We’re in the website services business. Customers pay us monthly for our websites which creates a nice recurring revenue stream, but doesn’t give us much cash upfront. We do a charge a one time setup fee but that offsets our hard costs. We’re considering changing our model to one large flat rate upfront with a very small monthly fee for hosting. Any advice?
Try running a "blind survey" (no brand) white paper, which simply identifies your target market, addresses the problem, and describes your solution. Then allow the recipients to tell you what they would pay... run A/B testing with a price per month & a lump sum yearly.
Take the numbers and arbitrate out what will generate the most profit for your firm + tweak your pricing according to the data.
Then simply take the information and make it actionable by converting new paying customers as well.
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If you're in a position where immediate cash is needed to grow the business, then simply offer up a discounted yearly price to all customers -- as long as the discount is cheaper than what it would cost you to get money from other avenues, and make sure you manage costs appropriately throughout the year.
Answered 9 years ago
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