Subscription Pricing and Packaging

Hi. I'm Matt Lindsay, the CEO of Master Economics.

I wanted to speak with you today about subscription pricing and packaging and how to optimize and implement those pricing strategies.

I'd like to talk to you a little bit about my firm, math or economics is a, economic consulting practice based in Atlanta. We've worked in the media industry for about twenty years, but we have clients in several other verticals, including, telecom, technology, other goods and retail goods and services that are sold on recurring revenue basis. We are a little bit unique in that we help our clients implement pricing strategies as well as do consulting engagements to help them determine their, overall pricing strategies and tactics.

We have over four hundred clients globally, and we are, like I said, we've been doing this for about twenty years. So I'd like to share with you some of our lessons learned over the past twenty years have been working with clients on subscription pricing optimization.

So just to start, start off, I'd like to give us baseline really quickly on subscription pricing and really this applies to other verticals besides news media, but really generally any type of model product or service that has a recurring revenue model. There's three main right points in the customer life cycle that are, key for a pricing strategy. The first is acquisition, price thing. The second is when you move a customer from a promotional offer to a regular rate. And then third from when, they have the, an anniversary of their subscription or when they've been on a current product or or price point for a period of time and you'd like to give them a price increase. Sometimes in a in a subscription environment, there's a there's a subscription term and there's a there's actually a renewal event.

But in either case, it's ongoing pricing management that is the third point. So as you can tell, there's much different, what you're you're solving for in these in these three points in time are usually very different. With acquisition, you're usually trying to get the highest quality customer starts that you can. And, but you also are looking for typically a volume target at the promotional price point change, you're looking for retention, which is also how do I keep as many of those new customers on my product or services I can while at the same time moving them off of a promotional rate.

And then the in the third point, you're really solving for long term revenue and profit optimization. So how can I manage this relationship to maximize my expected lifetime value? The data that you have is also very different. The earlier in their life cycle, the less you about them.

And so the modeling that you can do is is the more limited, and also what your, your price elasticity is also very high. And so as as you move through a customer cycle. Generally, you have more information and the price elasticity tends to decline.

So with those three points in mind, I'd like to talk about some current pricing trends. So The trends that we see in the acquisition area are that introductory offers. Typically, what you're what you're doing there is you're you're trying to get some information from a prospective customer, notably, you're trying to get a payment method and a contact information, mostly an email address.

Sometimes you're you're also trying to get them to just register for a product and service. So generally what we're what you do though in that case the dominant strategy has been to drop the the price point or the monetary price, often it's ninety nine cents for first number of months. Or in in other verticals. It could be other types of lower price offers that tend to mitigate the friction new customers feel when they're uncertain about the value proposition of a product or a service.

The next trend we're seeing is that migration from a promotional offer to a full rate we've done a lot of tests with clients where we've tried to target customers for specific retention, stop save offers, Generally, the the dominant strategy tends to be to move customers to the full rate and then focus your, stop safe efforts on on that, backside of that price change just because the economics are difficult to make that a positive ROI if you're looking for proactive retention offers. Not to be said, it can be done. And we've had some situations where that did work. But, generally, the the goal is to get more people to that that full price the last thing that we're seeing on the targeted renewal prices is is strategic pricing tactics there, which are similar to other industries where you use some pretty sophisticated modeling about price elasticity to optimize your pricing strategy so that you're maximizing the expected revenue.

And, generally, this means moving away from a kind of a one size fits all pricing model to more of a targeted segment and strategy where you're taking into consideration the the price elasticity of that customer segment, as well as some of their preferences that they've demonstrated during their relationship with you So the next, so we'll I'd like to talk a little bit more about each of these areas in detail just to give you some sense of how do you optimize each of these phases of the customer life cycle.

The first point is acquisition. So in this example here, you can see that, what we're really solving for is you're trying to attract the balance of quantity and quality. So as you drop the price, you would expect to get more customers, but the the trade off is that those customers will likely have less of an affinity for your product or service, and therefore, they're more likely to churn. So each individual customer will be worth slightly less as you drop the price to get customers to accept your offer.

So what you find is that there's points of diminishing returns to where you can actually drop your price to the point where you're actually gonna the cumulative expected value of those customers, even though there's more of them, it's actually less than it might be if you had fewer higher quality customers. And so determining that optimal point is really the point of this exercise, which is to look at the lifetime value and determine at what point do you reach that diminishing return? So in this particular example, we were working with a client that originally had a a slightly higher acquisition offer.

