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10 Subscription Pricing Strategies to Maximize Revenue 2024

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10 Subscription Pricing Strategies to Maximize Revenue 2024

Boost your revenue with these effective subscription pricing strategies:

  1. Tiered Pricing

  2. Usage-Based Pricing

  3. Freemium Model

  4. Dynamic Pricing

  5. Bundle Pricing

  6. Loyalty-Based Pricing

  7. Seasonal Pricing

  8. Personalized Pricing

  9. Hybrid Pricing Models

  10. Clear Pricing


Strategy

Best For

Key Benefit

Tiered

Diverse customer base

Caters to different budgets

Usage-Based

Variable consumption

Aligns cost with value

Freemium

Rapid user acquisition

Low-risk entry for customers

Dynamic

Fluctuating demand

Maximizes revenue opportunities

Bundle

Multiple products/services

Increases average order value

Loyalty-Based

Customer retention

Rewards long-term customers

Seasonal

Predictable demand changes

Optimizes pricing for peak periods

Personalized

Data-rich environments

Tailors pricing to individual users

Hybrid

Complex offerings

Combines multiple pricing models

Clear

All businesses

Reduces confusion and increases conversions

Related video from YouTube


1. Tiered Pricing

Tiered pricing offers customers different levels of your product at various price points. It's like a menu where people pick what suits them best.


How it works:

  • Create 2-5 versions of your offering

  • Each tier has its own features and price

  • Customers choose what fits their needs and budget


Crunch Fitness uses tiered pricing for gym memberships:

Plan

Price

Features

Base

$9.99/month

Basic gym access

Peak

$24.99/month

Includes group classes

Peak Results

$29.99/month

More fitness classes

Formstack, a form-building tool, takes a different approach:

Plan

Price

Focus

Forms

$50/month

Just form creation

Documents

$92/month

Document management

Suite

$191/month

All apps included

To make tiered pricing work:

  1. Study your market and competitors

  2. Highlight the unique value of each tier

  3. Make it easy to compare options

  4. Allow upgrades or downgrades


Aim for most customers to pick the middle option. A good split is often 20% lowest tier, 60% middle, and 20% highest.


2. Usage-Based Pricing

Usage-based pricing (UBP) lets customers pay for what they actually use. It's like a pay-as-you-go plan for software or services.


How it works:

  • Customers are charged based on consumption

  • Costs scale with usage

  • Billing happens at the end of each cycle


Amazon Web Services (AWS) uses UBP for cloud services:

Service

Pricing

EC2 Instances

Per second of compute time

S3 Storage

Per GB stored per month

Data Transfer

Per GB transferred

Twilio charges based on usage:

Feature

Price

SMS

$0.0075 per message

Voice Calls

$0.0130 per minute

Email

$0.0006 per email

UBP can boost your business by:

  1. Lowering entry barriers for new customers

  2. Improving customer retention

  3. Opening up a wider customer base


To make UBP work:

  1. Study your product usage patterns

  2. Set clear pricing tiers

  3. Offer a simple way to track usage

  4. Consider a hybrid model with a base fee plus usage charges


3. Freemium Model

Freemium offers a basic version for free, with paid upgrades for extra features. It helps grow user base quickly and tap into word-of-mouth marketing.


Examples:

Company

Free Offering

Paid Upgrade

2 GB storage

2 TB for $9.99/month

10,000 message history

Unlimited history, $6.67/user/month

Ad-supported music streaming

Ad-free listening, $9.99/month

40-minute group calls

Unlimited call length, $14.99/month

To boost conversions:

  • Let users try premium features briefly

  • Highlight limitations of free plans

  • Make upgrading easy

  • Provide top-notch support to all users


Freemium needs a large market to work. Track metrics like free users, conversion rates, and usage patterns to fine-tune your strategy.


4. Dynamic Pricing

Dynamic pricing adjusts prices in real-time based on market conditions and demand. It helps maximize revenue by charging what customers are willing to pay at any moment.


Examples:

Company

Industry

Dynamic Pricing Strategy

Uber

Ride-sharing

Surge pricing during high demand

Amazon

E-commerce

Multiple daily price changes

Airlines

Travel

Ticket prices vary based on factors

For subscriptions, dynamic pricing can be:

  1. Time-based: Adjust prices based on subscription length

  2. Usage-based: Change rates based on service usage

  3. Demand-based: Increase or decrease prices as demand fluctuates


To implement:

  1. Gather data on customer behavior and market trends

  2. Set up rules for price changes

  3. Use pricing software to automate adjustments

  4. Monitor results and fine-tune your strategy


Dynamic pricing works best with lots of data and markets that accept variable pricing.


5. Bundle Pricing

Bundle pricing combines multiple products or services into a package at a lower price than if bought separately. It boosts sales and increases perceived value.


