My favorite form of revenue is reccurring subscription revenue. Why?
- Passive income – This means you can be sitting on a beach or sleeping and your income stream does not change.
- Snowball Effect – Reccurring subscriptions add up fast! Once you implement subscriptions I guarantee soon after you will be kicking yourself that you did not implement them earlier. I know I was after I first implemented them on some sites. The snowball effect is pretty easy to understand. Basically since they are auto renewing – as you gain new customers the reccurring subscriptions are also coming in thus making a huge pile of cash for you.
- Easy to Implement – PayPal makes it amazingly easy to implement a recurring subscription.
OK so easy right? Well not that easy……. there are several things you need to think about before you throw up the subscribe now button.
Price Point – 10, 20, 30$ what is the right price point? This is something you are going to need to do some research on. Price points are something that have always intrigued me because its really amazing how it works.
In the book Pinpoint Pricing They do a study of pricepoints for an e-book. Whle this is not a subscription you can still learn a lot from it. In 2006 they conducted a 4-week AdWords split test for a new eBook. They tried $19, $29, and $39 for there e-book. Here is there results:
They go on to say:
We believe that the 19$ Price Point lowered customer perception of the books value and lots some sales. At 39$, the book was perceived as too expensive by some customers. 29$ was the “safe price. However, note that the 39$ price point generates more revenue, even with 22% fewer orders.
Since they were not trying to build a volume of readership for this ebook they recommended a 39$ price point. This is important to note because with forum or website it might be more important for you to get more users then to get a 1 time sale because the users will be coming back and might click on your Contextual Ads or pay for other services you have.
Subscription Length – 1 week? 1 month? 6 months? 1 year? Again another thing you are going to want to do research on. This really depends on the service. In writing this many examples came into my head but its hard to put them into writing. I guess the point is this – you want to lock people into the longest terms possible. Annual and bi-annual subscriptions I have found really kick ass but also take into account the higher cost of a long term subscription may not allow some people to participate. Longer term, higher priced subscriptions will also be better on your bottom line because of fees.
Terms Of Service – Always be very clear what the user is getting in their terms of service. From a money perspective you want to throw as many features as possible in the terms of service that a customer will be receiving but from a legal side you want to be as brief as possible. Anything you put in here you are going to have to provide and by being too specific you could be limiting yourself for growth.
My experiences – Most of my subscription revenue is from forums. I have tried literally 20 different price points and different lengths of time. I have found the sweet spot for me is 19.95 every 6 months. For terms of service I basically offer nothing I know I might not deliver. I refer to these as donation based subscription services. This means you are not guaranteeing crap.
So if you are not using subscriptions and you are sitting there saying to yourself, “Well nobody would sign up for a donation based reoccouring subscription on my site” and maybe you are right…. or maybe not =P
Anyway just some thoughts I had on subscription based revenue.