Do you remember, when you were a kid, how excited you would get when something came in the mail that had your name on it? You would immediately rip open the envelope or package with a smile so big it could rival the Cheshire Cat from Alice In Wonderland.

CheshireCat

As an adult, if you’ve ever signed up for an eCommerce subscription service, you know how exciting it can be to open your mailbox and relive that feeling of being 7 again. Maybe you signed yourself up or were gifted a subscription, whatever the case, getting something every month is very cool.

Merchants that already have an online store are now giving their customers the option of signing up for monthly or yearly subscriptions. The allure of offering subscriptions is the recurring revenue that it brings, a measure of stability in an up and down business.

You can get just about anything online from a box full of cat products to a monthly supply of razors. Subscription based eCommerce businesses are becoming increasingly popular, and consumers want more. Pricing ranges from weekly, monthly to yearly subscriptions. What works for one business might not work for another.

The most important question for retailers is, what are the pricing models that work? We’ve taken out the guesswork for you and have put together a list of some popular pricing options for your subscription business.

Term Discount

A term discount is when you give a percent or dollar amount discount depending on time. In the subscription world, the longer a customer stays in your subscription plan, the higher the discount.

Meow Box is a subscription based business that sends you a box full of samples for your cat. There are three different lengths of time to choose from, one month, three month or six month.

Have a look at their pricing below. The price per month reduces as the subscription length increases.

MeowBox

 

This is a great pricing model as it gives customers a big incentive to sign up for the longer plan. The discount between the one month subscription and the six month subscription looks like a lot. One is in the 30 dollar range, the other in the 20.

Monthly or Annual

People love options, as long as there aren’t too many. There are two types of people, the ones that pay for everything up front, and those who would rather just pay monthly. Perfect example: I personally hate paying for things monthly and would much rather pay upfront but my friend would rather pay for things on a monthly basis.

The solution? Offer both plans. I recently paid for a 6 month subscription to Sockscribe Me as a gift for someone. I hate the thought of paying month to month so this really appealed to me. But, for those who would rather do month to month, Sockscribe Me has that option. With Sockscribe Me no matter what plan you choose, the price is $12/month.

SockscribeMe

Annual Subscription Discount

Every merchant wants recurring revenue, so why not lock customers in. Get customers to sign up for the yearly plan with a discount.

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Offer a month to month plan and an annual plan. If the customer chooses the annual plan they receive a discount. For example, if a customer signs up for a yearly plan, they pay for only 10 or 11 months which results in the box essentially being ‘free’.

Birchbox, a beauty products subscription service, uses this model. If you subscribe monthly, the box costs $10 plus $4.95 for shipping. If you pay for an entire year, the price is only $100.oo plus shipping. You are essentially getting two boxes for free if you subscribe for a full year. A pretty hefty discount for those thinking of signing up.

BirchBox

Free Shipping

Lets take another look at Sockscribe Me.

SockscribeMe

Notice anything different about the plans? The 6 and 12 month plans include free shipping. It may not seem like much a different, but the monthly shipping adds up, so this may just be enough to encourage people to sign up for those plans.

People love free shipping. In fact, “For whatever reason, a free shipping offer that saves a customer $6.99 is more appealing to many than a discount that cuts the purchase price by $10″ says David Bell, Wharton School Of Business.

There have been numerous studies over the years and all have found how enticing free shipping is. Take a look at a few of these stats:

Because not every store yet offers free shipping it gives you an edge over your competition. Free shipping could just be the key to unlocking huge recurring revenue for your online store.

Start Experimenting

If you’re confused as to where to start your pricing, don’t worry. You just need to start somewhere and optimize it from there. If you want people to sign up for your yearly plan, try playing with the pricing a bit or include something like free shipping. If you only have monthly plans, try adding in a yearly plan and see if people prefer that.

In terms of pricing optimization you should also run some A/B tests. For example, does a $24.99/month price point generate more sales than than a $25/month price point? Remember not to forget the power of 9. Nothing is set in stone, so why not experiment?

Still not sure where to start? Take a look at your competitors price points so you can get an idea of what people are willing to pay. This is something you should be doing anyways.

Do you currently have a subscription based website or have you added a subscription option to your site? Let us know what works for you and if you have any tips you can add.