Would you, as a marketing professional, prefer short-term profit or long-term growth? Although the answer should be obvious, in a hyper-competitive market, subscription marketers continue to opt for the former instead of the latter. Before discounting subscription products in an effort to increase conversions, you should consider the following questions: • How do you know that your current discounted pricing isn’t hurting your product's long-term value proposition? • How do you know you found the optimized price for your product? • Is a single price point or product appropriate for all prospective customers? • Do you know which aspect of the product customers value most? • How do you retain customers at a price point that maximizes revenue in the long-term? However large your company, it’s important to analyze the role that discounting plays in the overall subscription strategy. Marketers will learn what to consider before discounting products, as well as risk mitigation strategies inherent in long-term promotional offers.

1. Maximizing Subscription Revenue
How 3 businesses increased their subscription revenue by discovering the optimal pricing strategy

2. We’re sharing on Twitter! #WebClinic

3. #WebClinic
Today’s speaker
Flint McGlaughlin—Managing Director, MECLABS Institute
Flint McGlaughlin is Managing Director of MECLABS Institute. The organization has partnered with key market leaders including The New York Times, Microsoft Corporation and Reuters Group.
McGlaughlin also serves as the Director of Enterprise Research at the Transforming Business Institute, University of Cambridge (U.K.), as the Chairman of the Board of Governors for St. Stephen’s University and as a Trustee for Westminster Theological Centre. McGlaughlin originally studied philosophy and theology at the University of London’s Specialist Jesuit College.
Today, his primary research is focused on enterprise as transformative agent. His work has won multiple awards and has been quoted in more than 13,000 online and offline sources.

4. #WebClinic
Experiment: Background
Background: A software as a service (SaaS) company that offers membership access to their products online.
Goal: Increase paying subscribers and increase revenue.
Research Question:Which price point will increase subscribers as well as increase revenue?
Test Design: A/B split test
Experiment ID: TP 11074
Record Location: MECLABS Research Library
Research Partner: (Protected)

5. #WebClinic
Experiment: Control
•Customers land on this page after choosing the Basic Membership Product to select length of service.
*Anonymized

6. #WebClinic
Experiment: Treatment
•All subscriptions were discounted by 22% to attempt to drive more subscribers to longer subscription durations.
*Anonymized

7. #WebClinic
Experiment: Side-by-side comparison
Control
Treatment
Audience Question: Which pricing strategy had the greatest results?
?
*Anonymized

8. #WebClinic
DesignTotal ConversionsTotalRevenue
Control
3.6%
Treatment (22% Discount)
4.3%
% Relative Change
19.44%
Experiment: Results
Relative increase in total conversions
19%
The treatment resulted in a 19.44% relative increase in total conversions.

9. #WebClinic
DesignTotal ConversionsTotalRevenue
Control
3.6%
$19,425
Treatment (22% Discount)
4.3%
$17,535
% Relative Change
19.44%
9.73%
Experiment: Results
Relative decrease in total revenue
10%
The treatment resulted in a 9.73% relative decrease in total revenue.

10. #WebClinic
DesignTotal ConversionsTotalRevenue
Control
3.6%
$19,425
Treatment (22% Discount)
4.3%
$17,535
% Relative Change
19.44%
9.73%
Experiment: Results
Relative decrease in total revenue
10%
The treatment resulted in a 9.73% relative decrease in total revenue.
The discounted option increased conversions but decreased revenue.

11. #WebClinic
Experiment: Background
Background: Online sex offender registry service for parents concerned about neighborhood safety.
Goal: To discover the optimal pricing point for the subscription.
Research Question:Which pricing strategy will generate the greatest results?
Test Design: A/B split test
Experiment ID: TP4002
Record Location: MECLABS Research Library
Research Partner: Protected

12. #WebClinic
Experiment: Subscription details
•Customers get instant access to the database, all reports and maps of offenders in the area.
*Anonymized

13. #WebClinic
Experiment: Subscription price testing
$6 a month for full access.
Control
$6 per month.
+ $20 activation fee
Treatment
Audience Question:
How will the $20 activation fee impact results?
?
*Anonymized

14. #WebClinic
DesignTotal ConversionsTotalRevenue
Control
2.4%
Treatment ($20 Activation Fee)
2.4%
% Relative Change
0%
Experiment: Results
No statistical change in conversions
0%
The $20 activation fee did not have any statistical effect on conversions.

