

Ask YC: Anyone have any subscription service tips/experience? - matth

I've developed a tool that I think could be valuable to a select audience, and may be a nice niche/lifestyle business.
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webwright
Sure! Overall advice-- think more about sales/marketing/distribution than you
do right now. How do you get in front of potential customers? Some specific
advice along those lines:

1) Get good at SEO. SEOmoz.org is the best place to start. 2) First, prove
that you can bring in 100 people and have some meaningful percentage turn into
customers. Might take a lot of design/wording iteration-- might not. Depends
on the product simplicity/value prop. 3) Price it in such a way that you can
afford marketing. If you can convert 3-5% of your visitors into customers and
you have a reasonable high price point, you can afford adwords, which is a
huge win. 4) Understand the "lifetime value of a customer". What's the average
customer worth? How long do they stay with you? This will tell you how much
you can spend per user on marketing efforts.

Let's see... Other generic advice:

1) Don't offer a free plan unless free users provide some other value. 2) DO
offer a free trial. It seems standard practice to ask for the credit card # at
the time of the trial... If your service is sticky enough, you might consider
doing it the other way. 3) Use BrainTree payment services. They've treated us
pretty well. 4) Price it high, but offer a "seasonal discount" so that people
feel like they have a bargain if they strike now. 5) Measure like crazy.
Understand your funnel REALLY well.

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hopeless
That's sounds like great advice. I heard 37signals mention that they're moving
to BrainTree recently so I'll certainly look into them -- the only negative is
that their site is not very informative/transparent.

I certainly like the idea of not offering a free plan at all and it's
definitely the way I'm intending to go (at least initially). One of the
advantages I can see is that it positions your service as a serious app
targeted at professionals (which, in a way, encourages professionals to use
it). Also, even if free users cost you nothing up front, you still have to
store their data and support them. I'd rather 10 paying customers than 1000
free + 10 paying.

As you mentioned, if free users contribute (perhaps, depending on the context,
by making their data public) then a free plan becomes more useful.

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trevelyan
You can give materials away without having a "free plan". This may seem like a
stupid distinction, but if it's free it isn't a plan. Don't muddle the waters.
You want to spend your text promoting the paid services, not explaining what
people get for free.

My own advice would be to have only one paid plan. Some sites have multiple
plans at multiple prices and try to segment their user market. It will save
you a lot of time hassle in development if you just have one premium plan to
start. When you are a success you can look at user segmentation.

Also - be aware that if there is a community element to your service multiple
plans can cause discord.

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zackola
This is the part of the post where you give out a few free beta accounts to
hacker news readers and ask them politely to judge your product/ask for
recommendations about pricing and business model.

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hopeless
Although if the niche isn't "people who read Hacker News", then giving out
beta accounts isn't going to get you much feedback from your target market.

I think the OP is asking for general advice re. running a subscription-based
web app, which Hacker Newsians are very well p[laced to do. Since he's light
on specifics, I'll throw out some questions here which have occurred to me:

\- How do you determine your feature/price plan(s). And if using multiple
price plans, do you release all plans at the start? the most basic plan first?
the middle plan first so you can introduce a higher or lower one?

\- How do you manage subscriptions? Which provider? Is Paypal as good as place
as anywhere to start? Can any of them handle voucher codes (e.g. 50% off for
first 6 months subscription, etc)

\- Do you offer a 30 day free trial? If so, do you require credit cards at
signup for the trial? If you don't require credit cards, do you just lock the
account until they upgrade? I guess the conversion rates have been discussed
to death but you're probably looking at <5% conversion from free trial to
subscription. Right?

\- How do you handle cancellations? Pro-rate the monthly charge or not?

These are just a few thing off the top of my head which would be
useful/interesting for others to share

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answerly
The three main levers in a subscription business are:

1) the premium: this is the enticement which gets people to try out your
product. Most typically it is a free trial period.

2) the fees: what does the service cost the user. My experience has been that
if your price point is under about $10 per month, you are better off charging
a quarterly or annual subscription.

3)the features: what does the user "get" for a monthly/annual fee. The best
features have a high perceived value to the user but a low delivery cost to
the provider. The worst subscription business focus on the wrong features
which are very high cost to deliver but have a very low perceived value to the
user.

Some other things to think about: 1) You need to test like crazy on each of
these levers. I have seen examples where a $14.95 price point has performed
30% better than a $15 price point. Make basic assumptions about the different
elements you want to test, but make sure to let the data make decisions for
you.

2) If you offer a free trial, make sure to get the credit card number up
front.

3) Be very upfront with disclosures on your billing process and have a very
liberal refund process. Anyone can request a charge back from their credit
card company for any reason and too many charge backs will sink your income
stream. Make it easier for someone to get a refund from you and you can
prevent these types of issues.

4) be very focused on retention. Retaining existing users is much easier than
acquiring new ones.

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rarrrrrr
A common combination is to give some useful part of the subscription away for
free (especially if this has little cost for you) and promote it. Getting
traction for a free service is usually easier. Then charge something for more
functionality. There's much to be said for high volume, low conversion models.
If only 0.5% of your users convert to paid, but your free product is so good
that you have a huge community, it's clearly worth it. An example might be
AVG. Whatever you think of their virus scanner, the business model is working
well.

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bisi
Is it B to B or B to C ? What type of biz is your site ? Do you have beta
testers ?

