Show IH: Modern Pricing - Earn 30%+ more revenue from new customers
Hey IH,
I’ve been a big-time lurker in this community for years. Thank you for your never-ending inspiration! Now, I’m happy to share the big idea I’ve been working on for several months: https://modernpricing.com
It all started when I was working at the popular online education company, Codecademy. We noticed that our pricing strategy, $20 per month for all users, had much room for improvement.
At a minimum, we believed we should test a variety of price points to improve our overall yield, but then we took a step back. Not all segments of users converted at the same rate -- some users were more price sensitive than others. So, we decided to run an experiment: what happens when we only show higher prices for users who we are certain can afford more than $20/month?
The results were phenomenal. Overnight, we started capturing more than 2x more revenue--millions of incremental dollars--from our more affluent customers, while churn actually decreased. That led me to ask myself, “Why aren’t more SaaS companies doing this?”.
It turns out some bigger SaaS companies are doing dynamic pricing already. Try subscribing to the NY Times in Bangalore vs New York. You’ll save almost 80% in India. However, big companies have many more resources to carry out pricing optimizations, including the people and tools to easily measure the results. Companies with little experience in pricing, or just not enough staff on hand to take on the laborious task, are simply missing out on revenue growth that should be easily had.
Enter Modern Pricing.
I’ve built an API that helps your business earn more revenue from dynamic pricing. You send us the IP Address and User Agent of your visitors, then we return a score that indicates the highest price level at which each visitor is able to buy. Our scoring algorithm considers factors such as income levels, devices used, visit frequency, and more. As a result, your lower prices will increase conversions when appropriate, and your higher prices will capture more revenue from customer segments who have the ability to pay.
But that’s not all. With our built-in A/B testing functionality, you’ll be able to directly see how well dynamic pricing is impacting your bottom line.
If you're thinking about pricing your SaaS, I’d love for Modern Pricing to be part of the conversation. Reach out to me, [email protected], and I’ll be glad to help however I can.
I see two problems here:
What happens when some customers discover that they are being discriminated against? On the Internet, it is not that improbable.
In some countries, pricing discrimination is illegal.
Overall, I think that this is an amazing product and wish you good luck.
What happens when customers discover that they paid too much is a viral social media shit storm.
The market leader in SaaS pricing intelligence has a great eBook [1] with one chapter dedicated to "why A/B testing pricing is really bad idea", applies 100% to dynamic pricing too.
[1] https://www.priceintelligently.com/hubfs/Price-Intelligently-SaaS-Pricing-Strategy.pdf (page 114)
Yes, exactly what I was thinking about.
Hey @Luqa,
@Luqa
I disagree. Does McDonald's lose its customers trust when it charges much more for a Big Mac in Lugano compared to Milan? I don't think so. Do airlines lose trust from passengers when they start charging two different prices for the same seat? For most products, customers expect companies to adjust their pricing to market conditions. This expectation will come to software too.
I'm curious to know if you know of any countries off hand?
Airlines are among the least liked companies by consumers. Both those companies do it in a transparent way.
@luqa The most-loved and trusted companies on Earth do dynamic pricing. For example, Disney changes prices based on the day, and charges different prices depending on your age. This is well-established.
I can't find any information to verify your claims on the EU here: https://ec.europa.eu/info/aid-development-cooperation-fundamental-rights/your-rights-eu/know-your-rights/equality/non-discrimination_en
You are right.
It isn't illegal by itself, but requires full transparency about it. That's why Disney can practice difference prices by age. The day is another bad example, because it is itself an element of differentiation. Going to Disney on Christmas isn't the same as going a random Monday.
"Marketing techniques such as personalised pricing, price discrimination or dynamic pricing fall under Directive 2005/29/EC on unfair commercial practices (UCPD) and are addressed in the Commission guidance on the application of that Directive. According to the Directive, traders are required to be transparent and clearly inform consumers about prices or how they are calculated. Traders remain free to determine their prices in different ways as long as they they duly inform consumers.
@luqa I agree - transparency is important.
No offense, but your Disney and McDonald's examples are really bad. They both do dynamic pricing completely differently than you, do it for understandable reasons, and are transparent about it.
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The difference is that for products like insurance, low income groups are unfairly penalized for being perceived as high risk. Modern Pricing is recommending that less affluent visitors get more fair pricing--lower pricing--than groups that we perceive as more affluent.
Cool idea. Good luck!
@blakerson Thank you!
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Hey @primer, thank you for checking it out! Modern Pricing works great with SaaS companies using payment processors like Stripe. All you'll need to do is create new pricing plans that align with the potential scores from Modern Pricing.
Take a look at our integration guide here: https://modernpricing.com/support/integration
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@primer That's great feedback, thank you!
A request is defined as a successful score. So, you only pay when you make a request to our API (with an IP Address being the minimum payload) and we return a score: high, middle, low, ultra. If we return "unknown" you will not be charged.
I'll make a change later today to make this more clear.
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That's true :)
To a certain extent it can be done with currency arbitrage as well. For example, in the past I have seen people buy airline tickets in the currency of a certain foreign country using a no-foreign-transaction-fee credit card because sudden fluctuations in currency value made it worthwhile to purchase tickets abroad.
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I agree on the ethics side and I believe that is damaging for the brand too in the long run.
Better to just fix a pricing minimum and let the customers decide if they want to pay more than that. Not as good for the bottom line in the short run, but a moral ethical, transparent, and overall better solution for the customer.
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You are right. It can be positive but needs to be shared with the customers.
This is great example. Thanks for sharing @alxcny!