setting subscription pricing

April 10, 2023 1

Pricing in a Subscription WorldSteve Adams – CEO

Monday, April 10, 2023 2

Speaker Introduction

Steve Adams, CEO

www.fusebill.comCall Us at: 1-888-519-1425 Copyright Fusebill Inc. 2013. All rights reserved

stevea@fusebill.com

3April 10, 2023

Agenda

• Evaluating Subscription pricing is different than 1-time sales

• Key Points– Lifetime value– Churn– Impact of billing practices

• Fusebill Introduction

4April 10, 2023

Key Takeaways

• Measure customer lifetime value. Segment!

• Pricing impacts churn, not just customer acquisition

• Billing itself triggers churn

April 10, 2023 5

EVALUATING PRICE MODELS IN A SUBSCRIPTION WORLD

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Price Testing in a Transactional World

Sales volumes drop as price increases

Sales volumes increase as price

drops

Choose the option that maximizes revenueRevenue = Unit Volume * Price_per_unit

$

$

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A/B Testing

• Split traffic between pages with different price points and compare

Price: $10Visits: 100Sales: 25Conversion rate: 25%

Expected Revenue: $250

Price: $20Visits: 100Sales: 15Conversion rate: 15%

Expected Revenue: $300

A B

• Conclusion:– B > A so set price at $20

8April 10, 2023

But…Subscriptions behave differently

January

Febru

aryMarc

hApril

MayJune

July

August

Septem

ber

October

November

December

$0

$5

$10

$15

$20

$25

AB

Price: $10 / monthVisits: 100Sales: 25Conversion rate: 25%Lifetime revenue: $120

Annual Revenue: $3000

Price: $20 /monthVisits: 100Sales: 15Conversion rate: 15%Lifetime revenue: $80

Annual Revenue: $1200

A B

9April 10, 2023

A/B Testing

• Split traffic between two pages and see what works best– Assumes cost of acquisition is constant– Assumes revenue (and margin) is the same

• Works well for one-time sales – revenue is known at time of purchase

• Fails for subscription sales – using initial revenue is not accurate

• Does help measure price/demand tradeoffs

10April 10, 2023

Model Lifetime Value

• (Lifetime revenue) – (Cost of acquisition)

• Segment:– Acquisition channel– Price plans

• Use margin

• Don’t ignore churn

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

(200)

(150)

(100)

(50)

-

50

100

150

Client Economics

Customer Acquisition Cost Cumulative Contribution

ProfitBreakeven

11April 10, 2023

Client Economics - Considerations

• Cost of Acquisition– Marketing Programs and Promotions– Sales (salaries, commissions)– Channels (commissions)

• Contribution– Revenue – Costs

• Costs– Cost of Goods– Customer Support– Data Center, Bandwidth…– Sales costs (incentives for upgrades, renewals)

12April 10, 2023

Impact of churn

• Churn (% customers lost per time period) drives customer lifetime (and CLV)

• Beware of averages – timing of churn impacts revenues

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 360

10

20

30

40

50

60

70

80

90

100

3% churn 3% churn after 3 months

3 year revenue = $2200

3 year revenue = $1320

13

Typical Impact of Billing on Churn

Free Trial Ends

Annual Plans

Monthly Plans

14April 10, 2023

Billing & Churn

• Card failures on initial signup– And/or no capture of client information for follow-up

• Card failures on recurring billing– Typically 25-30% of cards will fail but succeed on retries

• Expiring cards– Cards last 3 years – 3% expire EVERY month

• Passive churn– Card expiry, subscription expiry

• Surprise charges – especially for annual subscriptions• Oh! Am I still paying for that?

Mechanical

Behavioral

15April 10, 2023

Recurring Billing Systems Help!

• Automate intelligent retries

• Communicate:– renewal notices, – failure notices– Receipts?

• Evergreen vs. term based subscriptions

• Manage cards – online update of payment methods

• Implement account status – not paying needs to have an impact

16April 10, 2023

Implementation Issues

• “Changing the billing system” is often the hardest part of price testing– Restricts flexibility of sales and marketing teams

• Access to Information: revenues often buried in backend systems

• Need for Automation– Manual processes don’t scale – leads to revenue leakage and unhappy

clients

Flat rate pricing is often used ONLY because it is easy.

April 10, 2023 17

Fusebill Executive Dashboard

April 10, 2023 18

Track Lifetime Value, Churn

April 10, 2023 19

Fusebill Platform Overview

Scalable Multi-Tenant PCI Compliant Security

API Layer – Customers, Subscriptions, Transactions

PricingProducts

Price PlansUsage TiersDiscountsCoupons

AccountsSubscriptions

InvoicesLedgersReseller Tracking

PaymentsAdjustments

BillingRating

Usage VolumesPro-ratingTaxationCouponsCurrency

Adjustments

PaymentsCredit Card

ACHStorage Vault

GatewaysDunningRetries

Online Checkout

Self-Service Portal

Agent Interface Analytics

External Payment Processing

InvoicingPayment

Terms Date Control

Review, Edit Aging

Adjustments

Swipe & Subscribe

Lifecycle Management

20April 10, 2023

Implementation Issues

• “Changing the billing system” is often the hardest part of price testing– Restricts flexibility of sales and marketing teams

• Access to Information: revenues often buried in backend systems

• Need for Automation– Manual processes don’t scale – leads to revenue leakage and unhappy

clients

Flat rate pricing is often used ONLY because it is easy.

21

The Fusebill Difference

Experience

www.fusebill.comCall Us at: 1-888-519-1425 Copyright Fusebill Inc. 2013. All rights reserved

Product

Commitment to service

22

Try Fusebill Free for 30 days. No contracts, credit card, or surprises.

Sign up at www.fusebill.com

Thank You!www.fusebill.com1-888-519-1425support@fusebill.comTwitter: @fusebill