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How to price your subscription product: insights and examples

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Why can’t we get accessibility right? Claire Bauden (SVP Global Product Design, Global Payments Inc.)

Tirtha Chavan is an accomplished customer-centric strategy and business transformation leader in the Software as a Service (SaaS) industry, boasting over a decade of expertise in unlocking value for millions of global customers, driving long-term strategic growth, and maximizing profitability for Fortune 500 organizations.

Tirtha Chavan

<p>In today&#8217;s diverse customer landscape, one-size-fits-all falls short. Tiered <a href="https://www.mindtheproduct.com/getting-started-with-dynamic-product-pricing-vishal-kapoor-on-the-product-experience/" target="_blank" rel="noopener">subscriptions</a> offer tailored options for customer needs, budgets, complexities, and industries making products and services more personalized and accessible. These models foster brand loyalty, provide competitive advantages, and serve as a strategic blueprint for sustainable, value-driven customer relationships.</p>
<h2>Defining a tiered subscription plan</h2>
<p>A tiered subscription plan is a business strategy where a company offers multiple levels or &#8220;tiers&#8221; of service or product packages, such as Standard, Premium, and Enterprise,  each with its own price point and set of features. This approach allows customers to choose a subscription level that best aligns with their needs, preferences, and budget.</p>
<p>Typically, a tiered subscription can be visualized as a hierarchical structure:</p>
<ul>
<li><strong>Basic or standard tier:</strong> This is the most fundamental offering, usually priced at the lowest point. It provides essential features and services, targeting customers who require minimal functionalities or those who are testing the service. For example &#8211; Netflix offers the most fundamental Standard Plan with ads without an option to download videos to users who want to pay less for content.</li>
<li><strong>Intermediate or premium tier:</strong> Positioned in the middle, this tier offers more features or benefits than the basic level, often catering to the general needs of a broader audience. For example &#8211; Netflix offers the most Standard Plan without ads and an option to download videos to users who are willing to pay a bit more.</li>
<li><strong>Advanced or enterprise tier:</strong> This is the highest tier, priced the highest, and offers the most comprehensive set of features, functionalities, or benefits. It&#8217;s tailored for customers seeking an exhaustive experience or specialized functionalities. For example &#8211; Netflix offers the Premium tier without ads, an option to download videos, and the best video quality to users who are willing to pay the most.</li>
</ul>
<p>Tiered subscriptions are prevalent in various industries, from streaming services (like music and video platforms) to software as a service (<a href="https://www.mindtheproduct.com/how-entitlement-management-supports-the-move-to-saas/" target="_blank" rel="noopener">SaaS</a>) products, and even membership-based services. The primary advantage of this model is its flexibility and personalization, allowing businesses to maximize their reach and potential revenue while catering to a wide range of customer needs, complexity, preferences, and customer sizes such as individuals, SMBs (small and medium-sized businesses), mid-market, and large enterprises.</p>
<h2>The rise of personalization in the digital age</h2>
<p>In the digital realm, the notion of a static, universal user experience is increasingly becoming a relic of the past. The advent of platforms like Netflix and <a href="https://www.mindtheproduct.com/what-you-need-to-know-about-spotifys-search-function-jonny-brooks-bartlett-on-the-product-experience/" target="_blank" rel="noopener">Spotify</a> underscored the transformative power of personalization. Gone were the days of generic content lists; in came Netflix&#8217;s intricate recommendations tailored to viewers&#8217; unique tastes, and Spotify&#8217;s customized playlists mirroring individual listening habits. This seismic shift towards personalization was propelled by advancements in data analytics and technology. Sophisticated algorithms analyze vast troves of user data to curate experiences that resonate on a personal level. For consumers, this means a more relevant and engaging digital journey, minimizing the information overload and ensuring content relevancy. Businesses, on the other hand, benefit from increased user engagement, loyalty, and a higher likelihood of conversions. Thus, in this era, personalization isn&#8217;t just a luxury—it&#8217;s an expectation, fostering symbiotic benefits for both consumers and enterprises.</p>
<h2>The challenges in personalization at scale:</h2>
<p><strong>Deciding how to segment customer base</strong></p>
<p>Deciding how to segment the customer base is a pivotal yet complex undertaking for businesses. While segmentation can be based on apparent factors like demographics, spending, complexity, customer size, industry, or purchase history, determining the most strategic and meaningful divisions often goes deeper. It involves understanding underlying consumer behaviors, motivations, and potential future interactions. Moreover, as markets evolve and customer behaviors shift, these segments may need re-evaluation and adjustment. The challenge lies in identifying the initial segments and maintaining their relevance and effectiveness over time, ensuring that businesses can adapt to changing landscapes and consumer dynamics.</p>