Examples:

Company

Industry

Bundle Strategy

Software

Creative Cloud bundle for $52.99/month

Amazon

E-commerce

Prime subscription with multiple perks

McDonald's

Fast Food

Value Meals at discounted price

For subscriptions, bundle pricing can be:

  1. Pure bundling: Products only available in bundles

  2. Mixed bundling: Products offered individually and in bundles

  3. Complementary bundling: Adding related products to main subscription


To implement:

  1. Identify complementary products or services

  2. Set bundle price lower than sum of individual items

  3. Highlight savings to customers

  4. A/B test different combinations


Bundle pricing works best with multiple related products and customers who value convenience and savings.


6. Loyalty-Based Pricing

Loyalty-based pricing rewards long-term customers with better prices and exclusive benefits. It boosts retention and increases lifetime value.


Examples:

Company

Industry

Loyalty Pricing Strategy

Amazon

E-commerce

Prime members get exclusive deals

Pharmacy

CarePass offers free delivery and rewards

Outdoor Retail

Co-op members receive annual dividends

For subscriptions, loyalty pricing can be:

  1. Discounts for long-term commitments

  2. Exclusive perks for loyal customers

  3. Tiered benefits based on subscription length


To implement:

  1. Define clear loyalty tiers

  2. Offer meaningful rewards

  3. Make benefits easy to understand and redeem

  4. Regularly review and update the program


Loyalty-based pricing works best with a strong customer base and products with repeat purchase potential.


7. Seasonal Pricing

Seasonal pricing adjusts rates based on demand fluctuations throughout the year. It boosts revenue during peak periods and attracts customers during slower times.


Examples:

Company

Industry

Seasonal Pricing Strategy

Ski Resorts

Higher prices during holidays, early-season discounts

Amazon

E-commerce

Black Friday and Cyber Monday flash sales

Travel

Higher summer rates for beach destinations

For subscriptions, seasonal pricing can be:

  1. Holiday promotions

  2. Off-season discounts

  3. Special event pricing


To implement:

  1. Analyze historical data to identify peak and off-peak periods

  2. Set minimum and maximum price points

  3. Create a pricing calendar

  4. Monitor competitor pricing

  5. Adjust prices based on real-time demand


Seasonal pricing works best with predictable demand fluctuations and products with seasonal appeal.


8. Personalized Pricing

Personalized pricing tailors costs to individual customers based on their behavior and willingness to pay. It can boost revenue and improve satisfaction.


Examples:

Company

Industry

Personalized Pricing Strategy

Streaming

Country-specific pricing

Disney+

Streaming

Fees adjusted for regional content preferences

Dating App

Premium prices vary by user location

Travel

Rates differ based on booking history

To implement:

  1. Collect customer data

  2. Use AI to analyze data

  3. Segment customers based on shared traits

  4. Create tailored pricing plans


Personalized pricing works best with detailed customer data and advanced analytics tools.


9. Hybrid Pricing Models

Hybrid pricing blends different strategies to cater to various customer needs and maximize revenue. It combines elements like fixed rates, usage-based pricing, and feature-based tiers.


Examples:

Company

Industry

Hybrid Pricing Strategy

E-commerce & Streaming

Monthly subscription + Pay-per-view options

Customer Service Software

Tiered plans + Usage-based messaging

Email Marketing

Free plan + Paid tiers with usage limits

Marketing & Sales Software

Base subscriptions + Add-on products

To implement:

  1. Research your market thoroughly

  2. Choose a value-based billing metric

  3. Test different pricing structures

  4. Use forecasting tools to predict outcomes

  5. Prepare for potential backloaded growth


Hybrid pricing works best with diverse customer segments and products with varying usage levels.


10. Clear Pricing

Clear pricing makes prices easy to understand, reducing confusion and increasing conversions. It's crucial for boosting revenue and customer satisfaction.


To implement clear pricing:

  1. Use a limited number of tiers (ideally three)

  2. Avoid hidden costs

  3. Provide upfront information about renewals and fees

  4. Create user-friendly pricing tables


Examples of clear pricing:

Company

Clear Pricing Strategy

Dropbox

Easy-to-reference table with clear headings

Straightforward language and appealing design

User-friendly table with monthly/annual toggle

Tips for clear pricing:

  • Be upfront about all costs

  • Offer approximate costs for the first 12 months

  • Include true up/down terms and exit fees

  • Ensure pricing tables are mobile-friendly


Clear pricing builds trust and reduces customer confusion, leading to higher conversion rates.


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* Build and Elevate plans have a 1% Transaction Fees applied to new subscriptions and one-time purchases made through Priceable Pricing Tables. There are no transaction fees for subscriptions or purchases made in the Stripe Customer Billing Portal.

FAQ

  • Yes. Priceable does not store any personally identifiable information of your customers. That information is all held in your Stripe account. We only store the identifier to your Stripe account (and use that to trigger payment flows for your customers. This means you do not need to remove any personal user data from Priceable.

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