September 25, 2019

Switching from monthly to one time pricing

Adam Zerner @adamzerner

Right now I'm charging $5/month for Premium Poker Tools. I'm thinking of charging $25 as a one-time price for a basic tier, and $75 for a premium tier. Let me back up a little bit before explaining why.

First of all, let me explain my initial thinking with the $5/month price. My hope was that I'd get something like a $200-$300 average LTV with the $5/month price, meaning that the average customer would stay for 3-5 years. I know that some people would only stay for a few months and then leave, but I was thinking that other people would stay for something like 10 years, and that it would all balance out. Now, that seems pretty silly.

I've spoke to some people and I've come to believe that churn is pretty common in the poker world. Previously I was thinking that most people who play poker as a serious hobby or semi-professional thing do so throughout their life, basically (that's how I approach it, and how some friends of mine approach it). Now I'm thinking that many people will take it seriously for a few months, and then have something come up where they don't take it as seriously. Sometimes it's because they get a new job. Sometimes they develop a new hobby. Sometimes it's just that they aren't winning as much, either because of bad luck or poor skill. Whatever it is, I'm getting the impression that many poker players are more on-and-off than I previously thought. I've also learned that churn for SaaS apps in general is high, and "SaaS app" seems like a reasonable reference class for me to use.

So then, what is my new estimate for average LTV? Idk. $25? $50? It's tough to say. Somewhere in that ballpark.

Overall, the two important questions are 1) how does LTV compare with the monthly price versus the one-time price, and 2) how many users will I get at each price. So far I've been saying that (1) is pretty comparable, I think. For someone less serious, 5 months seems like a reasonable approximation of how long they'll be a user on average, in which case the $5/month for 5 months would equal the $25 one time fee I'd get assuming they sign up for the basic plan. And for someone more serious, I'd assume that they'd sign up for the $75 premium plan. Which I think may make me more money than the $5/month.

Ok, now for the second question. It too is hard to say. I've tried to talk to people, but ultimately I just don't have much data. But a) the impression I get from talking to people is there's definitely people who don't like the monthly price, and b) I really only have one(!) user at $5/month. So it at least seems worth experimenting with a different price structure.

It is possible that price isn't the issue, that the real issue is that I haven't gotten it in front of enough eyeballs yet, or that the product just isn't good enough and I'm sidestepping the real issue by messing with price. Those things are possible, but a) my gut says that the one time pricing will be better, and b) there's a lot of value in experimentation. Now that I mention it, I think that (b) is a really strong point. And I don't really have anything to loose, because it's not like I have a bunch of users right now.

Another important point I think is that overall, I'm really struggling. 850 visitors/month, one paid user, and about 90 free trial sign ups. So I'm thinking that there's a lot of value in just getting off the ground. Even if that means lower revenue per user. Because by getting some users, the brand starts to get out there, people know about it, etc. And I plan on adding more tools in the future, at which point I can have a more expensive tier and increase my revenue per user. Right now it really feels like sacrificing some revenue per user -- which I don't even think this move will do -- would be totally fine if it gets me off the ground.

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