Name Those Pricing Models!

Pricing models

As an eCommerce platform that touts our flexible billing solutions, we see a lot of different types of pricing models – there’s a huge variety of ways you can sell your product or service, going way beyond the standard one-time, fixed-price purchase. So we put together this reference page with a rundown of some of the other pricing models out there. Who knows, maybe one of them is a better fit for your business!

One-time Purchase

Also known as “straight sale,” or, you know, “the default way we sell things online,” one-time purchases are the simplest type of pricing model. The customer pays a set price once, and receives an agreed upon product or service in return.

Example:

Susan pays $15 + $2.99 shipping at PillowPerfection.com for one paisley throw pillow.

Fixed Recurring Subscription

This is the most basic type of subscription billing model. A customer pays a fixed amount every billing cycle, and receives a specific product or service each billing cycle in return. These models can either be for a set period of time, or continuous until the customer decides to cancel.

Example

As someone who does a lot of laundry, Andrew decided to join Laundry Love, a laundry subscription service. He pays $40 every three months for a quarterly delivery of Clean-O! laundry.

Example

As someone who LOVES laundry, Andrew decided to sign up for Suds and Sundry, a subscription laundry box. Each month he pays $20 to receive a mystery box of different hand-selected, homemade, laundry detergents and accessories.

Payment Plan

For particularly expensive products, businesses can offer their customers a payment plan, the option to pay off a single purchase in regular installments instead of in one lump sum. This makes it easier for customers to buy higher ticket items.

Example

Jane and Peter are purchasing an $800 mattress online. They choose the option to pay $100 every month over the course of 8 months instead of $800 all at once.

Free Trial + Fixed Recurring Subscription

A customer gives a business their credit card information in exchange for a product or service that they receive for free for a set period of time. Once that time period is up, the customer is automatically enrolled in a recurring subscription. Pro Tip: Send your customers reminders that they will be charged a subscription fee in the days before their free trial is about to end, otherwise you’ll have a collection of unhappy customers on your hands–people are forgetful, so they’ll get mad even if you warned them they would be charged when they initially signed up.

Example

Martin has been considering getting a membership with TV Time, a streaming service that will let him watch his favorite shows for a flat monthly rate. He signs up for the free trial, watches a few episodes of Janitor Wars on demand, and decides that he’ll keep the service and let himself be billed $10 at the end of the month.

One-Time + Recurring Subscription

Also known as the hybrid model, or straight sale + continuity, or straight sale + subscription, this model is clever: sell a product in a one-time purchase that is easily combined with a subscription product. Customers can sign up for the additional subscription at the time of purchase or not, but even if they don’t, you can entice them towards signing up for the subscription after the fact if your marketing is good.

Example

Jordan the office manager buys one printer for $200. At the Outstanding Office Supplies checkout page, he’s offered the option to sign up for automatic toner refills every two months, at $70 per delivery. Wanting to avoid the hassle of always keeping an eye on the office toner supply, Jordan signs up.

Usage-based pricing

Used most frequently with SaaS products, usage-based pricing charges customers for the amount they use your product. This model for products where the level of use per customer varies a lot. Customers who use the service rarely don’t feel like they’re being overcharged, while customers who use the service frequently pay accordingly.

Example

Bailey’s Bakery pays a 2.5% charge to the credit card company with every credit card transaction.

Volume-Based

Following the business standby that it’s cheaper per unit to buy and sell in bulk, this model offers competitive rates to customers who buy higher amounts of a product, or additional installments of a service, in one purchase.

Example

Samantha considers buying a pack of Marvelous Muscle protein bars for $15/pack, but is offered the option of buying three packs at $12/pack instead. Because she was planning on buying protein bars again eventually, she chooses the bulk option.

Example

When she isn’t powerlifting, Samantha works as a photographer. She can pay $30 for a Photopower software license valid for this month only, or she can pay a one-time fee of $240 for a license valid all year (which breaks down to $10 less per month.)

Bundling

Bundling is another model that encourages customers to buy more items in order to enjoy a better value. In this case, customers are offered the option to buy an item related to the product already in their cart, for a lower price than they could buy the item individually. This encourages customers to buy the additional item now, instead of coming back for it later.

Bundling often overlaps with the concept of upselling: offering an additional product or upgrade to a customer in order to increase their total order value.  

Example

While Jordan the office manager is buying a printer, he’s offered a case of printer paper at 10% off the regular price.

Discounts

Every customer’s favorite pricing model: a sale! This could apply to a one-time purchase, or to a subscription model, and comes in many forms: A percentage off a product category, a coupon for a flat dollar amount off of a particular item, “$X off your purchase of $Y or more,” whatever tickles your fancy. Discounts are great at delighting your customers and getting products off the virtual shelves faster.

Example

John is window shopping on GrillingGear.com when he notices that there’s a 50% off sale on novelty spatulas for the next 24 hours. He buys himself a stainless steel spatula in the shape of a four leaf clover.

The world of eCommerce is endlessly customizable in endless ways, so it can be easy to overlook designing pricing structures as a “given,” but making a change in your pricing structure can sometimes result in a big change for your business’ bottom line.

Choose the pricing models that fit your needs.  LimeLight offers merchants billing freedom: the ability to set up any type of business model for your customers from straight sale to recurring billing, variable billing periods, subscription packages for a set number of months, upsells, cross-sells, and more.