15. #WebClinic
DesignTotal ConversionsTotalRevenue*
Control
2.4%
$15,792
Treatment ($20 Activation Fee)
2.4%
$31,488
% Relative Change
0%
99.39%
Experiment: Results
Relative increase in total revenue
99%
Adding a $20 activation fee had a 99.39% relative increase in total revenue.
*Average lifetime customer value

16. #WebClinic
DesignTotal ConversionsTotalRevenue*
Control
2.4%
$15,792
Treatment ($20 Activation Fee)
2.4%
$31,488
% Relative Change
0%
99.39%
Experiment: Results
Relative increase in total revenue
99%
Adding a $20 activation fee had a 99.39% relative increase in total revenue
*Average Lifetime Customer Value
The increased price had no impact on conversions but had a huge impact on total revenue.

17. #WebClinic
Price testing problem
1st Experiment
2nd Experiment
Conversions
Revenue
Conversions
Revenue
Discount
Added $20 Activation Fee

18. #WebClinic
Marketers Ask:
“With so many different factors at play, how do we discover the optimal pricing for our subscriptions?”

19. #WebClinic
Price testing
11%
Revenue
36%
In Paid Subscriptions
609%
Capture Rate
112%
In Conversion
41%
Revenue/Conversion
43%
Conversion Rate
163%
Revenue
99%
Revenue
12%
Click Through Rates
69%
Revenue
Today, we will walk through three major price testing pitfalls we’ve observed from over 15 years of optimization researchto help you discover your optimal pricing offering.

20. #WebClinic
Pitfall #1:
Beware of metric isolation

21. #WebClinic
Background: A large media company offering various subscription options.
Goal: To determine the optimal pricing point after the introductory rate.
Research Question:Which price point will generate the greatest return?
Test Design: A/B split test
Experiment ID: TP 1739
Record Location: MECLABS Research Library
Research Partner: (Protected)
Pitfall #1: Metric isolation

22. #WebClinic
Experiment: Price test background
$0.99 Introductory Price: After the introductory price ends, the customers incur the regular rate.
*Anonymized

23. #WebClinic
Experiment: TreatmentDesignTest Price Variable
Price 1
$0.99
Price2
$1.99
Price 3
$2.99
Price 4
$3.99
Price 5
$4.99
Audience Question: Which price generated the greatest results?
?

24. #WebClinic
Experiment: Key metricsDesignTest Price VariableInitial Conversion RatesCancellation Rate After Introduction PeriodRevenue Per Subscriber
Price 1
$0.99
2.18%
Price2
$1.99
1.95%
Price 3
$2.99
1.80%
Price 4
$3.99
1.65%
Price 5
$4.99
1.47%
Conversion rates

25. #WebClinicDesignTest Price VariableInitial Conversion RatesCancellation Rate After Introduction PeriodRevenue Per Subscriber
Price 1
$0.99
2.18%
41%
Price2
$1.99
1.95%
51%
Price 3
$2.99
1.80%
56%
Price 4
$3.99
1.65%
57%
Price 5
$4.99
1.47%
60%
Experiment: Key metrics
Cancellation rates

26. #WebClinicDesignTest Price VariableInitial Conversion RatesCancellation Rate After Introduction PeriodRevenue Per Subscriber
Price 1
$0.99
2.18%
41%
$36.46
Price2
$1.99
1.95%
51%
$61.73
Price 3
$2.99
1.80%
56%
$82.54
Price 4
$3.99
1.65%
57%
$112.13
Price 5
$4.99
1.47%
60%
$130.42
Experiment: Key metrics
Revenue per subscriber

27. #WebClinic
The metric narrative
0%
10%
20%
30%
40%
50%
60%
70%
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
1
2
3
4
5
Cancellation
Total Revenue
$0.99
$1.99
$2.99
$3.99
$4.99

28. #WebClinic
The metric narrative
0%
10%
20%
30%
40%
50%
60%
70%
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
1
2
3
4
5
Cancellation
Total Revenue
$0.99
$1.99
$2.99
$3.99
$4.99
When price testing for subscriptions, we must be careful not to focus on only one metric such as conversion. It is not about a metric; it is about the metric narrative.

