Questions

I'm building a database to sell information on employment contracts and comparisons (terms typically found, what they mean, analytics on what percentage of people have them, etc) and am trying to figure out my pricing strategy. Users submit their information to get our information (similar to Glassdoor), so volume is important early on to continue building up the database. I've always read that 3 pricing options is the way to go - Low, Medium and High. What are the pros and cons of a transactional (one time) model versus a subscription model? How do you price this out if you offer both?

Others have shared the pros and cons of each model.

From real world experience, here's my advice:

You can't charge 12X the monthly subscription fee for the transaction amount when you have the subscription option available. Unless, of course, you don't really want them to buy using the transaction option.

You have to discount it at least by two months or say 20% (which I know is more than the 16-2/3rds percent 2/12ths is, but "16.667% Off" just doesn't have a nice ring to it or seem like a significant discount worded that way, does it?

Anyone who has taken basic accounting knows the maxim, "A dollar today is worth more than a dollar tomorrow." This is because of opportunity cost and the interest rate.

So getting your revenue now--unless you have some weird matching principle thing going on and want to spread that revenue out over several quarters--is better than having to wait for it in little pieces.

Also, and here's the real world intruding with its messy, "not nice" truths again, buyers screw up.

They run out of money.

They forget to fund their payment method.

They decide to buy beer or postage or pay their Over 90s instead of pay your subscription this month, and if you're using Paypal that auto subscription fails and Bang! it's dead.

So get your money now if you can. Because every month you have to come back around, cap in hand for collections, is yet another chance for the buyer to fail you.

And then you have to do unpleasant things in response like turn their access off or make a phone call to their Accounts Payable department.

One other factor in setting up these pricing options is to include an option nobody wants. Despite seeming pointless, this third option helps buyers make up their minds.

Dan Ariely explains this in his "Predictably Irrational" video:
https://www.youtube.com/watch?v=9X68dm92HVI

1 > Paris
2 > Rome
or 3 > Rome With Coffee

makes Rome With Coffee seem superior not just to Rome, but to Paris as well.

You need a third option available to make this work. It isn't possible with only two.

Get paid in full NOW if you can. Then you can rest easy in the knowledge you've already been paid...and get down to providing serious customer service. After all, they've paid for it.


Answered 4 years ago

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