Implementing a pricing strategy is a difficult task for any business- not only is price often considered the most important factor when making a purchase, but with the rise in ecommerce it is now even easier for customers to compare prices and similar products, making it crucial for your business to get pricing right. In past blog posts we’ve discussed the importance of choosing a subscription pricing strategy that fits your offerings, and in this blog we’ll demonstrate the importance of using data for your subscription pricing strategy AND to supercharge your business growth.
Why Subscription Pricing Should Consider Customer Data
A recent study has found that companies often disregard the importance of their pricing decisions, with businesses spending “an average of only ten hours each year on their pricing”. Out of all strategies implemented, the most profitable pricing methods were found to be those driven by data - but what is this data, and where does it come from?
Customer Surveys
Customer surveys are a low-cost and easy way to get valuable data from your current customer base. By utilizing the opinions of your current customers your business can gain information on:
- the willingness-to-pay of your customer base,
- what subscription pricing model current customers prefer,
- which of your offerings are viewed as the best value for money,
- and insights into why customers choose to upgrade or downgrade their subscription.
These pieces of data give your business a great overview of your current customer base, and what it is that potential customers might be looking for. Customer surveys are also a great way to assess the success of your offerings and give insight into how new products or services should be priced to suit your customers.
Pricing Tests
Data from pricing tests can be equally as valuable as customer survey feedback when it comes to price setting. By evaluating the reaction of your customers to any previous price changes, you can gain a greater understanding of the level of price-sensitivity, as well as an indication of how you should approach price changes in the future.
Data on why customers sign-up to or cancel your subscription offerings is also valuable when determining your pricing strategy. For example, if the majority of new sign-ups arise as a result of a short-term sign-up discount offered, it could be an indication that customers want to try your offerings before they commit to paying full price for a subscription period. In this instance, implementing a free-trial could be a great way to appeal to new customers.
Checkout Abandonment
For an e-commerce subscription business, the checkout abandonment metric is a really useful way of understanding why a number of potential customers don't complete their purchase. By tracking the customer journey across your e-store to see where the potential customer clicks off we are able to gain a greater understanding of how potential customers react to the set pricing.
Checkout abandonment itself refers to the event in which a customer adds items to their shopping cart, and yet exits the site before completing the purchase. At this stage the customer has already initiated the checkout process which suggests that they were aware of the product details - including price - before abandoning the checkout. Take a look at our previous blog post to find out why your business might have a high checkout abandonment rate.
Keeping Costs in Mind
It's no secret that customers want the best price available for your offerings, which could lead you to believe that the way approach your pricing strategy is to set prices as cheap as possible. However, implementing the lowest possible prices for your subscription products can be dangerous for your business. For example, if variable costs increase over a period it could inflict damage on the success and growth of your business. Using data on your customer base and evaluating your own business costs is the best way to set a successful pricing model.
Using Data to Drive Business Growth
Utilizing the Benefits of a Data-Driven Pricing Strategy
A strong and informed pricing strategy is a great way to enhance the growth of your subscription business. By using the data collection methods suggested above to implement your subscription pricing strategy, your business can appeal to a larger number of customers that are similar to your existing customer base. As well as this, with data-backed responses relating to new product lines and subscription upgrades, your business can use its pricing strategy to boost subscription upgrades and the popularity of newly introduced offerings to further grow your subscription business.
Improving the Customer Experience
A great and easy-to-navigate customer journey is essential for gaining new customers and growing your subscription business. Subscription offerings are often more complex than traditional products, so ensuring that the customer experience is as convenient as possible is a great way to attract customers. Using data from website monitoring and checkout abandonment rates are an efficient way to track the customer journey for your ecommerce subscription business, as it allows you to hone in on the areas of your website where customers are lost. Data such as the time it takes for customers to checkout and complete the payments pages are useful to make a judgement on how easy the checkout experience is for your customers.
Measuring Performance with Data
Subscription businesses have a number of differences to traditional businesses - one of which is the range of metrics available to measure the performance of your business. For subscription businesses, there are a number of key metrics that provide us with important data, including:
- Monthly recurring revenue (MRR): the total predicted revenue for your subscription business in a month period, based off all active subscriptions in that given month.
- Annual recurring revenue (ARR): the value of recurring revenue gained from subscriptions in a year period.
- Churn rate: the percentage of customers that cancel a subscription in a given period.
- Revenue churn: the effect on revenue from customers terminating their subscriptions.
- Customer lifetime value (CLV): the average customer's revenue generated over their entire relationship with your business
How Billforward Can Help Your Business:
Billforward caters to a range of pricing strategies so that you can implement the optimal subscription pricing for your business- whether that's volume, tiered, flat-rate or usage-based pricing. We know that a one-size-fits-all approach doesn't work for subscriptions, which is why you can include a range of different pricing strategies for your products inside Billforward, and combine extra features such as one-off charges and discounts into your strategy.
When it comes to data, Billforward makes sure that you're never stuck in the dark - with automatically generated reports into your revenue, dunning and subscription churn, Billforward allows you to use data to optimise your subscription strategy.
Why not book in a discovery call with one of our billing experts and see how we can help you meet your subscription goals!