And that what we showed was that with by by dropping that acquisition price, you actually would raise the cumulative expected value, until you got to about nine, nine fifty, a month and then then you would actually start to lose expected value again. So in this particular case, we did this analysis and then followed it up with some tests, and indeed it was found to be a a profit maximizing the I just wanted to give you some examples of some of the factors. So there's multiple factors working here. The first is churn.

And so when you look at the the expected conversion. Well, I'm sorry. The first thing is conversions. So how many people are you gonna convert at each price point?

And what you see here is that as you as you lower the price, the conversion rate will actually start to increase. And especially as you get towards that very, very low price, close to less closer and closer to a penny or ninety nine cents or whatever that that left most threshold is, there seems to be a real uptick in conversions.

And that is mainly because you are getting to the point where customers are just willing to take the risk that they even if they don't really like the product, they're only risking a dollar, and so they're not too They're not too worried about that decision.

The next factor is indeed, and so here you actually see the number of starts. So the first slide was conversion rates. This is actually the volume element of that. And again, that the the new starts increases. You get close to zero, the the thing to keep in mind is that there are some non monetary components of this decision on the part of your customers. One is sharing a personal including their contact information, like email and their payment methods. So the entirety of that transaction is both not monetary and non monetary prices.

Here, you can see that as I'm as I've mentioned, the big risk of dropping your price is churn. And so the way to mitigate that churn risk is to add a term to this to the subscription offer. And usually the longer the term, the less the churn will will happen. However, there are in many, like, in other things that are diminishing returns as well to where once you have a certain term length, it used to be ninety nine cents for six months. It was a common offer in this news media space. We've had lots of tests or gone to four months, three months, two months. Generally, what we're finding is that balance between the lost revenue or the opportunity cost of having customers on a promotional offer for a longer longer period of time and the incremental reduction in churn that you would experience.

And then, so this example here is actually a a a chart that demonstrates how churn is affected by the the price increase going from the offer to the regular rate. And so not surprisingly, when you have a a a very low acquisition offer, the percentage change in price is gonna be substantial when you move to a regular rate. And so, price elasticity for a large span of that price increase. The arc elasticity is pretty consistent.

However, an interesting thing happens when you get to very large price increases is that actually, the people that will stop due to price leave early in that in that price increase range. And so the people that remain, once you get above say a hundred, two hundred percent increase are actually not very price elastic, and so the the arc elasticity actually starts to decline over the entire cohort. So something to consider that, that you as you as you make these decisions.

Again, the the the stop increase percentage will go but again, it's proportional to the price increase is what the the elasticity is, as you all know, the price elasticity to the ratio of the of the percentage change in volume divided by the percentage change in price. And so when the when that percentage change in price becomes very large, even if you have a a significant reduction in volume, it can actually be less than a percentage change in price proportionally.

So one of the things that I wanted to share here, this is a this is a pretty dense slide, so I won't go through too much of this in detail. However, I did wanna demonstrate what certain price test outcomes look like. So for this particular client, we actually helped them modify the nature of their acquisition strategies by varying the introductory price and the term and what we wanted to find was what is what are what are the combinations of offer pricing term that maximize their their revenue or their volume And, again, we actually did ask the client, we wanted to find the the volume maximization as well as the revenue maximization strategy and what we found were in this table here.

In a sense, the, the the the lower acquisition offer followed by a high race, raising the price from the the promotional offer all the way to the full rate is the the dominant strategy. So in this example, as in most of the clients we work with, there are substantial, ROI opportunities from optimization of these offers.

So the next, the last part of the customer life cycle I wanted to discuss was the renewal cycle or the the annual increases that that occur.

One couple things to think about is that when you have these recurring revenue relationships, acquisition offers typically get the majority of the attention because that's that's where there's a lot of of dynamic activity happening, you're changing offer, acquisition offers, and there's there's marketing, and there's messaging.

And what we actually find is that eighty percent of your pricing decisions come at the third step of this life cycle management, which is on the annual renewals. And it's intuitive in the sense that you acquire a subscriber or a customer one time, and then you hope to renew them many times over their life cycle. And so, generally, this eighty, eighty percent is a rough, average of what we find at our clients. So it pays a lot. It pays to have a lot of of time and attention paid to optimizing this this annual renewal pricing cycle.

