On a coaching call within our Learning Community last week, someone asked about starting up a 9 (insert currency)/month Patreon-style offer.
This kind of question comes up frequently because it’s an increasingly common-style of offer, it seems like it would really work, and it’s financially accessible to folks who might not have as much money.
Let me start by saying that this kind of offer can work, and yet, it’s not always the best thing. As with any kind of offer or business model, I encourage our folks, including you, to really think it through. To get out your calculator app and run some numbers, and make sure it truly makes sense.
The Underlying Premises
There are three things in particular to have in your heart when you are looking at this.
First: Everything that is purchased needs marketing/promotion bandwidth and effort.
It’s surprising, but true, that it takes similar amounts of promotion to sell a low-priced monthly subscription, a mid-priced course, and a more premium-priced individual offer.
There is very little that you can just put out there once, and people will just sign up. It’s humbling, and it makes sense if you look at your own habits as a buyer.
Second: Audience size does matter.
Many people who consider these kinds of low-priced ongoing subscription offers are folks that are starting out, or just have very small audiences.
I’ve seen people think, oh, I have one hundred people I know, surely I can get 30-40 of them to pay nine dollars/month, and that’s okay to start.
Unfortunately, the truth is that it may be closer to five or ten people who sign up out of a hundred. Or maybe three.
Thinking in averages, a 5% conversion rate is HUGE, it’s usually closer to 1% or less. So, 1% of one thousand people is… ten people.
Now, a smaller audience often means more trust, these are folks that know you better, and so the percentage can be higher, maybe closer to that twenty or thirty people.
Yet, as a business expands its reach and increases its audience, that closeness doesn’t expand, because instead of friends and community members being the main people on the list, it’s more distant subscribers. Which is great! And, then you see the lower conversion rates.
Third: Churn happens.
“Churn” is the term used to describe people joining, and then leaving, a subscription service.
So, that means those who leave need to be replaced with new folks, which is effort.
It’s often easier to get to sustainable revenue with higher-priced offers.
I don’t even mean super-premium priced offers, just charging enough so that if you have these low numbers that are absolutely healthy and normal for a business in earlier stages of development, you can afford groceries and the mortgage!
10 x 9 = 90
10 x 90 = 900
20 x 150 = 3000
This kind of math can save your business’ (and your own) rear-end.
So, does that mean the low price/monthly model doesn’t work?
This model absolutely can work! And there are people who make it work quite well.
However it requires a larger audience. It requires a real commitment to the model in terms of marketing and promotion. It usually requires that it only be a portion of the business model.
And, honestly, it has to be in your heart. It has to really, truly make sense and feel right to you and what you’re doing.
It is not an easy thing to throw together while you’re trying to get to what you really want to do. It’s not a functional or profitable stop-gap while you get started.
Like everything in life, it requires some presence, some love, some care, some guidance. And it also requires some thinking it through, some clarity about numbers and structure, and some clarity about your own capacity and strengths and skills.
I’m so curious how this lands with you. If you have pushback, or questions, or examples.
with love,
Mark Silver, M.Div.
Heart of Business, Inc.
Every act of business can be an act of love.
