How to Price Your Subscriptions

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  • Option A: "Price it at $10/month!"
  • Option B: "Price it at $120/year!"

Does it make a difference?

You bet your bottom tidy ass it does.

Get this:

  1. Peyton pays for a CRM subscription for $10/month.
  2. Eli pays for a CRM subscription for $120/year.

What happens?

  • Peyton uses the software more throughout the year because he's constantly reminded of that $10 monthly bill.
  • Eli would use the software a bunch at first, but then gradually uses much less of it because the $120 bill becomes a distant memory.
  • Therefore, Peyton would much likelier renew his subscription because he sees more use out of it.

That's according to Harvard's John Gourville and his research peeps:

  • People are more likely to consume a product when they are aware of its cost - "when they feel 'out of pocket.'"

The less customers know about your charges:

  1. the less they'll invest time into your product
  2. the less they'll understand how enthralling your product really is.
  3. and, the less likelier they'll renew.

BOO!

"YO!"

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Posted on May 16

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