The cost of subscription: How much is too much & how much is not enough?
Over the last few weeks I’ve had a recurring conversation with a number of different startups, just how much do you charge for a subscription? It’s a really difficult question to answer. How do you know when you’ve hit the sweet spot for a tiered subscription model?
I was talking with James Wilson (also my colleague) founder of Adbok.com about the awesome DollarShaveClub (see the video I posted yesterday) and their $1/mo, $6/mo and $9/mo subscription model. Adbok, an established startup and a leader in its niche, is a cloud based driving school aggregator allowing learner drivers to find instructors and make buying decisions based on their preferences. At the same time, Adbok offers instructors tools to manage and track their business and financials - all integrated with social networks. James was talking about how difficult it is finding a price that is both accessible for ‘non tech savvy’ users without selling yourself short.
I had the exact same conversation this evening with Graham Ashton, founder of The Agile Planner. I met Graham on Monday at the Bootstrap Business Club where he gave a 5 min presentation on his product. The Agile Planner is a way for anybody using an Agile or Kanban dev process to track their tickets/ stories. Btw, from the demo I saw on Monday - I really like the look of it; crisp, simple interface and focuses on the essence of the ticket: the story. I liked it so much that it’s the reason we met up this evening at North Tea Power (where else?), we swapped details on Monday and met up to talk as I use Kanban pretty religiously in my day job. The subject of subscription price came up - I asked him “based on 50 developers how much would he charge per month?” - I won’t share his answer but I definitely thought it was too low! We ended up spending the rest of the time discussing frustrations around price points and perceptions.
Both James with Adbok and Graham with The Agile planner (and eventually myself with Twocial) are facing the same issue; How much is too much, and how much is not enough?
Again, none of us have the answer but we did share some interesting thoughts. I’ve read the awesome ‘Predictably Irrational’ by Dan Ariely who gave a TED talk titled ‘Are we in control of our own decisions?’ - about 12:30 into the talk he gives an amazing example of the psychology of subscription models (just watch it, I won’t give it justice by paraphrasing).
Ultimately we shouldn’t be afraid of charging from day one, Ryan Carson talks about this when Kevin Rose interviewed him on Revision 3 (about 20 mins in), because freemium don’t pay the rent.
So, no great insights, no answers, just a bunch of confused people and a few interesting videos - your thoughts?