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Subscription Economy

Keeping the Price Right: Multiple Editions & Base/Overage

By Ji-Soo Kweon
Keeping the Price Right: Multiple Editions & Base/Overage

Customization is a key advantage of the subscription economy - read on to find out how to tailor your product to meet consumer demands.

Pricing plays a vital role in establishing a subscription offering. With customers usually paying for their subscription on a monthly basis, it is important for pricing to always match the offering, as well as stay competitive within the market. Multiple editions and base/overage allow subscription products and services to be tailored to consumer preferences and usage habits. Find out how they work below:

 

Multiple Editions

When thinking about your go-to-market offering a tried and tested pricing strategy is to provide multiple editions of a product, targeted at different demographics. For example, meal kit company HelloFresh offers four ‘boxes’ aimed at different consumer needs - ‘Meat & Veggies’ for widest variety, ‘Veggie’ for vegetarians, ‘Family’ for kid-friendly meals, and ‘Quick Cook’ for recipes that take less than 20 minutes to prepare. By providing variations on a theme, a single product (with slight variations) can be marketed at a diverse consumer base, and take advantage of the subscription economy’s ability to provide a product curated to individual needs and tastes. 

Editions can also be divided by volume, with cheaper plans for fewer services and more expensive plans with greater benefits. This pricing strategy gives customers the feeling that they are only paying for what they use, and also allows them to downgrade to a cheaper subscription plan when necessary. Whilst this may seem like a flaw in the system, the ability to both upgrade and downgrade is an important part of reducing churn; if customers have the option for a more affordable offering when their own circumstances change, they are less likely to cancel the subscription altogether. 

The Multiple Editions model can also be combined with other pricing strategies. For example, Slack has a freemium version of its business communication platform, but organizations can choose to upgrade to one of three paid plans - Standard, Plus, and Enterprise Grid, with access to an increasing number of special features. Multiple editions - whether tiered by features available or by volume - is commonly used by SaaS companies, both B2B and B2C. 

 

Base/Overage

The Base/Overage pricing strategy allows businesses to capitalize on increased usage, wherein customers are charged a ‘base’ fee for a fixed level of service, and any services used in addition are charged an ‘overage’ fee. This system is common in mobile phone plans, where a monthly charge allows for a certain number of call minutes and/or data; any usage over this incurs a fee. The base/overage strategy can be very effective when used in conjunction with a tiered pricing strategy, as being charged overage fees can encourage customers to upgrade to a higher tier. 

However, this pricing strategy has the potential to alienate or frustrate customers if the overage fees are not clearly outlined, or if they are given insufficient notice that they are reaching their package’s limit. Companies should clearly outline their overage policy and provide customers with a reliable means of tracking their usage - either through automated texts or emails, or with a meter system. 

Another strategy that can be used with or instead of the base/overage system is to offer add-ons and upgrades to a standard package. This allows customers to customize the product for their own requirements, and gives them a greater sense of autonomy over the price and value of the subscription service. 

 

Stay tuned for the next instalment in this series, where we will be discussing other pricing strategies in the digitalized subscription economy. 

 

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