Again, the other eighty twenty rule that comes into consideration is that eighty percent of your pricing related churn or stops will come from twenty percent of your customers. And so we can do a lot of modeling to identify who the twenty percent are that are more likely to churn and come up with some targeted pricing strategies that address the per the higher percentage, churn risk that those customers will demonstrate So just to illustrate what this looks like, as I mentioned, it often involves moving away from a one size fits all pricing strategy at this, at this point in time. You can also move away from those one size fits all at acquisition and at the promotional transition pricing point.

But it really pays to to do this at that third point. And so instead of just in a simple example, instead of everyone getting a ten percent price increase, in practice happens is that you could even introduce three, two more prices. You could have a five percent. You could have a fifteen percent.

For the twenty percent most likely to stop, you could give them a five percent increase. And for the the the other end of the customer spectrum, the people that are most engaged or least likely to stop, to to do the price, you can give them a slightly higher average increase. You can still average the ten percent increase, but what's really effective, and I'll talk about this more in a little bit. Is that you can actually have both higher revenue and volume with a targeted strategy, which is obviously a a a wonderful outcome.

So, I'll move into kind of a just a quick demonstration of the ROI opportunity in this slide here on the left side. If you were to teach a client of ours that has perhaps a hundred thousand customers that are all paying fifty dollars a month. And instead of giving everyone a ten percent price increase, maybe do a more targeted pricing strategy. What would actually this compares the outcomes. And so, and across the board price increase with a ten percent a ten percent price increase with an average price elasticity of, let's say, point four. You would expect to have four thousand stops due to price. This is incremental stops above and beyond their normal churn.

Those four thousand lost subscribers would generate would represent two hundred thousand dollars a month in lost revenue and about two point four million in annual lost revenue from that pricing related churn. So, certainly, the customers that remain will be paying more and so that in your cumulative revenue will go will go up and you'll get a yield on the increase of about three point four million dollars, which is about fifty six percent of the gross yield that you would have received if every customer had agreed to pay the ten percent additional price under a targeted pricing model, instead of giving everybody the ten percent, and we utilize them where, let's call it a a three price approach we would actually be able to reduce the pricing related stops by almost half in in most cases.

And so for the For this example, let's say it went from four thousand to two thousand stops, that reduces the lost monthly revenue from two hundred thousand dollars to one hundred thousand dollars and again reduces the annual loss from two point four million to one point two million.

So there you'll actually add ninety eight thousand subs remaining after the price increase, and your yield will actually increase from three point four million to four point seven million. Which is about a seventy eight percent yield off of the gross amounts. So quite a high ROI, from this type of targeted pricing.

So one of the key tools that we use in our pricing optimization with clients, there's There's certainly the econometric modeling and machine learning and artificial intelligence models that we use, to to measure price elasticity The other is is AB testing. We actually recommend clients have an ongoing AB test process in place And what we do there, and and demonstrated by this, this was a an example of a client that we had done some modeling, and we had predicted what would happen with their with their customers up today had implemented a price increase. And in this example, they gave everyone a five percent price increase. We asked them to hold out a representative control group that received no price increase. And here we have actually broken this out by tenure buckets. So the people that the customers that were in their first year that five percent price increase generated four point three percent incremental stop. So, in elasticity, very close to one, unitary elasticity.

Customers that were in their in their fifth year or higher actually demonstrated a point one, elasticity. So almost one tenth the sensitivity to price of customers in their first year. So this is a pretty pretty typical result that we find when we work with clients, ten years, an enormous enormously powerful variable for predicting response to price increase.

Others happen to be digital engagement, how or just how engaged are they with the product, how passionate are they? Some demographic information around age or income, perhaps some other information like geography or payment method acquisition channel, those are all factors that we'd like to consider, when we look at a customer's overall price elasticity.

This chart shows a histogram of what a typical distribution looks like for one of our customers. So you have you have a long tail on either end of this distribution, To the far left, you have customers that are very insensitive to price. And to the Lorraine, you have customers that are much more sensitive to price. So instead of every customer in this example, getting a fifteen percent price increase, we would give a higher than average increase to the customers on the left and a lower than average price increase on the customers to the right.

