Microconf helped us add 33% more revenue

One of things that makes Microconf a great learning environment is the collection of great speakers that share actionable business strategies that will help your business grow.

At the 2013 Microconf, several speakers hammered on two themes that every business should consider implementing. 1. Raise prices. 2. Sell Annual Subscriptions. In the 9 months since Microconf, we used these recommendations to add 33% more revenue and now annual subscribers make up 40.4% to our Meal Plan business (www.getmealplans.com). I doubt we are the only success story.

Once I’d been properly motivated, I had to go home and convince the CEO. It’s a bit tricky because the CEO is my wife and Happy Herbivore Inc is her business. My role is mostly operational, support and technical; I do get involved in strategy but Lindsay has the pulse of our audience.

Our Business

So I should properly introduce Happy Herbivore. My wife Lindsay Nixon started blogging 6-7 years ago. She started first by selling digital cookbooks which then turned into a traditional book deal with a publisher. Her cookbooks have sold really well that she’s now published 4 cookbooks. In October of 2012, she released her first meal plan for sale. In her first week selling meal plans, she made more money than in a month of freelancing. We knew immediately we had a product that connected with our community. Our business 7-Day Meal Plans (www.getmealplans.com) is now our core business and source of revenue. We sell two meal plans every week: Individual (serves 1) and Family (serve 4). The meal plan covers all your meals for a week, 21 meals including snacks and desserts, you get a shopping list, a list of recipes, and a prep sheet to help you cook and prep most of your meals in advance. You can buy a meal plan a single week at a time or buy a monthly subscription.

In May after Microconf, we weren’t able to determine what was best strategy for raising the price of a single week so the single plans stayed priced at $5. We did decide to offer customers the ability to purchase an annual subscription for $179. If the customer purchased a plan every week for 52 weeks, they’d spend $260 so we marketed it as getting almost 4 months for free or as one of our customers posted on Facebook for “only $3.44 a week.”

The most important decision we made was to only offer annual plans on a limited basis. For our first sale we planned to only sell the annual subscription for a week starting on the Memorial Day holiday.

Jason Cohen’s talk advocated increasing your monthly subscription price to make the annual subscriptions more attractive to buyers. There is some amount of calculated risk you take when you raise your prices, raise them too much and sales drop off. For B2B changing pricing might not create any issues for your customers as a consumer business is was certainly something we wanted to avoid. Our choice felt less risky, by not changing our pricing and adding annual subscriptions we avoided any backlash.

If I had it to do over again, I’d partly follow Jason’s advice by increased the single week price and also offered annual subscriptions. I think at the time there were two possible reasons this didn’t happen: 1) I didn’t write an organized detailed argument for raising prices. 2) We have a huge life event in progress at the time that was both stressful and distracting.

As of Jan 1st 2014, we raised the prices of the single week purchase from $5 to $7. The initial results a positive but far from conclusive.

What really happened when it came time to sell?

Our first annual sales event was insane. We planned it for a week starting Memorial Day (Monday May 27th) with plans to end the sale on the following Sunday. Tuesday was our 2nd best day of the week. We find that our customers are more likely to purchase on a weekday when they are at work. I thought "Surely, only our really hardcore meal planners would upgrade." Nope! We were completely blow away, the number of purchases were 3 times our initial estimates. We expected that most purchases would be upgrades of existing subscribers. Nope. New subscriptions made up 63% of all purchases.

May was just the beginning. We decided based on my analysis of our first annual sales event; that without question we should only hold single day sales events for Annual Subscription. On Sept 24th we did our 2nd sales event and broke our May sales record. Our Dec 1st Black Friday matched our May sales. Finally on Jan 1st we held our 4th sale, and total destroyed the Sept record by more than 30%.

Based on customer service requests, facebook, and email; we believe that the "limited time offer" created scarcity and was instrumental in driving demand. You could feel the urgency in the support emails and several customers even were worried they'd "miss out on the deal." Why the fuck does scarcity matter? My focus on scarcity comes directly from Robert Cialdini lessons in his book Influence. "Scarcity: This principle says that things are more attractive when their availability is limited, or when we stand to lose the opportunity to acquire them on favorable terms."

Refunds have run between 3-6% and range from “I accidentally purchased” to people that had never used the meal plan before but determined ”it wasn't for them." That shit astonishes me; that people would spend almost $200 on an info product they'd never used.

Pricing Logic

The goal is always to get the customer to spend more with you because you might not ever get another buying opportunity again from this customer. One of the most import aspects of pricing is comparison. The human brain tries to map the prices to more concrete notions such as time, how many items they receive, and amount.

I’ve attempted to explain our collective though process then and now.

Our new weekly pricing, at $7 a week, makes annual plans more attractive at $364 ($7*52 weeks) versus the $179 for an annual subscription. Had we raised the price of the weekly, we could potential have charged more for annual plans, because as it stands $179 is 49% of the cost of buying weekly.

The new price of $7 for a week is specifically designed to push customers to buy a monthly subscription. $28 for 4 weeks or $18.99 for a month. Increasing the weekly price back in May, would have made us re-consider our monthly subscription price of $18.99. Imagine a customer comparing $18.99 and $179, the obvious math is that the annual is cheaper than the month plan. Imagine that most people can’t do the math of $18.99 * 12 months but they can easily multiple 10 * 18.99 = $189.90 to come to the realization that the annual plan is much cheaper. Follow a similar logic when picking the monthly price of well 4 week’s * $5 = $20 which makes it obvious to the customer that it’s slightly cheaper to buy a monthly subscription. The reality is that most months, there are 5 Wednesday’s so customer do better.

So did we test any of this? No. Lindsay is very against testing pricing because we want to avoid consumer complains for about paying different price. One customer buys a plan for $5 and another buys for $7 then they talk to each other and then the 2nd customer sends nasty emails. What are the chances of this happening? Highly likely, because our business exists within a community where peer support, communication, and sharing is very common. We also have a lot of interaction with our community and we recognize that consumers react very differently to price increases and changes. Consumers typically have a fixed income so they look to cut expenses and often go to the ends of the earth to save a dollar. We see a lot of keyword searches for “meal plan discount code” and we’ve never offered any discount codes.

My conclusions

  • Advertise your sale well in advance at least 3 or 4 times.
  • Sell for 1 day only.
  • Make the annual price a really good deal; more than 2 months free at least.

I've had conversations with a few other SaaS owner and they seemed to have ok results but nothing amazing like we experienced. Every business has it’s own challenges and for some annual sales might not be as important as optimizing other aspects of their sales cycle. However, if you watch Jason Cohen's video he says that 1/4 of people who signup upgrade to the annual payment and they are able to use that cash to fund more growth through paid acquisition.

Thanks for Reading

I’m Scott Nixon the CFO/CTO of Happy Herbivore Inc. Feel free to say hello I’m @citadelgrad everywhere including on gmail. I love meeting other entrepreneurs even if you are just getting started. I’m really open about what we’ve done and learned. Every business is different. Your mileage may vary but take those easy risks and try shit.



Author:

Previous: Struggling to Write

Tags: None

Comments powered by Disqus