067: Why you should only offer quarterly or annual plans - with Matt Inglot
🗓 March 17, 2021
Matt Inglot is the founder of Tilted Pixel, an agency specializing in growing membership sites. In this episode, he joins Ward to discuss why you should only offer quarterly or annual plans for your membership.
✍️ Show Notes
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📄 Show Transcript
This transcript is computer generated, please excuse any errors :)
Ward Sandler: Welcome, everybody. Today I'm talking with Matt Inglot of Tilted Pixel, an agency specializing in growing membership sites. Matt's agency has worked with numerous 6 and 7 figure membership sites and has a deep playbook on what works and what doesn't in the membership space. Matt, welcome to the Membership Maker podcast.
Matt Inglot: Thanks so much for having me, Ward!
Ward Sandler: Sure thing. All right. So we know that you've seen in work with very different types of memberships and different types of pricing strategies for those membership businesses. The question that we often get is, what should my pricing strategy be like? Should I charge my members annually, quarterly or monthly? What have you seen that works the best?
Matt Inglot: Yeah. So there are a few things you can jump into here. The first, the golden rule, is the longer the membership cycle is. So, for example, yearly versus monthly, the more valuable that customer ends up becoming. And I think there's a couple of reasons for that. One is obvious if they commit to a month, then after month one or month two, they might get everything they want out of your membership and just say, see ya. In which case you've charged them very little comparatively for your content, versus if you get an annual commitment, then you know, you're getting at least that one year. So it's, it's just math. They're going to be much more valuable. And also, the people that are committing to an annual or even a quarterly membership are more committed, period. And if you look back on your own experiences, if you've ever joined a membership site or something similar, the lower your upfront investment, the less seriously you take it, the less engaged you are and so on. And therefore, you're more likely to just let it slip by the wayside. So there are two things going on here; one is just getting that commitment, getting them to take it seriously. And the other is just mathematical. And the thing to realize is when they're signing up for your member's site, they're probably the most excited about it on day one because I've just done a ton of marketing around it. You've probably had some sort of Email sequence you're using to get people on board, and so they're ready. They're willing to jump in. And what we find is typically that annual barrier is not a, it's not a showstopper or what it is. You can scale down to quarterly, the exception being, if your membership is really costly, like if it would be like a thousand or 2000 a year, then people start wanting, you know, It has broken out into more payments, but if you're charging like a couple of hundred bucks a year, uh, there's a very good chance if you just remove your monthly plan, the value of your customer will jump up just like that.
Ward Sandler: So like a good rule of thumb that if it's in like the low, maybe mid-hundreds in terms of an annual price annual, shouldn't be too much of a barrier if you're getting above 500 for the year and obviously over a thousand and then it is going to, it potentially might do more harm than good.
Matt Inglot: Yeah, absolutely. And again, the golden rule here is, of course, you could experiment as well; the monthly thing is great because you can experiment just by removing it from your checkout and sales page and seeing what happens for a couple of months. And what we'll find is conversions may drop a little bit; you might get a 10, even 20% conversion drop, which at first sounds like, 'Oh wow, that's terrible.' What's happening. But when you realize that. Usually, the value of an annual membership is two to three times that of a monthly member. Right. If you average it out and look at how much a member is worth, they're worth that much more. A slight drop in conversions is perfectly okay because you make it up in much higher customer value.
Ward Sandler: Right. That makes sense. So a couple, I guess, sort of curveball questions then. One that all sounds good. In theory, let's say you get a bunch of people to sign up; a month goes by or two months goes by, maybe three months goes by. They've been pretty happy, but then suddenly, they're not for whatever reason, and they say, you know what, Hey, Matt, you know, I gave it a good shot. Just not, not loving it. I'm gonna need to cancel. Can you give me a refund? How would you approach that? Or what kind of general guidance do you think you might have for folks who come across that? Because just as context, like for member space, for example, we definitely have people who pay annually and sometimes they cancel before a year is up, and sometimes they ask for refunds, sometimes they don't, and I'm just kind of curious if you have any best practices or thoughts around that.