What we see here in this example isn't is a another table of a b test results. And so here, what we're really looking for is the the variable of interest, which is stops And so we look at total stops for the target group that received a price increase. That was about five point seven percent. The churn group or the, I'm sorry, the control group that did not have a price increase stopped at about a four point nine percent rate.

So about a point nine percent incremental churn rate or stop rate is what we're attributing to the price change. And you can see here that we we're not only tracking stops or tracking other variables because we realize when customers receive a price increase many times they will instead of just not paying the bill, they'll actually call customer service and they'll either be put on a stop save offer where the there's some price concession or they would be chain they would change their product or service level to to lower their price. And so here, we look at all those factors. And what we're really looking for is what's the net net net effect on volume and revenue And, so very powerful information.

This really gives a, almost a real time look into the market in terms of how your pricing is performing.

Last couple of slides I have here. In this example, I just wanted to show some trends. So here are what the average rates and it actually median subscription prices are per month for, several of our clients. We we compile all the data that we received from our hundreds clients, and we actually can group them or aggregate them into these types of metrics. And you can see that in across all sizes, there are year over year gains in average prices per customer.

And this has been a, trend that we've seen for, for many years now. So the good news is we found that price elasticity for digital subscribers or digital customers is comparable to customers that purchase physical goods, whether it's a you know, a physical product, media product, or it's it's a other type of consumer good. The, really, the value is a digital product that's the content or it's the user experience that they're paying or they're purchasing.

So they're the median or the platform is not as important as the product itself.

Lastly, I'd like to also talk about what a an approach looks like. So how does an engagement like this typically work And so what we often will start with is a kind of a current state assessment. So we look at how you currently pricing, what are your current customers look like, look looking like how have they reacted to price increases?

What are your what does your tech stack look like? What's your billing system? How do you communicate with your clients?

Generally that, that kind of first phase of data collection where we decide determine what type of analytical approach we wanna take and what data is required for that approach, and we come up with a a baseline revenue forecast. And so, once we complete that, we move into have a pricing and model development. So as I mentioned before, we use different types of models. We have, econometric models.

If you're if you're into econometrics, we use things like, discrete choice models. We also use survival analytics. These are these are tools that are really well suited to measuring price elasticity at different points in that in that consumer life cycle.

We will then create what we believe is is a demand curve for your products in your current market.

We can then move into a pricing roadmap So how do we what would we recommend? What's the most, what I'll call low hanging fruit or what are the what are the changes that we can implement quickly that will generate incremental revenue? And then what does a longer term pricing strategy look like and what are the what are the segments that we're trying to address?

How would we then implement an AB testing approach that will support ongoing optimization? And then finally, we will launch into the pricing management process So we will receive data on a regular basis. We will update our recommendations for each customer, and then we will send those customers recommendations back to your billing system, and those recommendations will incorporate AB testing so that we can then do some tracking, on an ongoing basis. So that's what a typical engagement looks like.

The the cost is is also very much a function of how many subscribers you have, what type of billing systems do you you interact with, how many products are there. And, generally, that's the type of, function that we look into. So would love to share any more information that would be valuable. I know we have some time for q and a, and I would love to answer any questions that you have.

Thank you so much for your time today. I look forward to speaking with you soon. Take care.

Hi, everyone. Welcome to the second part of today's webinar, and a huge thank you to Matt from Matter Economics for joining us, ensuring the latest pricing trends and benchmark data it was very insightful.

Now me as a product leader, I I think a lot about pricing flexibility And I know well the challenges in implementing a flexible pricing approach.

So we'll spending the next session here focused on, one, describing what we mean by price flexibility, as well as what are the types of things that you need to be thinking about from a technology standpoint to deliver on that flexibility?

So first, a little bit about me. My name is Neerich Nack. I'm a VP of product management at Rick Curley. Rick Curley is a subscription billing and management solution. We provide our customers products and solutions to help them configure the subscription plans they wanna sell. Configure the types of promotions and discounts they wanna offer all in the vein of helping them, drive acquisition.

Once they acquire those customers, we provide solutions to help them engage with those customers, help them reduce voluntary churn, involuntary churn, we'd have downstream integrations to help, streamline all the processes and data exchanges that need to happen between your subscription billing management platform and all of your adjacent sorts of technologies.

And then we wrap all that up in analytics to provide you the insights that you need so that you know which dials and which sliders you need to move in order to improve your operations.

