Rarely do I get to bring my passions together, but today’s one of those days.
On September 28, 2018 The Sufferfest, an on-line training tool for cyclists increased their prices from $9.99/month to $12.99/month while keeping the annual pre-paid subscription at $99/year. This was brilliant. https://thesufferfest.com/blogs/the-sufferfest-blog/why-were-changing-our-prices
Background about on-line cycling training platforms for folks who don’t know what a ‘smart trainer’ is
First, there are some important points that are critical to understanding The Sufferfest’s market. The Sufferfest is a tool for cyclists to use indoors on their ‘smart’ trainers. This is important for folks who are time crunched and/or live in climates where unseasonable weather limits their ability to ride outside for months on the year. The Sufferfest, like many global companies, derives much of its revenue from the USA, Canada, and Europe (I’m guessing, though they are based out of Singapore/Australia). Thus, the late Fall and Winter in the Northern Hemisphere is the time for them to make the bulk of their money.
Additionally, with a month-to-month model athletes are likely to only sign up for the Fall/Winter months and then will cancel their membership. SaaS (Software as a Service) pricing often provides (large) discounts for upfront payment. Companies love to lock in revenues and the cash flow favorability of such pricing strategies is obvious.
The price increase
Today I want to focus on both the SIZE of the price increase (30%) and the maintenance of the $99 annual price. As objective marketers and pricing professionals know, companies are more likely to benefit from price increases that are sensible and well communicated to customers. Put another way, it’s unlikely that revenues will go DOWN due to this price increase.
The Sufferfest faces steep competition from other, ‘more’ interactive competitors – Zwift is the best example. Most riders are unlikely to pay for both for the entire year…and even doubling up during the winter seems like a luxury (though I might do that as ANYTHING that keeps me on my bike in the winter is godsend…). Zwift took a price increase about the same time last year. Thus, the price increase could be seen both as reactive to Zwift’s pricing strategy as well to take advantage of the pricing differential that Zwift created.
Let’s analyze The Sufferfest’s pricing decision –
At $10/month and $99/year – the breakeven for an annual membership is 10 months.
Effectively, it’s more about whether you want to be charged up front or throughout the year. Sure, a 20% discount is generous. But, it’s easy to think that you’ll take a break during the heat of the Summer months. Surely, few do, but that’s the thinking.
A decision needs to be made upfront – the discount for prepayment is now 56% and the breakeven is 8 months. If you KNOW you’re going to ride (hard, really really hard, but that’s another post) only for the worst of the Winter months, then money can be saved with the month-to-month option.
I’d say that the $12.99/month option was a perfect price point. They are still $2 cheaper than Zwift and they’ve managed to increase their price by 30% (as mentioned above). This also enables them to increase the annual fee in 2019 to $120+
B2C pricing always has an element of optics to it. As a long-time The Sufferfest rider (I actually own all the videos before they went on-line, but love the new ones…thus I support their new business model) I can ‘see’ the value in $13/month being a sweet spot between $12 (otherwise why take a price increase at all) and $14/month (potential for folks to say ‘look you’re not offering as much interactivity as Zwift, I’m outta here). But I’ll have to jump on some The Sufferfest chat rooms to see how people are reacting.
Before the pricing strategy didn’t really SAY anything to potential customers –
- “come and try it out.”
- “If you like it, stay.”
- “If you pay up front, we’ll give you a (minor) discount.”
Now the pricing strategy says a lot –
- “come and try it out.” (they’ve kept the trial period and the monthly rate is still low)
- “There’s a 56% discount for paying for a year if you like it”
Customers then self-segment into annual folks and month-to-month folks. Consumers really have to make a tough decision when they sign up or shortly thereafter…
Self-segmentation is hugely valuable. As is getting annual pre-payment for SaaS offerings.
Why not take the annual price up?
While it’s likely that The Sufferfest would have made even more money by taking up the annual price too (as I mentioned a price point of between $110 and $120 inclusive seems optimal for 2019) the threat to the business of doing too much too fast exists. It’s clear from the post that The Sufferfest plans to retain as many current riders as possible using the $99/year strategy. It’s a great objection handler – yes, our MONTHLY prices went up, but we want you to stay for the year and that price strategy didn’t change.
And, as mentioned above, they should be considering an increase during 2019 for the annual price points as well.
I may be leaving out a passel of supportive details from years in the pricing trenches. Also, I realize that some of my arguments ($13/month and $99/year are and look ‘right’) are completely subjective. But I wanted to put together this post today to make the point about pricing against competition and allowing self-segmentation of pricing. Too many organizations are afraid of price as a true strategic option despite it being one of the most critical elements of ANY organization’s success. Also, I like getting out of the healthcare area every once-in-a-while to talk about other things that I’m passionate about.
Disclaimer: I pay for The Sufferfest and Zwift (though I’m currently, at the time of post NOT a subscriber of either; as I cancelled my subs during a period of zero riding as I got ChiralLogic off the ground). I do not and will not take money to post anything on ChiralLogic.com – and I don’t have a professional relationship with any company mentioned in this post.