March 8, 2022 | Authored by: Vindicia Team Blogs
When is the right time to revisit your subscription pricing?
Robbie Kellman Baxter recently pointed out that Amazon is raising its Prime subscription price by $2/month, even as the company reported a huge rise in profit.
As a purely revenue matter, why not? But from the customer perspective, something doesn’t add up.
Yes, businesses worldwide are facing inflation, increased costs for raw materials and manpower, supply chain issues, not to mention the ongoing impact of the pandemic. Despite all this, the last thing customers want is to pay more. And while Amazon, a giant with no direct competition, can afford to risk the goodwill of its customer base, most businesses can’t, and that makes the subject of pricing a very touchy one.
The best time to raise prices is…never
Price has always been a hot consumer issue. According to Fortune’s Future Consumer Index, it will continue to be, with 58% of consumers more focused on value in times ahead.
If it were only a matter of customer satisfaction, you would never raise your prices, period.
But price increases are a fact of doing business, and consumers know it too. It’s not that they don’t expect to ever have to pay more for products or subscriptions they love. Rather, the higher price must give them something of value in return. For businesses to take more, they are going to have to give more. It’s as simple as that (Amazon notwithstanding…)
What subscriptions are really built upon
When a customer buys a subscription, they are getting much more than just the product or service. They are getting a long-term relationship with a brand who delivers what they need, when they need it, in a frictionless way that doesn’t demand of them any effort. To enter into such a relationship, the customer must feel a sense of trust and security that the brand has their best interests at heart. Otherwise, they would never agree to hand over their credit card details for automatic recurring payments.
Trust is built when the subscriber can rely on the quality and availability of the product or service. Trust also comes from smooth payment processing, and the knowledge that if any problem arises with their credit card, the subscription company is on top of it and will be in contact to resolve it. In short, trust flows when the subscription experience feels good.
Trust doesn’t mean that the customer thinks the subscription price will stay the same forever. It means that they know that if the price has to go up, it will come with added value for them, whether it be an improved product or more choice, a better experience, or a combination of both. Every relationship is give and take – same goes for the subscription relationship.
Offer more, then you can charge more
Before considering raising your subscription price, first look at how you can add value to the subscription, so you don’t impact the high trust you’ve already cultivated with your subscribers.
Vindicia’s subscription tech stack is designed to help you create more value for your subscribers, for example, through the creation of tempting bundles based on the user’s preferences. Another way to add value is by personalizing the subscription journey for individual users, giving them a more tailored and satisfying experience with your brand. Collaborating with other subscription companies and offering joint bundles is a great way to increase value and brand exposure at the same time.
It’s all about trust
Today’s consumers are hyper-connected to their payments and subscriptions. Credit card transactions are pinged in real time alerts to their phones. They are notified when prices go up, by app, email and text message. Pricing can’t just be sneaked in under the radar.
While consumers might balk at the idea of a price increase, given the right context, they can be surprisingly amiable to it. After all, it’s been shown that 45% of consumers are happy to pay more if it means they get better customer service. And research demonstrates that consumers often choose the more expensive version of a product, believing that higher price translates to better quality.
At the end of the day, what it comes down to is trust. When subscribers can trust you on product, quality, value and service, they will trust you on price increases too. We wouldn’t recommend a sudden price hike like Amazon, but with the help of Vindicia subscription tech, you can provide added value and increase pricing without compromising customer trust. Thinking of revisiting your subscription pricing? Never say never.
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