We've got a lot of customers using us. We have over twenty two hundred brands globally using our platform.

And, one of my favorite things about Recurly is that we just don't provide a platform.

You know, we've been doing this for a very, very long time.

We've got many, many years of experience in subscription billing and management.

And so what we bring to the table with each of our merchants is a real partnership approach. So we're not just helping them, run their subscription business on our platform. We're using all of our expertise and using a real partnership approach to help them actually grow their businesses.

So you see a lot of the logos here on this slide here. And, it's crazy to think that a lot of these companies started with and we're new to subscription. So it's really cool to see the growth and maturation that we've seen, in these customers and the and the journeys they've taken with with recurling. We're really proud of that.

Okay. Back to, pricing flexibility. So what are the things that we wanna talk about today is when we think about pricing flexibility, There's a few things you wanna deliver around that. One is you wanna drive, and deliver a real frictionless experience. And we'll talk about a little bit about what that means.

You also wanna deliver a real flexible personalized sort of experience. Well, we'll talk about that, as well. And then lastly, we'll talk about what are the technologies in place in order to deliver that frictionless, flexible, personalized sort of experience in a scalable way.

So frictionless, what do we mean by frictionless when it comes to pricing flexibility?

Through our latest state of subscriptions report, and what consumers want report. We dove into dozens of different data points across the subscriber life cycle, and we learned a great deal. And what we learned with regards to pricing flexibility was that customers want a real frictionless experience. So when they're offered prices and they're offered, a specific subscription plan, they wanna know that, they're entering into a a friction that experience to not only obtain the services that you're offering, but then also be able to easily change those services. So easily upgrade or downgrade. In some cases, if they wanna pause a subscription, you just wanna make that a really easy frictionless sort of process for them to to manage their subscription.

And not only do they wanna do that in an easy way, they wanna do it in a personalized way. And, and we're not suggesting or recommending that you need to deliver a very personalized one to one sort of experience for each of your subscribers with a custom plan and the custom price and custom this and custom that. But really what you wanna do is provide your subscribers the tools, that they need in place to build or create a very personalized subscription experience, also in a frictionless way. And, I'll give you an example. So, you know, I'm in the subscription business. I subscribe to a lot of services.

And one of the services I subscribed to, and yes, I'm I'm one of those pet owners, I subscribed to a dog food service.

And, you know, this service, they ship me food every quarter or so, and I I pay a a monthly fee for that service. And one of the things they do is they make it very easy before renewal for me to pause my subscription if I choose to. And this is great when I feel like I've got too much food on hand. I got a bunch of food sitting in the freezer. And I'm like, oh, man. I can't take another shipment now. I can go in and easily pause my subscription.

And I can do it in a very easy frictionless way. And from a pricing, configuration perspective, so while they're not letting me change my price specifically, they are giving me the flexibility, and the tools to create a personalized or a subscription experience it's to to help me change the overall value of my subscription. So I'm not explicitly changing the price, but I am changing the value, that I'm getting from that subscription. And I'm doing it in a very frictionless way. So that's a great example I think of of creating that, pricing flexibility through frictionless personalized sort of way.

So let's segue here and talk a little bit about what you need to be thinking about a technology perspective to provide that friction frictionless personalized sort of experience.

When we think about, pricing flexibility in this frictionless experience, we wanna think about every touchpoint in the subscriber life cycle. It's very easy for us to think about acquisition, acquisition, conversion conversion conversion, and start at the top or the first sort of touch point. And that's really important. Right? You need technology that's helping you create a very, you know, personalized sort of price and personalized sort of product for for each of your subscribers.

And you want technology that that's helping you identify, track, and learn about your visitors, even before they become subscribers. Right? So doing so allows you to convert those visitors to trialists, to subscribers, by offering the right promotions offers and plans, again, based on how they're interacting with your site.

You want technology that helps with AB testing to build and test subscription strategies, including pricing, products, and plans that optimize conversion. And so those are obvious things that you should be doing from a technology standpoint to help you, create that sort of frictionless personalized sort of experience at acquisition and conversion.

But then once you've converted them, we all know it's it's much cheaper to retain a customer than acquire them. So you don't wanna lose these customers once you have them. So even here, like, beyond acquisition, it's really important to continue to create that personalized and frictionless experience at every touch point in their life cycle. So, for example, prior to renewal, you may want to, you know, track their usage, see how they've been interacting with your services, with your products, And then right before renewal, you may wanna provide them an upgrade path.

