discounts or complaining about prices, that’s a sign that your prices might be too high. On the other hand, if you’re regularly getting compliments on your pricing or hearing that your prices are “competitive,” that’s a good sign that you’re on the right track.

Understanding Customer Value

One of the most important things to remember when setting your subscription pricing is that you’re not just selling a service or product, you’re selling value. To optimize your pricing plans, you need to have a clear understanding of the value that your customers place on what you’re offering.

How to Update Pricing

To find the right price point for your business, start by evaluating your target market, understanding their needs and budget, and determining what they’re willing to pay. From there, you can experiment with different pricing models and price points to see what works best.

Find the optimal pricing point — price sensitivity meter

When you’re deciding on your subscription pricing, it’s important to consider your customer base. What can they afford? What are they willing to pay? What do they need from your service? Asking these questions will help you determine the best pricing model for your business. By willingly adjusting your prices based on customer feedback and data, you’ll be able to find the sweet spot that maximizes your earnings.

Cost-plus pricing

This is where you calculate your costs and then add a markup to determine the price. This is often used when selling to other businesses, as it guarantees that you’re covering your costs and making a profit.

Calculate CLTV & track churn rate

Customer Lifetime Value (CLTV) is a metric that considers how much revenue a customer will generate for your business throughout their relationship with you. Churn rate, on the other hand, is the percentage of customers who cancel or don’t renew their subscription within a certain period, which in the end translates in lost revenue which those customers would have brought if they were continuing using your products.

  • Offer different tiers of service
  • Offer Discounts & Coupons
  • Consider Customer Segmentation
  • Charge based on usage
  • Trial subscriptions with the option to convert to full-price plans
  • Freemium and Premium pricing plans

Price Based on Time

While you can and should increase your prices regularly, you might want to offer special promotional rates to current customers to keep them loyal. By “grandfathering” certain segments, they’re guaranteed the current price for a set period. This can help with your forecasting as you’ll know they’re likely to remain with the business while the discount applies, and you can then charge a higher rate to new customers.

Build a communication plan

If you do decide on changing your subscription pricing, it’s important to have a solid communication plan in place. You don’t want to anger or frustrate your customers with a price hike, so make sure they know what to expect and why the changes are being made. Keep your customer service team in the loop as well, so they can answer any questions or concerns that arise.

Align your pricing with your growth strategy

As your business grows, your subscription pricing should grow with it. If you’re aiming to scale quickly, you’ll need to make sure your pricing aligns with that strategy. Your plans need to account for the costs of acquiring new customers, as well as the costs of keeping your existing ones.

Conclusion

Of course, there are certain risks associated with changing your prices. If you make any sudden, significant adjustments, you could lose customers who feel like they’re being priced out. That’s why it’s important to make sure that any changes you make are gradual and that you communicate them in advance and regularly. Help your customers understand the reasons why this is happening and also make sure to explain the benefits they’ll realize by sticking with your service.

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2Checkout (now Verifone)

2Checkout (now Verifone)

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2Checkout (now Verifone) is the leading all-in-one monetization platform for global businesses built to help clients drive sales growth across channels.