Should I switch my product from a one-time payment to a subscription model?

Written by Corbett Barr

A member wrote in asking whether a one-time payment or a subscription model would be better for his online community for bloggers.

I’ve been running an online community for bloggers since 2010.

Historically, we’ve always charged once for lifetime access, and in 2015, we began to create additional online courses in partnership with other bloggers. We charge a one-time payment for these too, and each has its own Facebook group for discussion, Q&A, etc. To grow our revenue, we’ve bumped our membership price up each year, most recently a $50 increase from $397 to $447.

Now that the cost to join is getting so high, I’m sure we’re making it accessible to less people. Though this has yet to affect our revenue negatively, it may be stunting our growth. For several years I’ve considered the idea of switching to a subscription model.

There’s some doubt on my team (and in me) about whether bloggers would pay a recurring fee when so few make any money in the first 12 months (if not longer). Many will only ever do it as a hobby vs turning it into a career or business.

I don’t know how to confirm whether it’d be the right move for us. I guess I’m looking for a sign or sense of certainty that it’s the right move. Either that or I need to convince myself to try it as an experiment and even if it doesn’t work, we can always go back to what we do now.

The stakes seem higher since I have to support a two-person team, in addition to myself. I want us to be able to grow, but I’m afraid to risk what we already know works.

A friend who works with startups is creating two finacial projections for us, one based on our current model, and the other based on a subscription model. But at the end of the day, it still feels like it’ll come down to a gut decision to go for it, or not.

Should I switch my product from a one-time payment to a subscription model? What was your experience? How did you come to the decision?

Thanks!

In your financial projection, the key factors should obviously include average customer lifetime value, but it should also include conversion rate on each offer.

For example, if you convert 10% of people who visit your sales page to a $447 lifetime membership, but you convert 20% of people to a $49 monthly membership and those people stick around for 4 months on average, your value per visitor would be $44.70 (for the lifetime plan) vs $39.20 (for the monthly plan).

These are just numbers for illustration, but keep in mind these things:

  1. Customers will not stay around forever, you’ll have some average length of membership. For a training offering, you might expect 4-6 months on average. For software as a service, you might expect 8-12 months or more.
  2. Your conversion rate on sales should be higher when you offer a subscription plan, especially if there is a trial period.
  3. Cash flow is also a factor to consider because right now you’re getting the value up front, as opposed to spread month over month over month. This changes your ability to spend on acquisition.

If I were you, I would run a short test, side by side, with the two offers. Accept signups for both plans for a while, then give yourself 6 months or so to see what the stick rate is like, along with the initial conversion rate. That way you’re not making a bunch of big assumptions that could come back to bite you.

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Claire Pelletreau
ClairePells.com

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