Definition of subscription pricing models in which a customer must pay a recurring price at regular intervals for access to a product or service. The recurring payment can be daily, weekly, monthly, quarterly or yearly but never one-off.
Below are some of the pricing models that can be applied in a subscription business model. Please leave your comments if there are other new pricing models available.
It’s based on a single rate that also known as “free size” or “one-size-fits-all” model. Customer will only need to pay one recurring rate and enjoy all the features. Example below are some of flat rate products.
Widely used model ranging from 2 up to 5 tiers of pricing. These are differentiated based on product or service features. One of the key advantages is flexibility where it allows consumed to upsell or downsell their tiering but still maintaining within the service provider. Example of tiered pricing model.
Usage-Based Model (Pay-As-You-Go Model)
A pricing strategy that’s directly depending on the product ‘usage’. The more you use the service, the more you will need to pay (or vice versa) on the end month. For example, mobile internet subscription, it can be the amount of bandwidth used.
Per-User Based Model
The more user utilizes, the more you pay. This model is based on number of users that consume the products or services. Example of user based model.
Per Feature Model
This is a typical value product where customer only buy products based on the feature they require. Despite sounding like a tiered model, feature model isn’t flexible like upsell or downsell anytime. Feature model is ideal for customers who know what they want, sometimes it can be challenging to find the right feature. Example of per-feature model.
This model is charged based on no. of transactions, growth or reports. The more your transactions or data required, the more you have to pay. Sometimes, the pricing is tiered where as you grow, the subscription plan will change upwards to support your growth. Example are activity based pricing model.
Business Scale Model
Scaling model focuses on technical specification mostly, subscription provider offers customer a spec that suits their business needs. As user’s business requirement grows (such as storage size, computer leasing and etc.), the rate increases. Example of business scale pricing.
Membership Model (or lock-in model)
Usually this subscription is based on many variants or product range. Like financial payment, where charges are based on banking rates and etc. Hence, Lock-in model charges customer a fixed monthly rate and subsequently charge other charges based on their usage or user or etc. Another good example is subscription of a recreation club house, where a customer pays monthly and enjoys discounts as a member for all product ranges. Below are membership models:
Freemium pricing model (or Forever free pricing model)
The well-known subscription pricing model. Freemium or forever free allows customer to try the service for a limited time, transactions or features. The provider will begin buzzing and nudging to request to upgrade to paid service from time to time.