Subscription Pricing

March 13, 2022

What is subscription pricing?

In simple terms, subscription pricing means that customers pay on a regular basis for a service or product. Subscription pricing is different than pricing for traditional products and is becoming a more popular way of purchasing goods or services. Many different industries now use this as a method for charging their customers.  We have seen evidence of this in Florists, Mechanics, Gyms, even your morning coffee can be purchased through subscription pricing.

Should you consider a subscription pricing model?

The biggest advantage subscription pricing offers to a business, is that it allows the business to smooth its cashflow. You know exactly how much is coming in each week or month giving you control over your numbers.

Types of subscription pricing models 

1. Fixed / flat-rate pricing model

Fixed pricing stays simple: a single product or service, with a fixed set of features, at a fixed price per week or month. A popular example of this is

2. Tiered pricing model

Tiered pricing allows companies to offer multiple packages with different features and product or service combinations available at different price points. The number of packages can vary, but most subscription businesses offer two or three pricing tiers. For an example close to home:

3. Per unit/user model

The per-user pricing is the go-to model for the majority of subscription companies. Pricing scales evenly along with the number of users — the more users you have, the more you can charge. An example of this is

4. Usage model

Usage-based pricing is mainly used by telecommunications companies and IT services. Users are charged based on how much of a product or service they consume: download 4GB of data in a month, for example, and you'll be charged for exactly 4GB. Download 5GB next month, and you'll be charged more.