In this presentation Fusebill CEO Steve Adams discusses how to evaluate price models as opposed to price points, review churn and its impacts, what to consider when selecting a price strategy and review some of the most popular strategies for subscription based businesses .

1. Pricing in a Subscription World
Steve Adams – CEO
February 1, 2013 1

2. Speaker Introduction
Steve Adams, CEO
stevea@fusebill.com
www.fusebill.com
Friday, February 01, 2013 2
Call Us at: 1-888-519-1425 Copyright Fusebill Inc. 2013. All rights reserved

3. Agenda
• Evaluating Subscription pricing is different than 1-time sales
• Key Points
– Lifetime value
– Churn
– Impact of billing practices
• Fusebill Introduction
February 1, 2013 3

4. Key Takeaways
• Measure customer lifetime value. Segment!
• Pricing impacts churn, not just customer acquisition
• Billing itself triggers churn
February 1, 2013 4

5. EVALUATING PRICE MODELS IN A
SUBSCRIPTION WORLD
February 1, 2013 5

6. Price Testing in a Transactional World
Sales volumes drop as
$ price increases
Sales volumes $
increase as price drops
Choose the option that maximizes revenue
Revenue = Unit Volume * Price_per_unit
February 1, 2013 6

7. A/B Testing
• Split traffic between pages with different price points and
compare
A B
Price: $10 Price: $20
Visits: 100 Visits: 100
Sales: 25 Sales: 15
Conversion rate: 25% Conversion rate: 15%
Expected Revenue: $250 Expected Revenue: $300
• Conclusion:
– B > A so set price at $20
February 1, 2013 7

8. But…Subscriptions behave differently
A B
Price: $10 / month Price: $20 /month
Visits: 100 Visits: 100
Sales: 25 Sales: 15
Conversion rate: 25% Conversion rate: 15%
Lifetime revenue: $120 Lifetime revenue: $80
Annual Revenue: $3000 Annual Revenue: $1200
$25
$20
$15
$10 A
B
$5
$0
February 1, 2013 8

9. A/B Testing
• Split traffic between two pages and see what works best
– Assumes cost of acquisition is constant
– Assumes revenue (and margin) is the same
• Works well for one-time sales – revenue is known at time of
purchase
• Fails for subscription sales – using initial revenue is not
accurate
• Does help measure price/demand tradeoffs
February 1, 2013 9

10. Model Lifetime Value
Client Economics • (Lifetime revenue) –
150 (Cost of acquisition)
Breakeven Profit
100
• Segment:
50 – Acquisition channel
– Price plans
-
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
(50)
• Use margin
(100)
• Don’t ignore churn
(150)
(200)
Customer Acquisition Cost Cumulative Contribution
February 1, 2013 10

11. Client Economics - Considerations
• Cost of Acquisition
– Marketing Programs and Promotions
– Sales (salaries, commissions)
– Channels (commissions)
• Contribution
– Revenue – Costs
• Costs
– Cost of Goods
– Customer Support
– Data Center, Bandwidth…
– Sales costs (incentives for upgrades, renewals)
February 1, 2013 11

12. Impact of churn
• Churn (% customers lost per time period) drives customer
lifetime (and CLV)
• Beware of averages – timing of churn impacts revenues
3 year revenue = $2200
100
90
80
70
60 3 year revenue = $1320
50
40
30
20
10
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
3% churn 3% churn after 3 months
February 1, 2013 12

13. Typical Impact of Billing on Churn
Free Trial Ends
Monthly Plans
Annual Plans
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14. Billing & Churn
• Card failures on initial signup
– And/or no capture of client information for follow-up
• Card failures on recurring billing
Mechanical
– Typically 25-30% of cards will fail but succeed on retries
• Expiring cards
– Cards last 3 years – 3% expire EVERY month
• Passive churn
– Card expiry, subscription expiry
Behavioral
• Surprise charges – especially for annual subscriptions
• Oh! Am I still paying for that?
February 1, 2013 14

15. Recurring Billing Systems Help!
• Automate intelligent retries
• Communicate:
– renewal notices,
– failure notices
– Receipts?
• Evergreen vs. term based subscriptions
• Manage cards – online update of payment methods
• Implement account status – not paying needs to have an impact
February 1, 2013 15

16. Implementation Issues
• “Changing the billing system” is often the hardest part of price
testing
– Restricts flexibility of sales and marketing teams
• Access to Information: revenues often buried in backend
systems
• Need for Automation
– Manual processes don’t scale – leads to revenue leakage and unhappy
clients
Flat rate pricing is often used ONLY because it is easy.
February 1, 2013 16

17. Fusebill Executive Dashboard
February 1, 2013 17

18. Track Lifetime Value, Churn
February 1, 2013 18

19. Fusebill Platform Overview
Self-
Online Swipe & Agent Lifecycle
Service Analytics
Checkout Subscribe Interface Management
Portal
API Layer – Customers, Subscriptions, Transactions
Pricing Accounts Billing Invoicing Payments
Products Subscriptions Rating Payment Credit Card
Price Plans Invoices Usage Volumes Terms Date ACH
Usage Tiers Ledgers Pro-rating Control Storage Vault
Discounts Reseller Taxation Review, Edit Gateways
Coupons Tracking Coupons Aging Dunning
Payments Currency Adjustments Retries
Adjustments Adjustments
Scalable Multi-Tenant PCI Compliant Security
External Payment Processing
February 1, 2013 19

20. Implementation Issues
• “Changing the billing system” is often the hardest part of price
testing
– Restricts flexibility of sales and marketing teams
• Access to Information: revenues often buried in backend
systems
• Need for Automation
– Manual processes don’t scale – leads to revenue leakage and unhappy
clients
Flat rate pricing is often used ONLY because it is easy.
February 1, 2013 20

21. The Fusebill Difference
Experience
Product
Commitment to service
www.fusebill.com
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Call Us at: 1-888-519-1425 Copyright Fusebill Inc. 2013. All rights reserved

22. Try Fusebill Free for 30 days.
No contracts, credit card, or surprises.
Sign up at www.fusebill.com
Thank You!
www.fusebill.com
1-888-519-1425
support@fusebill.com
Twitter: @fusebill
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