<p><strong>Balancing customization with cost-effectiveness</strong></p>
<p>In the realm of personalized tiered subscriptions, striking a balance between customization and cost-effectiveness poses a significant challenge. While tailoring services to individual needs enhances user satisfaction and engagement, it also escalates operational and technological expenses. Each layer of personalization may require sophisticated algorithms, data analysis, and potentially even different infrastructure components. It can increase costs disproportionately if not managed astutely. Therefore, businesses are tasked with the intricate endeavor of offering meaningful personalization without compromising their economic viability.</p>
<p><strong>Providing consistent quality experience to a diverse user base</strong></p>
<p>Providing a consistent quality experience to a diverse user base is a nuanced challenge in the world of personalized tiered subscriptions. As businesses expand their reach, they cater to a spectrum of users, each with distinct preferences, cultural backgrounds, and expectations. While tailoring offerings to individual needs is essential, it&#8217;s equally crucial to maintain a baseline quality that resonates with every user. Striking this balance means ensuring that no segment feels overlooked or receives a subpar experience, while also preserving the brand&#8217;s core values and service standards across all tiers and user groups.</p>
<h2>Five strategies to tailor tiered subscriptions for diverse needs</h2>
<p><strong>Define customer segments</strong></p>
<p>Customer segmentation is crucial for businesses aiming to resonate with diverse audiences. By categorizing customers based on behaviors, preferences, industry, and demographics, businesses can pinpoint distinct groups. This classification enables companies to deliver tailored experiences, ensuring that each segment receives offerings that align with its unique needs. Through such targeted approaches, businesses can foster deeper connections and elevate overall customer satisfaction.</p>
<p><strong>Define tiers and benefits in each tier</strong></p>
<p>Crafting a successful tiered subscription model hinges on a clear definition of each tier and the benefits it encapsulates. By delineating distinct tiers, businesses can cater to varied customer segments, from budget-conscious users to premium clientele. Equally vital is the communication of unique benefits within each tier, ensuring that subscribers recognize the value proposition and align their choices with their needs and desires. A well-defined structure not only simplifies decision-making for customers but also strengthens the perceived value of the offering.</p>
<p><strong>Dynamic pricing</strong></p>
<p>Dynamic pricing is a responsive strategy where businesses adjust price tiers based on various factors, such as market demand, customer value, and studies on a customer&#8217;s willingness to pay. By tailoring prices to specific customer segments or their usage patterns, companies can better align with the financial expectations and capacities of different user groups. This fluid pricing approach not only maximizes revenue potential but also ensures that offerings cater to a wide spectrum of budgets, striking a balance between profitability and customer accessibility.</p>
<p><strong>Customer pilots and feedback loops</strong></p>
<p>Exclusive early access pilot programs allow businesses to glean direct feedback from select users. By collecting and analyzing this feedback, companies can rapidly test their ideas and hypotheses to adjust their subscription offerings. This agile approach, grounded in real-time insights, ensures that businesses stay attuned to evolving customer expectations and market trends, allowing them to remain competitive and responsive.</p>
<p><strong>Flexibility and customizability</strong></p>
<p>In a market that values individual choice, offering flexibility in subscription features is paramount. By allowing users the liberty to add or remove specific elements, businesses empower them to shape their own subscription experience. This adaptability not only caters to diverse needs but also amplifies user satisfaction, as customers appreciate having greater control and a service that aligns more closely with their preferences.</p>
<h2>Conclusion</h2>
<p>As we gaze into the horizon of the next decade, personalization and tiered subscriptions are poised to play an even more dominant role in shaping consumer experiences. The fusion of immersive technologies, bolstered by advances in data analytics and AI, will redefine the boundaries of tailored offerings, promising richer, more engaging user interactions. However, with this evolution comes the imperative for sustainable and ethical personalization practices, ensuring that customization enhances, rather than invades, user privacy and choice.</p>
<p>The current market landscape undeniably underscores personalization as its keystone, signalling businesses to not just embrace this trend but to continuously innovate. In this dynamic ecosystem, adaptation and foresight will be the linchpins, propelling businesses to meet and exceed ever-evolving customer expectations.</p>
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Personalization at scale – tailoring tiered subscriptions to meet customer needs

Personalization at scale – tailoring tiered subscriptions to meet customer needs

Tirtha Chavan

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