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How To Price Multi-Month Packages? (Eg. 3 Month, 6 Month, etc)

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GetShitDone

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I run an online service based business. Currently, I charge $1,000/mo and make roughly a 65% gross margin.

However, I'm now doing 3 important NEW things:

1) Hiring a Commission-Only Closer to close my deals for me for 20%-25% commission for all upfront deal value (eg. he closes a 6 month $6,000 package, he makes $1,200).

2) Increasing my pricing to $1,500/mo to pay the closer and make a better margin

3) Introducing 2 multi-month packages which are for 3 months and 6 months where the client pays everything upfront.

At $1,500/mo without a multi-month package, my gross margin would be 54% (including after paying the closer).

*As for net expenses to pay with the gross profit, they are very low currently at around $400/mo, as 1 client alone would still have me net profitable.

I've never provided multi-month packages before, so it feels kind of crappy losing my margin if I provide a 6 month package due to a discount. However, I understand the value of getting paid lots upfront VS a client being month-to-month. With that said, I don't even know how much to discount.

My question: How much do you typically discount multi-month packages compared to a 1 month package and any advice regarding this situation?
 

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Kid

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Can you increase your 1-month package?
 

PizzaOnTheRoof

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Just throw something out there and see who bites.

5% discount for 3 months and 10% for 6 months.

Having a secured long term contract is worth it’s weight in gold especially in this climate.

What services do you provide?
 
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GetShitDone

GetShitDone

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Can you increase your 1-month package?
Thanks @Kid

Yes, I'm happy to increase it to $1,500/mo as mentioned.

Looks like I'll do a 5%-15% discount for the 2 long term packages

I'm debating one last thing now:

Since the $1,000/mo offer is selling very well and generating me lots of leads...

For the 1 month only - Should I charge $1,500/mo OR $1,000/mo + $500 Set Up Fee?

I was originally targeting beginner business owners, but now I want to target business owners who make a minimum of $10K/mo.

Just throw something out there and see who bites.

5% discount for 3 months and 10% for 6 months.

Having a secured long term contract is worth it’s weight in gold especially in this climate.

What services do you provide?
Thanks for that @PizzaOnTheRoof

Sounds good. One of my competitors does 10%-15%, so I think this gives me a good idea.

It's a marketing service.

Please give me your thoughts regarding the price increase question above this reply to @Kid
 

PizzaOnTheRoof

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Thanks @Kid

Yes, I'm happy to increase it to $1,500/mo as mentioned.

Looks like I'll do a 5%-15% discount for the 2 long term packages

I'm debating one last thing now:

Since the $1,000/mo offer is selling very well and generating me lots of leads...

For the 1 month only - Should I charge $1,500/mo OR $1,000/mo + $500 Set Up Fee?

I was originally targeting beginner business owners, but now I want to target business owners who make a minimum of $10K/mo.



Thanks for that @PizzaOnTheRoof

Sounds good. One of my competitors does 10%-15%, so I think this gives me a good idea.

It's a marketing service.

Please give me your thoughts regarding the price increase question above this reply to @Kid
100% raise your base rate to $1,500.

Really you should be increasing prices until you start to see diminishing returns.

Let’s say you have 10 customers now at $1,000/mo. That’s $10,000/mo

You raise the price to $1,500/mo and 3 decide to cancel. Now you have 7 at $1,500/mo totaling $10,500/mo.

+$500/mo even though you lost clients.

Less is sometimes more. You may find the trouble clients cut and run once you raise rates.

I don’t know your situation but “cutting the fat” when raising prices is a common strategy.

Only numbers that matter are the top/bottom line.
 

roguehillbilly

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I feel strongly that pricing is all just made up. Raise prices until you meet resistance. Even if you do, as mentioned above, it'll usually be fine as you have fewer clients paying more. I also provide a marketing service and discount 15-20% for annual plans, I should consider a 6 month as my smallest is quarterly.
 
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GetShitDone

GetShitDone

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100% raise your base rate to $1,500.

Really you should be increasing prices until you start to see diminishing returns.

Let’s say you have 10 customers now at $1,000/mo. That’s $10,000/mo

You raise the price to $1,500/mo and 3 decide to cancel. Now you have 7 at $1,500/mo totaling $10,500/mo.

+$500/mo even though you lost clients.

Less is sometimes more. You may find the trouble clients cut and run once you raise rates.

I don’t know your situation but “cutting the fat” when raising prices is a common strategy.

Only numbers that matter are the top/bottom line.
Good point. I'm honestly going for 100 retainer clients by the end of the year. The amount of them that end up not cancelling is another question. I'll likely increase to $1,500/mo which is still affordable.

An extra $500 isn't going to kill them (even the beginners who I was originally targeting).

I'll charge $1,500/mo and discount 5%-15% for the 3/6 mo packages.

I feel strongly that pricing is all just made up. Raise prices until you meet resistance. Even if you do, as mentioned above, it'll usually be fine as you have fewer clients paying more. I also provide a marketing service and discount 15-20% for annual plans, I should consider a 6 month as my smallest is quarterly.
Interesting. Yes, I didn't want to go further than 6 mo as it was my first time offering multi-month.
 
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reedracer

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Good point. I'm honestly going for 100 retainer clients by the end of the year. The amount of them that end up not cancelling is another question. I'll likely increase to $1,500/mo which is still affordable.

An extra $500 isn't going to kill them (even the beginners who I was originally targeting).

I'll charge $1,500/mo and discount 5%-15% for the 3/6 mo packages.



Interesting. Yes, I didn't want to go further than 6 mo as it was my first time offering multi-month.
I always like the offer you can't pass up pricing. And I am a sucker for it, too.

1 Month $1500 1.2 k plus setup if you like
3 Months $4199 Waive the setup fee
12 months $12, 997 Waive the setup fee + almost 3 months free
Just my .02
 

Kid

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One more thing - don't increase the price for existing customers but increase it to new ones.
This way if new pricing won't be in clients brackets you don't risk your actual income.

If actual clients take all of your time then thats more complicated - maybe increase for small group of clients like 20% first and see if they stick with the service.

For the 1 month only - Should I charge $1,500/mo OR $1,000/mo + $500 Set Up Fee?
I personally don't like setup fees but that's totally subjective on my part.
Maybe there are some case studies about difference but haven't stumbled upon any.
 
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tpf

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Instead of discounting is there any extra value you could offer the people on multi month contracts?
 

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