Here are four tips drawn from consumer behavioral data.
1. Uncertainty is part of the value. Leverage uncertainty to increase engagement and retention. Sudhir spoke about how capitalizing on the “gambler in all of us,” using the anticipation of a reward — whether it’s an email, a Facebook “Like,” or a new StichFix package — can keep customers coming back for more.
2. Reminders work…but only after habits are formed. Reminders can be a prompt to action. But too many risks drives customers away. For instance, month-to-month subscribers tend to be stickier. But they also have more opportunities to churn. One way to minimize this and avoid the “pain of payment” is through automatic billing.
3. Concentrate on what really moves the needle. The reason this is so important Seung Yoon Lee stated is because “if you just focus on acquiring people who are not really fully forming their habits, before they get to renew for next year, then that’s a problem… Because a lot of your long-term profits are coming from retention, not acquisition or growth.”
4. Experiment, experiment, experiment to find the pricing structure that works. Every subscription business is different. You can’t one-size-fits-all your way to optimum pricing. Instead, begin with these fundamental or “first order” questions:
– How much should we charge?
– What price tiers should we have?
To answer these questions, you really have to get to know your customers, checking to see how the answers change acquisition and retention rates, and tracking if and how customers are switching between different price tiers.