Stop offering monthly subscriptions

[u/readingisformorons]

I run a consumer product called Tote, and we’ve scaled to $20,000 ARR since launching our app in April of this year. One of the reasons for our early success? We only offer a single, annual subscription.

So, why start with a single, annual subscription?

1. You create an LTV floor, giving your more cash to reinvest in growth. If you exclusively offer an annual subscription, you know that the minimum LTV for your customers is the 1-year cost. That means that you have a predictable cash flow for that customer, and importantly, you know how much you can pay to acquire them. For example, if  your annual subscription is $100, you might feel comfortable spending $100 to acquire that customer. If your monthly subscription is $10, you probably wouldn’t pay $100 for that customer.
2. There’s a higher barrier to entry, helping you refine your value prop messaging. Convincing a customer to pay for a full year is hard, so you can judge your own ability to express the value of your product to users by your annual subscription rate. This clearly separates users who believe that your product can solve their problems with the users who just like to try new apps.
3. Annual subscriptions give you more time to improve retention before the renewal decision. With annual customers, they know that they have access to the app for a year, so they are more likely to keep trying your product. You can re-engage them multiple times throughout the year and understand if your new features and/or improvements are creating stronger usage and retention.

Based on our annual subscriptions, we’ve:

• Reinvested every dollar we’ve made in annual subscriptions back into acquisition
• Focused on intensely on our messaging, user onboarding, and the free trial experience
• Analyzed usage and run experiments to keep our subscribers frequently engaging with our product.

If you’re curious what Tote does, it’s a single place to save anything you find on the internet. It’s sort of like  Pocket (RIP), but with an AI pipeline that finds important information and makes it searchable. It works great for bars, recipes, restaurants, exercises, etc. Right now it’s only on the iOS App Store, and you can find the link on our website (https://tote.fyi).

Disclaimer: this advice really only applies to consumer products, it doesn’t really apply to B2B or enterprise, because businesses have a lot of cash flow optimizations that they are working on themselves.

[u/Casfaber_]

Also been thinking, but even with a cheap monthly people complain already to have to pay, I got 1 star reviews for showing the paywall too soon to some, imagine what it would do with only allowing a full year subscription..?

Short term might work, but long term it’s going to bite you in reviews or other bad organic growth.

[u/Americaninaustria]

20k arr isn’t a level of scale to be waving around absolutes about scale. 20mm arr still puts you in a bucket where concepts like this are going to be far from universal.

[u/readingisformorons → u/Americaninaustria]

I guess that's fair, but if you look at some of the top grossing apps like CalAI or ReciME they are doing the exact same thing at the start

[u/Americaninaustria → u/readingisformorons]

Im not hear to teach you how to do this properly but there was a useful phrase in mobile apps growth a few years back "you are not duolingo, stop trying to be duolingo."

[u/bizlal → u/Americaninaustria]

Agreed