I often say you need to know the goal of your subscription product (or any product for that matter) to properly make decisions around pricing. Sometimes this doesn’t seem obvious, because isn’t the goal of all products to maximize profit?
Panera Pricing Example: How Subscriptions Can Increase Your Goals
Panera’s new coffee subscription is a great example. Panera is offering a subscription to coffee at their stores for only $8.99/month. Why? Do you think it’s to make money on coffee? Maybe, but highly unlikely. You see, they tested this program in 150 stores. They had three great results which let us know why they really have this program.
Look at these 3 surprising outcomes from Panera’s subscription program:
- Coffee subscribers increased their number of visits by 200%
That means if they used to come once a week they now come 3 times a week. Wow. But, if all they do is get coffee that may or may not be a profitable business for Panera.
- Panera reported that subscribers had a “70% increase in food attachment”
Although I’d like to better understand what this means quantitatively, qualitatively the results are apparent – they’re selling more food to their coffee subscribers.
- They increased the number of people who come to Panera for breakfast
Today 75% of their business happens after 11 am and with their new breakfast offerings and coffee subscription, they are trying to increase breakfast revenue.
Clearly Defining Your Subscription Goals Leads to Effective Pricing
Now, think about the question, “Why does Panera even have a coffee subscription?”
It’s probably not to make money selling coffee. No, it’s to bring in customers more often and to buy more products, especially at breakfast time. When someone asks you, “What is the goal of your subscription?” You want to begin to think about it in this greater context.
Sure, maybe it’s to maximize profit on that subscription. But maybe, it’s something else. Maybe it’s to drive another sale that drives profit. Maybe it’s to be a good community steward.
Articulate the goals. Then, the pricing model and price levels can be more effectively determined.
Tags: pricing strategy, subscription