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

https://news.ycombinator.com/item?id=388198

by matth • 18 years ago

20 8 18 years ago

news.ycombinator.com

I've developed a tool that I think could be valuable to a select audience, and may be a nice niche/lifestyle business.

zackola• 18 years ago

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.

hopeless2• 18 years ago

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

bisi• 18 years ago

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

rarrrrrr• 18 years ago

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.

webwright• 18 years ago

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.

hopeless2• 18 years ago

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.

trevelyan• 18 years ago

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.

answerly• 18 years ago

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.

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

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