Always, always, always add pricing tiers 💰
Stock Alarm recently had an experience that we would love to share with our fellow indie hackers.
My partners and I recently decided to switch our pricing model to include multiple pricing tiers as we have some features that are much more expensive to implement than others.
To give you the bare minimum background info on our platform to understand our pricing tiers. We provide stock alarms (hence the name 😜), these alarms are composed of multiple conditions on a certain stock (e.g. TSLA) and when these conditions go off you will get an alert (Phone call, Text, or Push notification). We have normal conditions (upper/lower limits) and premium conditions (fancy stuff based on technicals/fundamentals/sentiment).
Previously we had the following model:
- Free tier: Assigned 1 alarm with 3 normal conditions
- Premium Tier $4.99/month : Unlimited alarms/unlimited conditions
Our new model:
- Free tier: Assigned 1 alarm with 3 normal conditions
- Bronze tier $4.99/month: 5 alarms, unlimited normal conditions, 2 premium conditions
- Silver-tier $9.99/month: 10 alarms, unlimited normal conditions, 5 premium conditions, text message alerts
- Gold tier $19.99/month: Unlimited alarms, unlimited normal conditions, unlimited premium conditions, international calls + text messages, sentiment-based alerts
We made a few assumptions on how this would play out based on analysis of how our current user base (10k+ users) have used Stock Alarm
- 60% of users would be bronze
- 30% of users would be silver
- 10% of users would be gold
The results were absolutely insane to us!
Out of all the new users (100+):
- 50% are gold
- 40% are bronze
- 10% are silver
Hopefully, this provided some form of insight as the moral of our story is to always add pricing tiers because they can really help you monetize your product.
The next step is to add annual subscriptions (at a significant discount from the monthly pricing)....
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In the immortal words of patio11: Charge more.
If 50% of your customers are looking at $20 as such a bargain, it seems highly likely that you could significantly raise your prices and come out way ahead. And with higher margins, you'd have more money and headroom to operate in to provide more and better service to your customer, so everyone wins.
You can grandfather your current customers and try pricing experiments with new customers until you find a position you're comfortable with. Remember: just because you sold something at one price once, doesn't mean you're contractually obligated to continue to sell it at that price forever.
Totally agree with your statement and the wisdom of patio11 😉
That's exactly what we did!
We grandfathered all of our old $4.99/month customers into the new $19.99/month and it improved our retention numbers quite a lot and we found that users were happy to pay more as long as we continued to offer a premier service (and take their suggestions into account at every step)!
Add a $99/month tier and see what happens
Intuitively it doesn't make too much sense to do that but we just might, after all our intuition was completely wrong the first time!
Thanks for the suggestion!
Based on those results it very much seems like your price is too low (customers instantly skip to “give me everything”).
I’d change the tiers to something like:
🥉 9,99
🥈 29,99
🥇 69,99
Maybe even higher for gold tier.
Really good point. Thank you for the insight as you're most likely right, we will try to experiment further with pricing tiers!
Thats great that you did this experiment. I even think you should experiment with rising your fees even more. your target audience is "investors" people already have money and some extra to invest. and if they get value from your product (which seems like they do) they would pay premium
This is such valuable feedback, will definitely consider it as our users seem to be willing to pay more as long as we continue to provide a high-quality service (never missing a notification ).
Thanks so much!
Great post! There's a dogmatic way of thinking that more choices = worse conversion beyond 3 tiers.
I read an article the other day from CXL that challenges the paradox of choice on conversion rate. I had my doubts reading it but now you've got me thinking about it again.
Interesting article. I've read the book by Schwartz and liked it a lot. Definitely feels like there's a lot of dogmatic thinking in this area. I think it depends on the product.
It's probably fine with a few options(and might be beneficial) as long as you keep the complexity low for the user by having clear options. Like this bronze-silver-gold model.
I totally agree that there seems to be that dogmatic mindset but so far we have not seen any decrease in growth rate.
Really interesting article, thanks for sharing as this got me thinking about our modeling as well...
Thanks for sharing your experience, that's really helpful.
I question whether "always add pricing tiers" is the best advice for all circumstances. For a brand new product, it requires work to develop different "versions" of your product for different tiers. If someone hasn't implemented this yet, should this prevent them launching? The traditional advice I see on indiehackers is get your product out there as soon as possible to validate whether customers really want this.
Once a product has users and validated that customers are willing to pay for this, it seems like the right time to experiment with pricing tiers.
Awesome. Thanks for sharing.
So happy you enjoyed!
Seems like most people want slightly more than 1 alarm or unlimited. You should drop the bronze category completely. I bet most of the people willing to pay for bronze will pay for silver.
Yes we are definitely considering making the switch but we still want to cater to the novice traders as they don't need more than a few alarms for their needs!
We also might just raise the prices on all the tiers as we offer more features (while grandfathering all our old users in).
Thank you for the input!
Congratulations Yahia, your app looks amazing. Unrelated to the post let me ask you the following: Why a phone call, when the app can just ring to alert the user?
Thank you !!!
That's actually our main selling point. My partners and I all work during the day and we cannot afford to stare at charts all day so we need notifications that we absolutely know we will not miss (also how StockAlarm started!)
Think about the last time you missed a phone call vs the last time you missed a push notification!
Got it, clever!
Wow, that must have been a pleasant surprise. Thanks for sharing!
I wasn't thinking on adding tiers to my upcoming product but I guess, I should re-evaluate that. Great post and thank you for sharing.
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I mean it's definitely worth a shot IMO!
i think it would be worth adding a $25 price tier where you give slightly above the average # of tracks that your users are using (that's kind of how we created our tiers and it worked out well).
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Unfortunately your product is a little out of my domain but I think the "making the tracks downloadable" seems very interesting. You could make it a (ability to download X tracks per month) and then vary X according to your tier!
Regardless please make a post with your results so we can see if it works well for you!
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