Hey. It looks like you haven't been taking advantage of X Way and maybe you need to, right, based on their usage, or you might wanna provide them a downgrade path. Looks like you haven't been using as much of x, y, and z. Right?

You may wanna offer a a specific price or promotion. Like, oh, we see that you haven't been using our services at all.

Here's the promotional discount to to stay with us, right, because we feel like you're gonna churn.

And then even if you can't save them at renewal, at the time of cancellation, you wanna make sure you've got technology that allows you to automate and and show dynamic sorts of cancellation flows, all aimed at saving the customer at the time of cancellation.

So they give you a reason for why they're canceling. Hey, it's too expensive. Great. Now you can dynamically offer them an offer or a a lower price to stay with you. Or in the case they give you a reason, like, hey, I'm not getting all of the services that I that I really wanted. Well, great. Well, here's an upgrade path where you have me considered x, y, and z.

So this is where it's really important to to use technology not only at the point of acquisition and conversion to create that frictionless personalized experience, but then make sure you're using technology to do that at every point in the subscriber life cycle.

And even more so, so, you know, if we're talking about creating a frictionist subscriber experience, what often gets overlooked and is a major black hole for a lot of businesses is involuntary churn or failed payments that happen when processing recurring payments.

So take me, for example, I'm subscriber of this dog service. I've got a credit card on file with them. Every quarter, they go and they try to charge my credit card. Well, there are over two thousand reasons why my credit card might fail when they try to charge it.

And if you can proactively prevent or recover from those failures, you know, there's studies that show that technology in general and art technology can actually recover seventy three percent of those subscribers who have failed for one of those two thousand reasons. So it's really important that you pick a technology or half technology in place that automates that at at scale. And so what do we mean by, like, techno? Like, what are the things that technology actually does in this this realm.

You know, we think about it in two different ways. There's proactive things you can do or technology you can do to help prevent a payment failure. One is updating the the credit card on file. So let's say, for example, the last order I lost my credit card, And I got a new credit card for my my credit card service, and they issued me a new card, but you don't have the right number on file.

So then when you try to charge my credit card, it's gonna fail. Well, there's account updater services that you can use to make sure you've got the right credit card number on file. And ensure a success on that renewal attempt. The other thing, because, like, maybe my credit card expired in the last course.

Do you wanna make sure that you got the right expiration date on my car before you try to charge it.

And so you could take all of these approaches. The technology can help you make, you know, prevent that initial failure. But in some cases, even though you've taken all these precautions, the card will still fail. The transaction will still fail.

Again, two thousand different reasons why it might fail. One of them could be I had insufficient funds in my account or I hit my credit card limit. And that's where you want your technology to start doing some automated retries on those soft declines. And you wanna pick a technology that's using machine learning based logic, analyzing, you know, trillions of data points across millions of subscribers to understand what works from a retry first sector, what is the right day to try a retry?

What is the right hour to try a retry?

And make sure technology is doing that. So you've got automated retries that are happening on those failed transactions past due invoices.

And then you want a technology that's gonna help you proactively communicate to these customers, again, in a frictionless way, to get them to update their billing information. So, hey, we tried to charge this, but it failed. Please update your billing information.

Give them a very seamless, easy call to action to go update it, and, you can high have high conversions there. And the crazy thing to think about here is, you know, in our state of subscriptions report, we uncover that if you recover that failed payment, so this is a payment that failed, and your invoice has gone past due. So then the second part of this graph here, that if you recover a subscriber in this stage, they will stay with you for a hundred and forty one days on average. So it's not like these customers wanna leave. It's just that there was some passive churn there. So if you can collect that money, and keep their subscription active. They're gonna stay with you for a hundred and forty one days, which has a meaningful impact on overall LTV and revenue for your business.

Great. So we talked about a frictionless or personalized experience.

Let's talk about what flexibility means. And again, personalization is sort of a theme for these first two frictionless and and flexibility.

But what we're talking about here is you can actually provide personalization through flexibility. And, again, we're not saying that you need to provide a, you know, a very custom personalized subscription plan and price and so on and so forth for each individual subscriber. You just wanna have the tools and solutions in place to provide the right billing susability, that your customers desire.

