The recall of the subscription the price is the guarantee of recurring revenue for your business. Once a customer activates the switch to activate the subscription, it's easy to earn:
- Easy to recognize your income.
- Easy to determine your margins and profits.
- It's easy to improve your product and extend your revenue for months, even years.
While that's true, converting a customer to a subscription isn't as simple as flipping a switch. You can build a platform, launch it with fanfare, offer all kinds of incentives and trials to attract potential customers, and watch them disengage and fall into limbo.
Contrary to popular belief, the subscription price does not work due to the lower price allowed by a monthly installment.
This is the actual guarantee that comes with the subscription price, which will happen unless you cultivate a funnel that captures potential subscribers as soon as they learn about your product and follows them to their last login.
I built my first subscription product in 1999. I'm currently in early access on my latest one and have launched many more along the way.
While the customer dynamic has changed over the past 20 years, the conversion process hasn't changed. In fact, it has become easier to convert and retain customers through the subscription funnel.
Here's what I learned.
Because the subscription price works
The pricing of subscriptions is a major trend in nearly every business in every industry. Pay-as-you-go is the new normal from software to retail to service.
In my mind, the main change came when cell phones started pricing unlimited usage per period rather than fixed or per minute. Once the usage limits were removed, the use cases exploded and the promise of a truly mobile computer was finally realized.
Manufacturers of all kinds have learned this lesson: From razors to video streaming to accounting software, pricing models have emerged that focus on time periods rather than units.
But contrary to popular belief, the subscription price does not work due to the lower price allowed by a monthly installment. It's effective because a subscription redirects each customer's mind from product function to value proposition.
I don't care what kind of German engineering went into my razor blades, as long as I have working blades when I need them.
As an entrepreneur, you probably use at least one digital subscription service to build your product and business, if not several. In fact, just to get to the MVP of my new project, I signed up for AWS, MailChimp, Zapier and Bubble. They are still in the free tier of some other services for some lower priority features. There are others that I have stopped or have never tried.
So, you know that added value plays a big part in whether the customer will pay and stay. So strengthening your value proposition should play an important role in every level of your customer funnel.
You have to capture and monitor customers to be effective
A subscription pricing model without the ability to track steps in the conversion funnel will result in all the subscription price headaches without any benefit.