For SaaS vendors, continuity income means you only make a sale once, and continue to get paid every month, quarter, or year; just keep the customer happy!
Why should you care about the Pricing Page for your SaaS or Web App? Simple... a well-designed Pricing Page WILL help you increase sales and therefore your recurring revenue.
To really understand how this can happen, we need to understand the difference between a one-time sale product and a recurring-revenue or subscription product.
Single Product Sales
If you charge $20 for your product and you sell 100 in January, you made $2000.
If you sell 100 in February you also made $2000, or $4,000 year-to-date.
if you sell 100 each month for the rest of the year by the end of December you will have made $24,000 for the year ($2000 per month x 12 months).
On January 1 of the second year, if you want revenue, you need to hustle again and find 100 new customers because you're starting from scratch, just like every other month before it!
That sounds like your hustle:revenue ratio is wrong. What if you have a subscrption product and charge $20/mo per customer?
Subscription Product Sales
If you could get 100 customers in January at $20/customer, that would be $2000/mo or a run-rate of $24,000/year. That means, you could stop right there and have the SAME revenue at the end of December that you would have achieved from ALL of the single product sales (at $20/each) over the course of the year, only you would have worked A LOT harder with the single product sales.
It was pretty easy to get 100 sales in January since you really understand your customers and the WIIFT (What's In It For Them?). You used that knowledge to create a marketing site and pricing page / sign-up process that conveys the appropriate marketing messages and you think you could easily add another 100 customers in February.
So you make that happen - adding 100 customers in February - and add ANOTHER $2000/mo giving you a $48,000/year run rate, or DOUBLE what you would have done with single product sales. Even if you had to hustle just as hard for each sale, you have now only put in 1/6 the effort and now have 200% of the annual revenue achieved with single product sales locked down. You can stop right there and make no more sales and be better off than if you had a one-off product to sell.
But you don't want to stop there, right? So you continue to improve your marketing site and your pricing page, a/b testing, talking to and learning from customers, understanding their value perception and continually working to align your value proposition with their perception, and you add 100 new customers in March. Now you have a run rate of $72,000/year.
If you continue with that same growth rate of 100 new customers each month, by December of your first year you will have 1,200 customers with a run rate of $288,000/year and ACTUAL year-to-date revenue of $156,000!
That means, if you make ZERO sales the second year (but work your ass off to keep customer service high and churn at bay) then you will have a guaranteed revenue of $288,000. Even with 10% annual churn (way too high if you ask me!) you'd still make $259,000 in your second year - all with ZERO new customer sales. But why stop, right? Keep growing!
Something to consider... if you were thinking about Freemium as an option, based on typical conversion rates of ~3%, keep this in mind. In this scenario, you would need to have 40,000 free users over the course of the year - about 3,300 NEW users per month - to get 1,200 people to become customers. Support costs would likely skyrocket, not to mention overall customer acquisition costs. It would seem to be EASIER to simply try to reach a even a couple thousand new prospects each month in an attempt to land 100 new clients than the many hundreds of thousands needed to get 40k new users.
It is possible to leverage Freemium in some cases, for sure, but you need to have a massive addressable market, a clearly defined plan and the ability (and money) to execute on it. Either way, it seems like Freemium would be the harder way to go in this example. If you work hard to not only make your marketing site great - but your pricing page, too - then you will increase sales which increases your recurring revenue; no need for the free option.
If you are exploring something at the scale of the scenario presented here - just a few hundred new clients per year - you could leverage Freemium as a way to get people to the site and use a well designed Pricing Page - in addition to an overall marketing site and strategy - to promote the premium version over the free version in an attempt to convert would-be free users to paying customers out of the gate. No matter what, your pricing page should maintain the marketing momentum you've built up on the rest of your marketing site and should quickly and efficiently encourage the customer to make a purchase.
Remember, the pricing page is not just a place to list prices and take orders - assuming just because they are on your pricing page that they'll buy could be a costly assumption - if you're already in the market that assumption should be trumped the the real world bounce or exit rate for your pricing page! Clearly, you aren't converting every visitor to that page which means they aren't yet ready to buy. Most of the time this is because you aren't marketing to them anymore once they're on the pricing page.
Pricing Pages are much more complex than most people think - but I've put together a 5 Hour video series - the Pricing Page Success Formula - to simplify the process of designing and understanding what a Pricing Page really is. I want to help you get the most out of your Pricing Page and grow your Recurring Revenue. For a limited time you can get the Pricing Page Success Formula video series - with content on Value Pricing, Pricing Page Design, and even Price Testing - for an introductory price of ONLY $297.
Go get this amazing video series for only $297 right now. It is up to you to take your business to the next level... get the videos and let me help you.
Now go grow your Recurring Revenue and let's get you to your goals!
- Lincoln (@lincolnmurphy on Twitter)