And so we work with, like I said before, we've got twenty two hundred brands in our platform, and no single brand is is the same. And they all have different sorts of products, different sorts of ways of engaging with their customers with their products, and they all need different sorts of billing models and pricing models to offer their customers. And through that flexibility, they can provide a really personalized experience.

So there's a few examples of the types of billing models that, technologies can offer. One is a fixed base price. So this one's an obvious one, easy one where, hey, every month, I'm gonna charge you two ninety nine a month, and you're gonna get access to our services.

You want a billing, subscription billing and management, tool that provides you one time sorts, enables one time transactions and one time charges. So you think of a a streaming service that might have a pay per view event that wants to promote that to their subscribers.

Your technology should be able to support that. The dog food service that I subscribe to, they should be able to provide opportunities for me to make one time purchases during my subscription life cycle as well.

Quantity based pricing models. So if you've got products and services where you wanna sell quantities of something. Like, hey, I want five bags of coffee each month, or I want three bags of coffee each month. Your technology should take care of that for you.

Ram pricing, which is, a really great promotional tool. So we have a lot of publishing companies that wanna offer, you know, a promotional price for the first three billing periods. Get our paper for, for ninety nine cents a month for the first three months, and then automatically upgrade you, or increase your price with the standard price after the third billing period. So you wanna make sure that your technology supports these sorts of flexible, promotional sorts of pricing, usage based pricing.

This is a huge sort of like trend and in the consumer space where customers just wanna pay for what they use.

And so what you can do is monitor their usage and then build them in arrears.

And then prepayments, which is similar where, hey, I'm a customer. I just wanna pay upfront, and I want you to decrement against my balance and then re fill me once I've used all of my usage. So, again, having all those sorts of different flexible billing models in place, it's really important for your technology to have so that you can provide a, quote, unquote, personalized sort of plan for your subscribers.

And you need to consider the operational technology side of this as well. Like, having all those different sorts of combinations and terminations of plans, being able to offer those, being able to take those to market quickly, a solid technology is gonna help you do that rapidly and quickly, and help you respond really quickly to market changes, to competitive changes, to evolving consumer needs, you're really gonna wanna take advantage of that, and for companies that are planning price changes down to down the road or wanna offer different sorts of plans and subscriptions to their existing customers. As as Matt mentioned during his session, it's really important to have the technology. It allows you to do all these different things and offer all these different flexible sorts of plans.

So the other thing that you can do from a flexibility standpoint, is offer add ons on your plans as well. So you can have, your base plan and then allow your subscribers to go create their own custom personalized subscription on the fly. So subscribe to our base plan. Maybe it's zero dollars a month. And then you pick and choose which add ons that you want in order to make up for your to to make up your subscription.

Again, this is providing flexibility. It's providing, you know, flexibility around pricing as well. Folks can, like, configure whatever makes sense for their budget. At the same time, it helps, your customers create that personalized, sort of, like, subscription that they're looking for. And in the the research and data that we've done, again, in these reports that I've mentioned before, we found that our was able to generate an additional two point two billion dollars of incremental revenue by offering these add ons and letting their customers customize the plans that they wanted to to purchase.

The other thing that you wanna do from a a flexibility standpoint, and maybe as little as to do with pricing, but, when you're on checkout as a subscriber, you wanna make sure that your subscriber is able to pay in their preferred payment method.

So, you know, we've seen that forty two percent of customers had actually bailed at a checkout because the payment method that they wanna use is not available to use. You see this a lot when customers are trying to go into international markets and all they're providing is credit cards. A lot of consumers outside of the US wanna use other payment methods outside of credit cards. We're seeing now, you see the stack here too, where alternative payment methods are really growing in popularity.

So, you know, nineteen point three percent of all the transactions than volume that we're seeing come across. And we're currently is happening in alternative payment methods like Ppal, Amazon, and so on and so forth. So Again, it's really important that at checkout, you wanna make sure you've got the flexibility and the types of payment methods that you accept. In order to drive that conversion.

Alright. Scalability. How do you do all this in scale? Right? We talk a lot about frictionless and ability and personalization. How do you add scale?

Well, it all comes down to having the right subscription billing and management, solution in place.

One that integrates really well with your marketing website, with your e commerce platform or wherever you are, where you're trying to drive traffic and get visitors and convert them into subscribers.

