Ask HN: Yearly only subscriptions for apps – what are your experiences?
5 comments
In my experience of running hosting business people want to pay month to month or yearly. I think we maybe had two or three customers that wanted to pay biannually, not worth the bother.
We had large upfront costs (servers) and lots of competition so low margins. If the customer was paying month to month usually they would stay long enough for us to easily manage the server and keep it profitable.
But some packages had more customer churn, You will pay for you backup hosting no matter what but a cheap server for an experiment is not going to see enough months to be profitable.
Making these high customer churn products a yearly thing made them profitable. Similar thinking for products that are just dirt cheap, add in the cc fees and other costs of billing, if its late or declined, it makes much more sense and profit to charge £24 a year for an email than £2 a month.
We had large upfront costs (servers) and lots of competition so low margins. If the customer was paying month to month usually they would stay long enough for us to easily manage the server and keep it profitable.
But some packages had more customer churn, You will pay for you backup hosting no matter what but a cheap server for an experiment is not going to see enough months to be profitable.
Making these high customer churn products a yearly thing made them profitable. Similar thinking for products that are just dirt cheap, add in the cc fees and other costs of billing, if its late or declined, it makes much more sense and profit to charge £24 a year for an email than £2 a month.
There's a reason this is standard operating procedure among gyms. They know their target user is only going to actively use their product for a limited time, and the subscription model is sticky enough to monetize it for much longer.
The friction of admitting to oneself that it was a bad decision to join a gym one doesn't make time to actually use is what keeps people from cancelling on their anniversary date, and it's what keeps most gyms in business.
If you decide to instead only ask for monthly renewals, you make the work of retention 12x harder, with very few actual instances where you deter paying customers. When people check their card purchases over the course of the year and you show up 12x vs. 1x, even if it's the same amount of money it will be perceived as more expensive.
The friction of admitting to oneself that it was a bad decision to join a gym one doesn't make time to actually use is what keeps people from cancelling on their anniversary date, and it's what keeps most gyms in business.
If you decide to instead only ask for monthly renewals, you make the work of retention 12x harder, with very few actual instances where you deter paying customers. When people check their card purchases over the course of the year and you show up 12x vs. 1x, even if it's the same amount of money it will be perceived as more expensive.
You also have the opportunity to better engage with people's brains' built-in fallibility to the sunk cost fallacy, which is also a lesson places like gyms learned a long time ago.
You see this in things like upsells for classes: a gym will send you a flyer every couple months about exciting new classes that are only $x more thanks to that membership you bought months prior ("just imagine if you were paying for this class on its own somewhere else"). People like thinking they are getting a deal, and want to make use of an existing investment they already sunk money into, and are sometimes willing to sink more money into the existing investment.
You see this in things like upsells for classes: a gym will send you a flyer every couple months about exciting new classes that are only $x more thanks to that membership you bought months prior ("just imagine if you were paying for this class on its own somewhere else"). People like thinking they are getting a deal, and want to make use of an existing investment they already sunk money into, and are sometimes willing to sink more money into the existing investment.
I bought a personal Jetbrains 1 year license because of the 20% discount (as opposed to monthly)
If there was only a yearly option i likely would not have bought it (but the savings!)
3 months in I find myself using other IDEs..
Give people the illusion of a choice, don't explicitly force them
If there was only a yearly option i likely would not have bought it (but the savings!)
3 months in I find myself using other IDEs..
Give people the illusion of a choice, don't explicitly force them
I believe Calm does offer monthly subscriptions (https://www.calm.com/subscribe). Although I do understand that a lot of companies are starting a trend of offering yearly subscriptions, there can be many aspects as to why companies would choose to go for such a pricing model. Any company using a subscription based pricing model would want to make the customers stay for the maximum months possible, basically increase the lifetime value of the customer, maybe the pricing the product per month would be low and then the companies would have to make sure that customers keep subscribing for every month inorder to make maximum profits which also depends on how much is the Customer Acquisition Cost. Another aspect would be where the company knows that customers won't be able to see great results in a few months but the product would be very valuable on a long run, in such cases the companies would probably give 1 month free trial and then a yearly pricing.
I run a productized service (http://draftss.com) where we create unlimited designs for our customer on a monthly based subscription. We create multiple options for each design task that we do for our clients and thus we have a lot of leftover designs. We have been thinking to give away all of these leftover designs for a yearly subscription or maybe even lifelong subscription.
I run a productized service (http://draftss.com) where we create unlimited designs for our customer on a monthly based subscription. We create multiple options for each design task that we do for our clients and thus we have a lot of leftover designs. We have been thinking to give away all of these leftover designs for a yearly subscription or maybe even lifelong subscription.
In my head this seems like a risky move, as it removes a segment of more casual users, and also takes away other pricing "tricks" you can employ such as anchoring, discounts for longer subscriptions, etc.
Does anyone have any thoughts on only offering a only a single yearly plan, or any experiences in the past why companies might be moving to this pricing model?
Thanks!