29. #WebClinic
Design
Test Price Variable
Initial Conversion Rates
CancellationRate
Revenue Per SubscriberTotalRevenue
Price 1
$0.99
2.18%
41%
$36.46
$17,172.54
Price 2
$1.99
1.95%
51%
$61.73
$26.048.01
Price 3
$2.99
1.80%
56%
$82.54
$31,611.53
Price 4
$3.99
1.65%
57%
$112.13
$45,189.15
Price 5
$4.99
1.47%
60%
$130.42
$39,386.81
Experiment: Results
Relative increase in total revenue
163%
Price 4 had a 163.1% relative increase over the highest converting option (Price 1).

30. #WebClinic
The metric narrative
0%
10%
20%
30%
40%
50%
60%
70%
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
1
2
3
4
5
Cancellation
Total Revenue
$0.99
$1.99
$2.99
$3.99
$4.99

31. #WebClinic
The metric narrative
0%
10%
20%
30%
40%
50%
60%
70%
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
1
2
3
4
5
Cancellation
Total Revenue
$0.99
$1.99
$2.99
$3.99
$4.99

32. #WebClinic
The metric narrative
0%
10%
20%
30%
40%
50%
60%
70%
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
1
2
3
4
5
Cancellation
$45,189.15
$0.99
$1.99
$2.99
$3.99
$4.99
By only focusing on conversions, you may miss out on other factors that impact revenue more directly.

33. #WebClinic
Pitfall #2:
Beware of value deflation

34. #WebClinic
Background: A large media company offering various subscription products.
Goal: To determine the optimal pricing point after the introductory rate.
Research Question:Which price point will generate the greatest return?
Test Design: A/B split test
Experiment ID: TP 11087
Record Location: MECLABS Research Library
Research Partner: (Protected)
Pitfall #2: Value deflation

35. #WebClinic
Experiment: Control
•Customers are presented with an offer of “50% off Home Delivery for 12 Weeks with free digital access.”
*Anonymized

36. #WebClinic
Experiment: Treatment
•If the order is not completed within a certain time, a pop-up appears with an incentive for an additional four weeks at 50%
*Anonymized

37. #WebClinic
Experiment: Side-by-side comparison
Control
Treatment
Audience Question: Which treatment had the greatest results?
?

38. #WebClinic
DesignTotal ConversionsRelativeDifferenceAggregateLOC
Control
17.2%
-
-
Treatment
16.5%
-4.03%
% RelativeChange:
-4.03%
94%
Experiment: Results
Relative decrease in total conversions
4%
The treatment resulted in a 4% relative decrease in total conversions.

39. #WebClinic
DesignTotal ConversionsRelativeDifferenceAggregateLOC
Control
17.2%
-
-
Treatment
16.5%
-4.03%
% RelativeChange:
-4.03%
94%
Experiment: Results
Relative Decrease in Total Conversions
4%
The Treatment resulted in a 4% Relative Decrease in total conversions
Discounting can dramatically decrease the perceived value of an offer. We must be careful not to damage the long- term value of an offer with a discount.

