SUBSCRIPTION AND CUSTOMER LIFETIME VALUE Flashcards
(15 cards)
price structures may have been pioneered with magazines and news-paper, but from this humble origin, they have become standard pricing practices in many industries.
SUBSCRIPTION
a series of related individual purchases is converted into a single purchase decision.
SUBSCRIPTION ARRANGEMENT
5 SUBSCRIPTION
PRICING THE SUBSCRIPTION
CUSTOMER LIFETIME VALUE
BEHAVIORAL EFFECTS WITH SUBSCRIPTION
OVERESTIMATION BIAS
VALUE PROPOSITION AND SAAS
When considering ADDING SUBSCRIPTION sales to individual product sales, the firm should ensure that it will be more profitable with subscriptions than it is with individual product sales at a minimum.
PRICING THE SUBCRIPTION
2 PRICING THE SUBSCRIPTION
TOTAL PERIOD PRICE
CUSTOMER PERIOD VALUE
It is simply the PRICE that customers would pay if they purchased EVERY ITEM within the subscription. It is the MAXIMUM price that customers would consider paying.
TOTAL PERIOD PRICE
It calculates the expected profits EARNED FROM CUSTOMER during the period, given customer’s actual purchase behavior.
CUSTOMER PERIOD VALUE
It influence pricing decisions in many areas outside of subscriptions. Many times, firms make an initial sale at a loss in the hopes of earning profits on the sale of subsequent items.
CUSTOMER LIFETIME VALUE
3 BEHAVIORAL EFFECTS WITH SUBSCRIPTION
MARKET SEGMENTATION
LOCK IN
INCREASED CONSUMPTION PATTERNS
Within the MARKET FOR A SERIES of products, there will be natural market heterogeneity Or differences in the preferences of customers.
MARKET SEGMENTATION
When customers subscribe to a series of products, they become LOCKED into an with the arrangement with the supplier.
LOCK IN
One reason for this is that once the customer has entered into the subscription arrangement, future CONSUMPTION of the product comes with a zero or otherwise low marginal price.
INCREASED CONSUMPTION PATTERNS
When customers are choosing between a subscription membership and a pay-for-use offer, they sometimes fall subject to an OVERESTIMATION bias of their positive future behavior.
OVERESTIMATED BIAS
In many cases, the benefits delivered through subscription arrangement are GREATER than those delivered on a pay-per-item basis.
VALUE PROPOSITION
the benefits delivered through the subscription are substantially more valuable, and the variable costs to serve are also HIGHER.
SAAS
