How often do you analyze data about your paying users? Looking through this information and making changes to your monetization strategy is often the easiest way to increase revenue, without having to invest any additional money into marketing and user acquisition. How? By simply increasing your product prices.
Here are two real-life examples of what happens when you do it. You can take a guess from the graphs where the price increased (orange represents the number of payments, yellow the revenue and blue the average transaction size):
There are several instances when you should seriously consider reviewing your pricing:
You are introducing new products or features, which increase your value proposition. If you have put in the extra work to deliver more benefits, why not ask for more money?
User payment behaviour indicates that they would be willing to spend more money if they had the option
You have a clearly segmented user base where a large majority of users make a few transactions per month, but a small amount of users contribute most of your revenue
While changes to pricing in the first two cases are dependent on your target markets and product, the third point is applicable to any digital content merchant. To figure out whether a price increase makes sense, we need to look at two factors:
How big is your average transaction size compared to the market average? Our market reports bring out the market average for countries we support carrier billing in. If your average transaction size is below the average, there is room to increase it; if it above the average, your user base is “wealthier” than the average consumer and thus higher pricing makes sense as well
What is the payment distribution among your existing price points? For example, if you are selling products priced at $1, $3, $5 and $10, which price point has the biggest number of transactions and which brings in the biggest revenue? If the $5 and $10 price points are the most popular among consumers, that also indicates a willingness to spend more. Our market reports for 2017 will also include a breakdown of payment distribution by price point in each country, so make sure to check those
If either or both of these points hold true, it’s time for a price change. This is easiest in case you have a “virtual currency” type service where the user gets X amount of currency (or items) for Y amount of money. In this case, simply adding an additional higher price point to the checkout menu allows people to buy more of the same items at a higher price point. If you wish to switch on a higher price point but do not see it on your Fortumo Dashboard, please reach out to us so we can add it for you. Some recent markets where we have introduced higher pricing include the UK, Germany, Romania, the Nordics etc - so make sure to check those.
For example, if you have so far been selling 59 gold Coins for $2.99 and 99 Gold Coins for $3.99, add an additional package of 199 Gold Coins for $3.99. A best practice here is to also apply a bulk discount, that is to increase the ratio of items a user gets when they pay more. On the $2.99 price point, $1 gets you 20 Gold Coins, whereas on the $3.99 price point, $1 gets you 50 Gold Coins. Fortumo’s Dashboard also provides an easy way to set this up (check the “Volume discount” input when changing your prices). It’s also best to also leave the lower priced options available as not all users have the desire or ability to pay more.
For single items and subscriptions, the situation is a bit more tricky as users have only one price option available to them. To validate whether higher pricing would work, running an A/B test (displaying different prices to sets of users) should give the answer. An even simpler approach is using a painted door test, something which we have also recommended in our payment analysis guide.
Increasing your service pricing is a delicate subject that needs to be well thought out in order to not upset customers, but can bring significant additional revenue from your service. If you are a merchant looking to understand whether increasing pricing makes sense for you or need us to open up additional price points: get in touch!