40. #WebClinic
Pitfall #3:
Beware of cost perception

41. #WebClinic
Background: An independent vitamin manufacturer and distributor.
Goal: Increase total revenue from the page.
Research Question:Which page will generate the highest total revenue?
Test Design: A/B multifactorial split test
Experiment ID: TP 1903
Record Location: MECLABS Research Library
Research Partner: (Protected)
Pitfall #3: Cost perception

42. #WebClinic
Experiment: Control
•Products displayed in a horizontal matrix with the $77/month option preselected.
*Anonymized

43. #WebClinic
Experiment: Treatment
•The treatment displays the products vertically.
•This version adds “Most popular!” and “Best Value!” next to different options.
•The best value option is preselected, which also happens to be the most expensive
*Anonymized

44. #WebClinic
Experiment: Side-by-side comparison
Control
Treatment
Audience Question: Which treatment had the greatest results?
?

45. #WebClinic
DesignTotal ConversionsTotalRevenue
Control
2.31%
Treatment
2.88%
% Relative Change
24.68%
Experiment: Results
Relative increase in conversions
25%
The treatment had a 24.68% relative increase in conversions.

46. #WebClinic
DesignTotal ConversionsTotalRevenue
Control
2.31%
$12,877
Treatment
2.88%
$21,737
% Relative Change
24.68%
68.8%
Experiment: Results
Relative increase in revenue
69%
The treatment produced 68.8% more revenue than the control.

47. #WebClinic
DesignTotal ConversionsTotalRevenue
Control
2.31%
$12,877
Treatment
2.88%
$21,737
% Relative Change
24.68%
68.8%
Experiment: Results
Relative Increase in Revenue
69%
The Treatment produced 68.8% more revenue
Price is one of many factors that contribute to cost. To decrease perceived cost, we may alter material factors (e.g., price), mental factors (e.g., friction) or both.

48. #WebClinic
The principle of sequence
Protocol ID: TP1811
Not this
But this
Service Detail Page: Moved monthly fee from bottom to the top of the table to enhance clarity
38%
in conversions
*Anonymized

49. #WebClinic
The principle of elimination
Protocol ID: TP1169
But this
Product Matrix: Eliminated the different premium options from the control
36%
paid subscriptions
Not this
*Anonymized

50. #WebClinic
The principle of suggestion
Protocol ID: TP1774
Not this
But this
Pricing: Moved to a preselected “Recommended Option” and emphasized monthly price
15%
Increase in Orders
*Anonymized

51. #WebClinic
What you need to know: Your customers determine the price they are willing to pay. It is the marketer’s responsibility to first establish value then guide the customer to the ideal price.

52. #WebClinic
Maximizing subscription revenue
Warning —Common pitfalls
1.Beware of Metric Isolation: When price testing for subscriptions, we must be careful not to focus on only one metric, such as conversion. It is not about a metric; it is about the metric narrative.
2.Beware of Value Deflation: Discounting can dramatically decrease the perceived value of an offer. We must be careful not to damage the long-term value of an offer with a discount.
3.Beware of Cost Perception: Price is only one of many factors that contribute to the perceived costs of an offer. To decrease cost, we may alter material factors (e.g., price), mental factors (e.g., friction) or both.

54. Live optimization

55. #WebClinic
Live Optimization: Indianapolis Star
Primary Audience: Print & Digital Newspaper subscribers near Indianapolis.
Page Purpose: Sell subscription access
Landing Page

56. #WebClinic
Live Optimization: Logic Monitor
Primary Audience: IT professionals, Web Based Companies, & Cloud Providers
Page Purpose: Visitor sign-up for a 14 day free trial
Top of Page

57. #WebClinic
Live Optimization: Stamps.com
Homepage
Primary Audience: Companies and individuals looking for on demand postage
Page Purpose: Visitors to begin the account creation process and purchase membership

58. #WebClinic
Live Optimization: Medical Care Alert
Primary Audience: Seniors looking for a home monitoring solution for emergencies
Page Purpose: Purchase a quarterly, semi- annual, or annual membership
Product Matrix

59. #WebClinic
Live Optimization: Who2Start.com
Primary Audience: Fantasy football enthusiasts
Page Purpose: Purchase a membership to receive weekly fantasy football picks and advice
Homepage

60. #WebClinic
Interested in optimizing your online business?
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