Case study: is it worth it to lower your subscription price?
Let me be more specific: is it worth it to lower your subscription price in hopes of getting more fans…because you believe that:
more fans = more people to sell things to
lower price = people might be inclined to buy more content/services/etc
Let’s explore all that in today’s case study 🥰
Today we have a case study request sent in from Amanda (anonymous name). I do free analytics reviews as long as you’re okay with me sharing the information anonymously for other people to learn from 💕
Her question is: I normally charge $14.99 for my subscription but have recently been running a 50% off sale for all of November and into December. I’m getting way more fans but can’t tell if this is translating into a better business choice. Can you help me figure it out?
Let’s break that question down into multiple parts:
This is what we want to figure out:
How much will a 50% reduction in price increase your fans count & conversion rate?
If you have more fans, will you actually make more money because more people are there to buy the services / customs / ppvs / etc that you sell?
At what point can you call the sale a good or bad business choice?
To answer these questions, we have to look at the data 🔎
Girlies you know how much I love data. Data driven decisions are how we make optimized businesses 😇
Below is how I organized her data. Some of this data you can get on your own through OF, while the rest of it I calculated myself.
Specifically: conversion rate, and average $ per user are not metrics that OF will tell you.
In the above screenshot, you can see that September and October had the original subscription price of $14.99 and November is when the 50% off sale began.
I’m sure you can already start seeing some interesting tidbits, BUT to make this data easier to evaluate, let’s just compare October and November and look at the percentage change between the last two months:
Now that we’ve put them side by side and calculated the % change, it is soooo much easier to evaluate what’s going on.
Using this data, we can start answering those big questions
Question #1: How much will a 50% reduction in price change her fan count & conversion rate?
Initially you may think that the number of new fans increased 85% from October to November. But!! This does not tell the full story! You have to account for the fact that there is also an increase in clicks from October to November.
We need to remove that variable to see how the different prices would perform if they had the same amount of clicks. Calculating this is fairly simple:
I took October’s conversion rate of 1.83% and applied that to 10k clicks, resulting in 183 fans
I took November’s conversion rate of 3.20% and applied it to 10k clicks, resulting in 320 fans
Now, we can see that had both prices received the same amount of clicks (10k), subscriptions would have increased 75% from October to November.
We can say with certainty that lower price = more fans, though that’s not really a surprise. The more important question is:
Question #2: If you have more fans, will you make more money since more people are there to buy the services / customs / ppvs / etc that you sell?
In this situation, the answer based on the data we see is no.
You can see that despite Amanda getting many more subscribers, not only is she making less money in revenue from subscriptions…those fans are also spending much less on average:
The average fan only spent $10.41 in November, which is nearly half as much as the $21.74 that the average fan spent in October. That’s a HUGE decrease. The thought of “maybe if I make the subscription price cheaper, people will be willing to spend more” is not happening here, which is a problem.
When you have a huge decrease in average individual fan spending, you need a massive increase in fans to make up for it. A simple way to imagine this is: if you used to have 5 fans paying you $100, if you lower your price to $50, you now need 10 fans just to make that same amount. If you have anything less than 10 fans, you’ll be making less money. Your fan count might increase tremendously, but it needs to be enough to make up for the lower price.
In Amanda’s case, the increase in fans did not make up for the revenue lost from the lower sale price.
Question #3: At what point can you call the sale a good or bad business choice?
Personally, I think it’s valid to make a decision at 2-4 weeks. If you want to be safe and collect more data, you could let the sale run for 2 months and see if it’s possible that having more fans to market to might make a big difference.
Maybe you think that if you continue getting 75% more fans each month, some small percent of them will be super high spenders, maybe something like 0.5%. Or, you may believe that it takes more than a month for a fan to be ready to purchase something expensive like custom content or calls. There is no right or wrong answer here, it’s really up to your comfort zone.
Question #4: What would I do if I was in this situation?
If I launched a sale and got a lot of new fans but those fans weren’t spending much, and overall revenue was down, I would go back to the higher price after 2-4 weeks, depending on how badly it impacted revenue. If revenue was about the same (or higher!), I would keep the sale going since more fans = more people to market to.
It’s okay to have a lower conversion rate or a smaller amount of fans if total revenue is higher.
It’s not okay to assume that lower price = more fans = more people will spend money unless you can prove that in your data.
I wouldn’t leave a sale up for too long if it’s really hurting overall revenue, you may want to wait 2-3 months to see if maybe they will spend more in the future, but I don’t think fans typically take a long time to show their spending habits. You can probably make a decision within 2 weeks.
Do your own research, run your own tests 💕
When you read this case study, I encourage you to learn from this data but to not necessarily make final conclusions until you do it with your own page. We each have different situations and our audiences react differently, no two situations are ever the same.
It’s very possible that you run a similar sale and get different results! My goal isn’t to share what decisions to take away from others’ experiences, but to understand the questions you should ask yourself when you experiment with your own pages.
If you have a similar thought that Amanda did, of “maybe I should lower my price to get more fans, so I have more people to sell to” or “maybe if my subscription price is lower, people may be willing to spend more” make sure to think about the following things:
If you hope that lower price means more people will have access to you, and more people will buy stuff — make sure you measure whether or not this is actually true. You can check this by finding the average amount of money that a user spends (take total revenue divided by total number of fans).
Does the increase in new fans make up for the loss of revenue from the sale? When checking this, make sure you remove “clicks” from the equation because this can impact your overall revenue too. You do this by finding what your conversion rate is before and during the sale, and extrapolating what your revenue would be for the same amount of clicks. (If that was confusing, see screenshot 3 above or email me for help 💕)
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