1
3 Comments

Price inversely proportional to usage: stupid idea?

Specifically for an app (B2C) where higher usage doesn't incur significant higher costs.

To keep it simple, the idea would be to charge a fixed amount per month, and once a minimum usage threshold is reached, cancel the payment subscription and let the user continue using the app for free (forever, updates included).

Current thinking for why this is a good idea:

  • Encourages customers to actually use the app.
    Aligns financial goals with customer goals (under the assumption that the more they use the app the better for them, ofc within reason).
  • Reduces entry barrier and churn bc they know that eventually they will have it for free, and keep getting closer all the time.
  • Makes explicit the fact that no customer stays around forever, but without the drawbacks of LTDs.

I am looking for counter arguments, or any observations really.

Thanks!

on January 11, 2023
  1. 2

    A little early where am I at, but the first issue I see is a problem for investors? How would you continue generating revenue from your users if they don't pay after a minimum use threshold? Sponsorships? (Also besides investors how would you keep paying for costs if the free users' usage outweighs the paid users' revenue generated?)

    I also think because you're targeting B2C I'd recommend watching the initial pricing as people generally like to spend less upfront

    1. 1

      Thanks for the comment!

      Something I missed to point out is that I'd calculate that minimum threshold (in minutes or hours) using a reasonable expectation for usage / day, so that most users (the tip of a bell curve) would need around 2 years to reach; so that CLV would be maybe less, but still in the same ballpark of the CLV for a typical subscription model.

      There is a good point about free user costs outweighting paid user revenue; but if I have this problem means that I have been very successful already :) (compare eg. with freemium model, in which you can have this problem way before being successful).

      1. 1

        Sounds like a plan!

        Also agree even if they're free there should be plenty of opportunities to find ways to monetize the audience without charging them directly