And it's really important that your subscription billing management system integrates well with your CRM, with your customer data platforms, with your subscriber engagement platforms, because as we talk about creating a personalized, sort of experience through that frictionless, flexible, sort of, experience, you know, this subscription billing and management platform is gonna need access to a lot of data, or it's gonna have to push a lot of data to these platforms so that you can go create those promotions and the plans and the packages that these customers want.

So it's really important that the subscription billing and management platform plays well with those customer engagement platforms, CDP platforms, make sure that those platforms can consume webhook that are coming out of your subscription and management billing platform. Make sure that your subscription billing and platform is API first so that you know, those other platforms and systems can integrate really well with your, billing solution.

And then, of course, you know, less important to this sort of webinar, you definitely want a solution that integrates well with all of your downstream processes, you know, from an accounting perspective, taxes perspective, you know, make sure it integrates well with the right payment gateways that you're using and and the right payment methods that you need.

The other thing that's really important to enable scale for frictionless, flexible, personalized sort of pricing, is making sure you have the right reporting and analytics. Right? So if you've got a subscription billing and management platform that's automated all this personalization and and so on and so forth, you're gonna be generating a lot and lot of data. A lots of different common a lot of different combinations and permeations of plans, of prices, of descriptions, promotions, you really need to understand, where you really need to have the right data in place to help you understand which of all these things is actually working what's not working, which things are working to really drive LTV for my business.

So it's super important that when you think about scale, you've got a platform that's automatically providing all these analytics and top level dashboards so you can quickly consume these things, and then make the right changes in your business. To to optimize and hit make things better.

And at a minimum, you wanna make sure subscription billing and platform has the right data exports, the right API access to pull the data out of your subscription billing and platform so you can ingest it into your data warehouses, and have your data science team or, you know, business analysts get in there and normalize and transform the data that makes sense for you as a business. So that, again, you can take actions to understand what's working from a pricing flexibility standpoint.

And I love this quote So, you know, Greg Jenkins, head of product at Find MyPass, we've been working together for a while. And, You know, I love this quote. Subcriptions are constantly changing. You need the flexibility to have the time to look ahead rather than spending all your time going, how do we fix what's there now and how do we optimize? So when we think about scale, oftentimes people are thinking about, well, You know, I only have a few hundred subscribers or, you know, scale only becomes important when I've got millions and millions of subscribers.

But that's not really the case. When we talk about scale, it's time to value. It's quickly getting new plans, new products, you pricing out there in the market quickly, we talk a lot about time to value so that you can quickly respond to shifts in the market, quickly respond to ever changing consumer needs. And Greg says it best here, like, don't just, you know, optimize and fix what's there now have time and have the flexibility to think about what's had. Think about what you need to do in the future to combat competitive changes and make sure you've got the right technology that helps you, you know, be that flexible.

So the key takeaways here, we've talked about creating a frictionless environment. So, you know, make sure it's really easy for your subscribers to take actions on their subscription that that they want to in a very less way, make them feel like they're getting a personalized experience through that frictionless environment as well.

You wanna make sure that you've got all the flexibility you need in your billing management solution to provide you know, different competitive sorts of pricing models and billing models and pricing structures that that meet your consumers' needs. And through those, you can create a personalized experience with your four year customer. So without having again to figure out how do I go create a cuss like a personalized custom sort of thing for each one of my subscribers.

And then lastly, you need to think about scalability, and it's not only just scalability for, running personalization, frictionless sort of environment, flexible sort of environment across millions and no other subscribers, it's more about that time to value and being able to get things out to market quickly, not a huge development effort.

And again, being able to, like, you react to market changes and proactively address potential competitive threats.

And so in closing, you know, I I mentioned a a few times here our our state of subscriptions court research. That is available now at recurly dot com. There's a QR code here. Feel free to use that, but I encourage you guys to check that out. Tons of great data, industry benchmarks, around acquisition rates, churn rates, you can see how you compare against peers in your industry, and learn, like, about some actual recommendations that you can take to to help you improve your acquisition and your and your and reduce your churn rates.

So thank you so much for your time. I hope you learned a little bit about what we mean by pricing flexibility and all the things that you need to do there and and think more deeply about the sorts technology that you need in order to deliver on that pricing flexibility.

Thanks.