I started working on a subscription service that offers people noticeably large discounts. As far as I'm aware, no one else is doing this. The math checks out but there are big caveats. The power users could sink me, especially if the bet I'm making based on geopolitics goes against me. The more users I have that represent the average demographics of the country, the more money I make. The more prices stabilize or don't increase a further 30%, the more money I make. Surprisingly people at first think I'm crazy, then they think for a minute, and start seeing that it could work. You can literally see it on their face as they process it. A few have flat out told me I'm charging too little. I originally wanted to charge $1,200 annually but then fixated on $2,000 before realizing that I would be really vulnerable to power users, and users in more expensive states. In almost every worst case scenario, I end up deep in the red per user. I don't break even in my worse case scenario unless I'm charging $6,000. These are gross profits. So my question is, for those who have experience with these types of companies and models, how do you set prices? Do you price for the more expensive users so you can sleep better at night but growth may lag a bit? Do you price for the average? Or do you price for growth and hope for the best (as in grow enough to attract a VC willing to light money on fire)?
From just talking to random strangers, responses range from $1,200 is the I probably won't think about it and will subscribe price, to you could get away with $3-4,000 if you market this to power users and then they start telling me how their friend or family member would benefit from this. They also talk about needing a monthly payment plan, or some kind of way to split it up because most people don't have $1,000+ sitting around to pay for this all at once. My original plan was to try to get buy now pay later companies to help push this through, or credit card companies due to the high sales price.
I am open to recommendations.
Pricing
Best case scenario assumes user base reflects current behaviors of the average American consumer in this space. Relatively low and predictable usage. Current price includes a small buffer to protect me from price fluctuations.
Middle case scenario assumes my expenses increase 25%. I have no control over my main expense since I am just a middle man.
Worst case scenario assumes both increase spending, and that all of my users are power users who use the service 4x more than the average consumer.
$1,200
$2,000
$4,000
$5,000
$6,000
Best Case (Gross Margin)
48%
57.60%
67%
73%
Middle Case (Gross Margin)
16%
48%
44.58%
49.39%
Worst Case (Gross Margin)
-224%
-96%
-27.42%
-8.20%
4.56%
From just talking to random strangers, responses range from $1,200 is the I probably won't think about it and will subscribe price, to you could get away with $3-4,000 if you market this to power users and then they start telling me how their friend or family member would benefit from this. They also talk about needing a monthly payment plan, or some kind of way to split it up because most people don't have $1,000+ sitting around to pay for this all at once. My original plan was to try to get buy now pay later companies to help push this through, or credit card companies due to the high sales price.
I am open to recommendations.
Pricing
Best case scenario assumes user base reflects current behaviors of the average American consumer in this space. Relatively low and predictable usage. Current price includes a small buffer to protect me from price fluctuations.
Middle case scenario assumes my expenses increase 25%. I have no control over my main expense since I am just a middle man.
Worst case scenario assumes both increase spending, and that all of my users are power users who use the service 4x more than the average consumer.
$1,200
$2,000
$4,000
$5,000
$6,000
Best Case (Gross Margin)
48%
57.60%
67%
73%
Middle Case (Gross Margin)
16%
48%
44.58%
49.39%
Worst Case (Gross Margin)
-224%
-96%
-27.42%
-8.20%
4.56%