Incremental Pricing Optimisation

There was no way we could get customers to buy more, but we did know that for the price we were offering, the customers didn’t mind paying then leaving unused minutes.

We were looking at the user data to try and see patterns in the usage of the product and purchase value and frequency, and it was clear customers would come, make a single purchase roughly meeting their needs, generally they’d use under what they had allocated, and when they made a second purchase, if they did, it was just to top-up a little additional minutes that they’d failed to account for, then they’d leave.

Bundling the pricing had work, paying $9 for 10 minutes, and tiering this was also effective, but ultimately it was too ‘clean’ – customers would by $9 for 10 minutes, and use 9.30minutes then never come back, there was little we could do to increase the revenue of these kind of users.

We opted to looking at the data, we needed to re-draw the lines so that we could earn 10-20% on each transaction somehow. The way i saw it, we needed the price and minutes to be just under the average threshold.

I’m a big fan of dimsum, we usually go as a group of 5, and generally we order steamers of food, usually these steamers can hold 3-4 dumplings, but never 5, so for each of us to have one dumpling… we’d need to order 2 steamers and be left with 1-2 additional dumplings, or have one of our group miss out.

This was the rational that i was suggesting, if the majority of users were paying $9 for 10 minutes, but actually most were only using 8minutes, then charging $7 for 7 minutes, would mean you could artificially jack up the price from $9 per user, and push it to $14 per user simply by adjusting the time threshold.

We could experiment with this in a few ways.

first, by shortening the time, so the customer would need to make 2 purchases to reach the time they needed.

Or next, we could increase the minimum time and price so they would always have excess unspent time

or we could shorten the ‘active’ period the time was available for, currently the customer could comeback 3 years from now and use whatever balance of time still remained on their account, but if we adjusted this to be under the ‘churn time’ for a customer to return (typically 2 months) then when they returned they’d need to make a new purchase, therefore bringing in new revenue.

These tactics are pretty hard-sell, theres no doubt they worked, and help impact returns, but they ultimately need to be done in moderation since they are quite aggressive and customers tend not to like that they lose out due to tactical pricing. Still these tactics are worth considering to impact the bottomline, so long as they’re done carefully.

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