Matt Inglot: Speaking to refunds more broadly, if someone asks for a refund, my general policy is yes, give them a refund, right? You have very little to gain by trying to fight it. You can create issues with your payment processor. If I start doing chargebacks, it is going to hurt your reputation. And because we're here in the world of mostly digital products or at least high margin products where our costs aren't tied to our customer, but more our marketing and so on. It doesn't cost us a lot to give that refund. It's not like you shipped someone, you know, a very expensive product and like a laptop, and you need to get that back. So given the refund and our experience is that as long as the membership is valuable and everything is groovy. Then this happens so infrequently that it's negligible, especially when you look at the revenue bump, but that said, I mean if you are finding your refund on rates are high, like you're getting a 15% refund rate. For example, that's something to examine, period. And that's probably not an issue with your billing cycle or your tiers or anything like that. It's probably something deeper where there is a fundamental mismatch between the person's expectations and what your membership is actually delivering, and that is definitely worth troubleshooting.
Ward Sandler: Yeah. I agree with you in general, like yeah. If someone asks for a refund, you should give it to them, and there's more downside to not doing it, but for an annual specifically, or even for a quarterly membership, do you believe in a prorated refund, like if you've used up three of your 12 months of an annual. We'll refund you nine of those 12 months if you cancel.
Matt Inglot: Yeah. You know what? Most people will go for it. So you may as well do it, and that's fine, but again, because the refunds should be a negligible portion of the revenue. It honestly doesn't matter too much. It kind of comes down to your own personal preferences. You can definitely give them a prorated refund, and that's totally fair, but at the end of the day, that's not really going to change the trajectory of your business.
Ward Sandler: Got you. Okay. So one other question then, it seems pretty clear. I think you're making a good case for why quarterly and annual memberships and subscription plans should be maybe thought of as the default, or at least you should experiment with it. Depending on a few factors aside from, you know, having an expensive annual plan, as we talked about, of 500 or more dollars, is there any other reason you can think of why someone should not want to have an annual or quarterly plan or would want to stick to like a monthly or maybe even, you know, weekly?
Matt Inglot: Okay. Yeah. Honestly, it's not too many; price is probably the big concern. There's a lot of reasons why. You may have difficulties with this, and it doesn't work out quite that way. They all come down to, is there something about the membership that's not quite true sticky, right? Those people I only want to have it for three months, and then they just don't care. And then they do want a refund, and that's usually because they, the main reason we see that as, for example, if you have a course, and it's just the course, it's just access to lessons, nothing else on an ongoing basis, then people will go through that material pretty quickly. And three months later, they won't be that interested in that course, in which case that's actually more of a reason to charge annual because then. You've said we are a reasonable floor price for access to those materials, but then the better solution, of course, is figuring out how to deliver recurring value. Other reasons for charging monthly, I suppose, if you go down the route of something super-specialized like it's a monthly service that you're providing, but then again, it tends to be more expensive anyway, then I'm sure you can find exceptions. Right? And that's another thing that is absolutely the same as another, but broadly speaking, we've seen this work over and over on so many sites that we're very confident.
Ward Sandler: Matt, thanks for taking the time to talk with us. We really appreciate it. Would you like to share any resources or recommendation for folks that are trying to learn more about Tilted Pixel?
Matt Inglot: Yeah, absolutely. Well, first and foremost, just go to our website, tiltedpixel.com and right there on the homepage and the footer. You can find our newsletter. You can subscribe there. You'll immediately get a few lessons on optimizing your membership site, and we also periodically send out more information, more ideas on how you can grow your membership site. And of course, if you want to work with us, then that's the same resource tiltedpixel.com. Get in touch, and let's see if we're a fit.
Ward Sandler: Excellent. And I just want to really throw my hat behind Matt here for folks to definitely reach out, they definitely know what they're talking about, and they'll definitely help you scale up your membership. So thank you.
Matt Inglot: Thanks so much, Ward.