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Feb 17, 2004
How To

How to Raise Subscription Site Conversions and Lifetime Value Rates (Checks Rule Over Cards)

SUMMARY: Even if you're a veteran online subscription seller, you're sure to find a few new tips in this article. Includes expert info on:
- Site design to increase subscription conversions
- Price testing tips
- Month-to-month vs quarterly payments
- How to increase subscription lifetimes

Plus, fascinating data on why you should push automated checking payments as the top option on your order form:
More than 100,000 sites, including The Weather Channel and several CNET properties use the Internet Billing Company to process their reoccurring billing offers for content, downloads, and site access.

We interviewed Major Accounts Director Howard Goldberg to get some eagle's eye advice on what works and what doesn't work for selling online subscriptions. And, boy did he have some great advice:

First, make your home page trustworthy and enticing

"A lot of people who are searching for information and willing to pay for it are not your very savvy Net surfers who know they could find it for free," says Goldberg. "We're dealing with people who need to have that impulse satisfied quickly. Many online subscription purchases are impulse buys."

This means your home page (or marketing campaign landing page)
should load lightning fast; your headline should speak directly to their need; and the rest of your sales points should be very easy to skim -- either as telegraphic bullet points or "highlighted" phrases within longer copy.

"They need to make a decision within the first 10-15 seconds." Is what they see, in that short time, enough to get them sucked in to read longer copy, or click to learn more?

While you can test Flash for a site tour if you'd like, Flash intros are not a great idea because they slow down and often annoy visitors.

Use a pale color-pallet in your design to build a sense of trust. "They want to feel calm, and lighter soothing colors tend to do that. A lot of new sites tend to use darker colors - that doesn't lean toward calmness. I've tested this."

Many publishers simply use surveys to ask free readers, "Will you pay and how much?"

Instead Goldberg says you should survey to find out what types of content your visitors yearn for. So, you are asking visitors for help with product and premium development - not merely price.

"Figure out what can I do to make them reach into their pocket and pull out a card. What would be worth it? Get as much demographic information as possible to figure out what makes markets more apt to purchase - and then design offers accordingly."

Keep selling on your barrier and order pages

"It's unbelievable how short a human attention span is. You suck someone into your site, get them all worked up to make a purchase, and then they click to the order form and all of the sudden all of that stuff you heated them up about just cools down. The fall-out is pretty high unless you continue to give people reasons to buy on that page," notes Goldberg.

"People leave a lot of money on the table," he adds.

So, make sure the order form includes some sales copy, such as a bulleted list of features and benefits, and possibly some testimonials, or perhaps a graphic image of a premium (gift with order) to keep customers excited as they go through the drudgery of typing out their address and credit card information.

Tips on pricing and term

"$19.95 per month is a sweet price point," says Goldberg, who's also seen success at the $4.95 and $9.95 price points for consumer content and $29-39 for business-to-business.

But, if your competitor is already $19.95 (or another price you were considering) should you go lower to beat them? "I've seen that backfire so many times. You're devaluing yourself in the consumer's mind," says Goldberg. "You know they are willing to pay $19.95, why undercut yourself? If you see two radios and one is $59.95 and the other is $13.95, which one in your mind is going to be the better radio?"

He definitely advises price testing - but you should always test higher as well as lower to see which works best. Plus, tweak your copy, site and product to see what other elements might improve conversions before you settle on lower prices. Once you get into price battles, subscriptions become nothing more than commodities and that doesn't help anyone.

If you're using reoccurring billing, Goldberg strongly recommends sticking with monthly versus quarterly or any other term. "People forget they said re-bill me. They see charges and call the credit card company saying, 'I never authorized that' even after only two-three months. And you have to keep your chargebacks under 1% to keep your merchant account.

"There was a really big company that sold domain registries with annual reoccurring billing. They came close to losing their merchant account."

This is also why you want to make your reoccurring offer copy explicit and highly visible. Companies that put "you will be changed every month" in the fine print are the ones with high chargeback rates. It's a dangerous business practice.

How many payment options should you include?

While most tests have shown you want to keep your offer as simple as possible (asking buyers to choose between two or more different term or price options can greatly depress your conversion rates), Goldberg says you should give as many payment options as you can.

Making consumers decide between different offers is a barrier to sales. Offering consumers a wide variety of payment-type options is removing barriers to sales. For US shoppers, offer all three major credit cards (Visa, MC, Amex) and yes, definitely offer checks.

According to Goldberg, on average about 10% of subscription buyers will chose the checking account option.

Plus, if you're serving customers outside North America, don't rely on credit cards as your main payment method. "In parts of Europe credit card penetration is only 20% and they tend not to have a lot of faith in online payment processing."

His favorite alternate is paying by phone bill. "I like dialers where you pay by the minute. It's anonymous, they pay as they go, and if your site is really rich in content and you do regular updates you can gain more revenue per person coming in on dialer than you can with reoccurring billing."

It's slowly being offered in the US as well, but Goldberg isn't as excited because "our telcos are very lenient with customers. If they call up and say this is fraud, they tend to issue refunds no questions asked. In Europe it's different, they ask did you make this call? I'm providing a service and you have to pay for it."

Increasing subscriber lifetime

Big news -- according to Goldberg consumers who pay reoccurring subscriptions via checking account "tend to be retained two-three times longer on average than those who pay with credit cards." Some subscription sites have seen average checking-account customers stay as long as 13-14 months with 30-day payments.

And no, no site he's aware of gets an average of 12-months for their month-to-month subscriber lifetime. Publishers who stick that assumption into their predictive spreadsheets are not remotely in touch with reality.

Best ideas for increasing lifetime value:

-> Start with a content-rich site instead of just promises. "You have to preload your site so you'll be able to feed your members until the next update. You can't just serve a salad until the main course."

-> Send a valuable welcome message. Whether you use an emailed autoresponder or a direct mail package, send new subscribers something extra such as links to deep content. Added value from the start builds goodwill when your brand is top of mind, which helps later on when it's not anymore.

-> Send random warm fuzzies. Consider an autoresponder with a thank you gift sent at slightly random intervals, such as six months out. You're sending them this extra because they are a valued customer, not because you're asking for money right now.

-> Loyal members get something special. If they've been a member for a specific time period, send a reward or allow them into a special "ultra-loyal" members site section.

-> Do everything you can to increase "sense of community" whether it be allowing people to post their own content (notes, photos, reviews) or to vote on the future development of the site.

-> Get them back to the site more frequently. Goldberg notes in Europe where SMS is much more heavily used, some sites send SMS updates to members whenever there's new content. "They noticed that people who tend to check in once a day without the SMS, will go back twice with the SMS."

Example, a dating site member who routinely checks his postings every day at 6pm might also check an additional time during the day if he gets an SMS message about a new member that matches his requirements. "They've already got a habit. You're not breaking it, you're just getting more visits."

And the more visits, the more likely the member will continue to pay.

In the US, you might use personalized email alerts, a desktop app or RSS feeds to accomplish the same thing.

Internet Billing Company -- http://www.ibill.com

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