Changing Site Prices
Given the recent flurry of new Webmaster affiliate program announcements by both established, as well as some less-seasoned sponsors, the conclusion could be easily reached that many pay site owners are finally waking up to a fact that their customers have known all along – they’re charging too much for porn!
At this past Internext Expo in Hollywood, Florida, my wife Dawn and I entertained a few friends at one of our informal balcony ‘conferences’ where we enjoy the crashing ocean waves as each sea breeze blows fresh ideas around our estimable group. Since many confidences are shared at these sessions, I will not reveal the guilty parties involved – or all that was discussed – but the occasion in question brought together friends old and new, representing ‘real’ amateur site owners, ‘name brand’ sponsors, and a new generation of super slick, ‘up and coming’ pay site operators.
Among the topics for discussion were the various impacts that changing price points made on initial sales as well as retention. Most of our group has done thorough testing, and seen the results their own particular experiments had. Most now promote various offers to access their sites at disparate price points: $39.95/ mo. Or how about a $5.95 trial membership? No, lemme’ make it $3.95. How about I pop a “special offer” console to capture traffic exiting my ‘buy’ page without making a purchase – after all, the price might not have been just right. Oh, and let’s not forget about the ‘thank you’ email that cancelled subscribers receive: I’m just so damn grateful for their business, I’ll let ‘em sign up again at half price!
While this discussion focused on the more ‘scientific’ approaches for analyzing optimum price points; given a balance between initial and recurring sales, with an eye to mitigating credit card charge backs, it had totally overlooked the ‘human’ element. After all, we market to people, not to “traffic.” It overlooked it, that is, until Dawn, who until now had been sitting quietly in the corner, listening intently, stood up and announced to her audience: “You’re missing the point!”
Missing the Point
Dawn entered sermon mode as our group eagerly looked on: “We all know about ‘friendly fraud’ – that’s where some loser joins one of our sites and then denies the charge when either ‘mom’ or ‘wifey poo’ sees the credit card statement. Unless that sale is immediately refunded, you’ll get a charge back.”
Our group nodded knowingly, as she continued: “Legitimate customers who join pay sites – those who are willing to truthfully acknowledge their ongoing desire for premium porn – are all adults who don’t have to worry about mom finding out how Little Johnny ‘borrowed’ her credit card, and don’t have anyone looking over their shoulders at the statement when it comes in.”
“That’s your market. It’s not ‘traffic’ – it’s those people!” Dawn was on a roll: “That guy’s your customer. Here’s a little about his psychology: He was surfing porn one night, you caught his attention and he made an impulse purchase. Hey, it was only $1.95, right?” I was mesmerized as my wife continued – “Sure, he did click on your ‘Yes, I agree to your fine print’ button – but he’s horny and waiting to whack off through this whole process. Dude’s in a hurry, and doesn’t have time to read the ‘we’re only billing you $1.95 now, but we’ll bill you $29.95 in 3 days then once a month forever unless you jump through our hoops…’ sub section on your site’s boring Terms & Conditions page. He wants pussy now!”
“So the dude’s ‘taken care of business’ and goes back about his life. Then the VISA bill comes in and there’s a big surprise on it. His $1.95 porn site adventure really cost him $31.90 (the trial fee plus first month). Now most of these guys will be too embarrassed to call the porn company and confront them over what they may have really feared all along; that if they put their credit card number into a porn site, they’d quickly get ripped off! Many will simply pay that bill, believing it to be the last – hey, they never returned there, why would they still be charged?”
I was furiously trying to get my video camera out to capture her: “Other customers will mean to investigate the charge or close the account, but procrastination sets in, and they put it off.” Ahhh, procrastination, the root of all recurring billing. “They put it off until the next bill comes in. Wham! Another $29.95! Joe surfer picks up the phone and dials the 1-800 number. Another customer cancels….” More guests arrived as Dawn continued: “This is where you get the ‘average retention is 2.5 months’ from. It’s NOT because of the design, niche or update frequency or the amount, type or quality of your site’s content – it’s simply because of your customer’s procrastination!” “The bottom line is simple: the lower the price point, the longer surfers will procrastinate about canceling their memberships, and the less charge backs you’ll incur. It’s all just a study in basic human nature…”
Several of our group understood this, for others, it was a revelation. Encouraged, Dawn went on: “Marketers need to understand the role that procrastination plays in our business, and make it work for them rather than against them. It’s simple: pain and procrastination are on opposite sides of a balance. When there’s no pain, there’s no reason not to procrastinate. When it hurts more not to do something than it does to do it, we take action. In the case of pay site memberships, the ‘pain’ a customer feels in retaining one is directly dependent upon its price point. If you’re charging $59.95 a month, you’re causing a significant number of subscribers ‘pain’ every time they open the bill..."
"At some point, this pain overcomes their procrastination, and they call up to cancel; if you’re causing them lots of pain (like by charging them $59.95/mo), then their procrastination will end sooner than later…”
“But what if you could take away your customer’s pain? What if you could offer a high quality, competitive product at a price point that was profitable, yet so low that it wouldn’t cause enough ‘pain’ to override your customer’s tendency for procrastination?” The group listened carefully; an intense energy swirling about the silent onlookers: “You would have a dramatic increase in retention, while at the same time driving down your charge back ratio as even several months of fees would not incense customers nearly as badly as if you charge $59 or even $29 a month!”
“Like you all were saying earlier, there’s a sliding scale. If you can charge less than $20 a month, you’ll find a great customer base. Less than $10 a month? A great market too! Go any lower and you take a chance of actually losing sales since lots of folks will find your offer ‘too cheap’ and not value it enough to bother… But of course, there’s a market, and price point for everything.”
“The bottom line is simple: the lower the price point, the longer surfers will procrastinate about canceling their memberships, and the less charge backs you’ll incur. It’s all just a study in basic human nature…”
With a sudden sensitivity to how she had become the center of attention, Dawn excused herself and the group quietly pondered the insights they had just received. Food for thought about a new and better way of doing things. Or at the very least, another track to investigate as we all endeavor to ensure the long term viability of our enterprises.
What stuck with me though was her statement about ‘the bottom line,’ and the overwhelming realization of just how many factors go into developing a profitable pay site pricing plan, and the lessons to be learned from an analysis of these factors. Lessons that many players are acting upon today, with several recent announcements about new ‘low price’ programs from sponsors like Adult.com and Platinum Bucks – and you can be sure that many more such programs are on the way! Stay tuned for more! ~ Stephen