Subscription Fatigue: How to Evolve Pricing from Product Transactions to Relationships
Lately, I’ve noticed something interesting during my client engagements: people are getting tired of subscription models. If you’re in the SaaS or media entertainment sector, you might be feeling it too—this growing “subscription fatigue” that’s making customers second-guess that monthly charge.
According to woop, approximately 39% of global subscribers plan to cancel at least one subscription within the next year, citing content issues (54%) and high costs (43%) as primary reasons
As a fractional CMO and CRO, I help organizations rethink their pricing models to address this very issue. The goal? Combat fatigue and rebuild trust with our customers. I’m seeing an exciting new era in pricing, one that’s all about relationships rather than just transactions. Digital transformation and changing customer expectations are pushing us to rethink the old ways.
The Evolution of Pricing Models
Historically, pricing was simple: supply, demand, a little markup, and done. But that world has changed. Today’s market is abundant and open, with digital access and global connectivity totally reshaping how we perceive value.
What was once a simple “cost-plus” transaction has grown into a variety of sophisticated models that respond to different needs, behaviors, and expectations.
For those of you in the C-suite—whether you’re a CEO, CMO, CRO, or VP of Marketing—understanding these shifts is critical for navigating your business through today’s complex market.
In this post, I’ll walk you through some of these modern pricing strategies, share real-world examples, and introduce some unconventional ideas that might just challenge how you think about pricing.
From Cost-Plus to Dynamic Relationships
Traditionally, pricing was straightforward: take the cost of producing a product, add a markup, and sell it. This “cost-plus” approach was reliable for physical products but often missed out on the customer connection—it was purely transactional.
However, as the competitive landscape evolved, more dynamic models started taking over. Think of it like a shift from a simple product purchase (like a limited-time clothing sale) to a relationship-based transaction, where the price can adapt to the customer’s needs, actions, or loyalty.
Two newer approaches embody this evolution:
- Dynamic and Action-Based Pricing: Leveraging data, companies like Uber and Amazon dynamically adjust their prices based on real-time factors—such as demand surges or inventory levels—to optimize profits and align with customer behavior.
- Licensing and Royalty Models: Content creators and technology firms, like software providers and entertainment companies, are moving towards royalty-based pricing. Used by companies like Substack, YouTube, Patreon and Apple Music, this model rewards stakeholders continuously, whether it’s for every stream of a song or per use of licensed software.
Tried & True Models Still in Play
Before jumping into the really out-there ideas, let’s review some existing pricing models that have worked well over the past decade.
1. Customer Usage and Value-Oriented Pricing Models
We find these pricing models align cost to answer perceived value, offering flexibility, reducing waste, and tailoring pricing to customer behavior, which fosters stronger relationships.
- Usage-Based (Pay-As-You-Go) Pricing: Often seen in cloud computing (e.g., Amazon Web Services) and telecommunications, this model ensures customers only pay for what they use, providing flexibility and minimizing waste.
- Freemium and Paywall Pricing: In the software and media industries, freemium models lure users in with basic free services (e.g., Spotify) while encouraging upgrades. Similarly, paywalls on news sites like The New York Times provide a taste of the content before requiring commitment.
- Outcome-Based Pricing: Industries like legal services and advertising sometimes base fees on performance or specific outcomes. This results-oriented model aligns incentives for both the client and provider, creating a win-win situation when objectives are met.
2. Segmentation and Differentiation Pricing Models
Not all customers are the same, so why should pricing be? Segmentation pricing helps growing businesses understand customer needs and tailor pricing to capture more market segments and drive growth.
- Tiered Pricing: SaaS companies, such as Slack or Salesforce, effectively use tiered pricing to cater to different customer segments, ranging from startups to large enterprises, each receiving features tailored to their specific needs.
- Geographic and Regional Pricing: Netflix adjusts subscription fees across various countries to reflect purchasing power, cost structures, and local competition.
- Loyalty Pricing: Airlines have mastered loyalty pricing, creating recurring customer engagement through miles programs that encourage repeat bookings and higher lifetime customer value.
3. Product and Service Bundling Models
Bundling can also help companies upsell by encouraging customers to opt for higher-value packages that include additional services or features.
- Subscription-Based Pricing: Industries like streaming (Netflix) and software (Microsoft Office 365) use subscriptions to ensure predictable revenue while offering ongoing value to consumers. Microsoft relies on licensing agreements for its software offerings, such as Microsoft 365, enabling steady, predictable revenue through a subscription-based approach.
- Bundling and Unbundling: Telecom companies often bundle internet, TV, and phone services to increase perceived value, while SaaS products might unbundle services to attract new users at a lower entry point.
4. Market Entry and Promotional Pricing
These pricing models can help companies quickly gain market share by offering competitive rates and incentives that attract a large number of customers in a short time.
- Penetration Pricing: Spotify used low-cost introductory offers to quickly capture a large user base, relying on customers’ later transition to higher-paying plans for revenue growth.
- Seasonal Pricing: Hotels and airlines use seasonal pricing strategies to adjust rates during holidays or peak travel seasons, optimizing both occupancy and profit margins. Uber employs action-based dynamic pricing to adjust ride costs during peak hours or bad weather, optimizing driver supply and passenger demand.
5. Psychological and Perception-Based Pricing
- Psychological Pricing: The classic $9.99 vs. $10 psychological trick is alive and well across retail—a small adjustment in price often leads to outsized changes in consumer perception.
Finding New Pricing Ideas
Innovation in pricing is about more than optimizing what’s already there; it’s about creating new connections between cost, value, and trust.
I recently worked with a client in the energy sector, and we considered shifting from a pay-per-use model to a membership-based one, adding extra services to boost customer loyalty.
Let’s look at some bold new ideas for pricing—some are a bit unconventional, but innovation often starts with thinking outside the box.
1. Hybrid Pricing Models
- Reverse Auctions for Services: Consulting firms could adopt reverse auctions, where service providers bid downwards to win projects, combining competitive pricing with quality assurance.
- Community Investment Pricing: A model where part of the customer payment goes into a community fund, creating value beyond the product itself.
2. Dynamic Charity Contributions
- Dynamic Charity Contributions: Fitness equipment companies could allow customers to choose part of their payment for charity, providing a deeper emotional connection.
- Ad-Based Subsidized Pricing: Clothing retailers could offer discounts for customers who watch ads or share promotions on social media.
3. Behavior-Driven Pricing
- Health-Driven Dynamic Pricing: Fitness centers could use wearable data to offer discounts for customers achieving health milestones, promoting healthier habits.
- Behavior-Driven Discounts: Tech companies could reward customers with discounts for helping in product development or sharing feedback.
4. Social and Group Dynamics
- Group Solidarity Pricing: A digital product where prices decrease as more people purchase, encouraging group buying and social sharing.
- Time-Based Devaluation Pricing: A model where service prices decrease over time, rewarding those who are willing to wait while incentivizing early adoption.
5. Experience-Based Models
- Emotional Pay-As-You-Feel: Entertainment venues could allow customers to set their price after the experience, aligning value with personal satisfaction.
- Pay-Per-Mood Pricing: Aligns pricing with how much perceived value or comfort customers expect at different emotional states. A spa could base its pricing on customer mood—offering discounts to stressed customers while charging premiums to those already relaxed.
- Karma-Based Pricing: Restaurants or cafes could implement pay-what-you-feel pricing, creating an emotional connection and community-driven value through customer fairness.
Steps to Reevaluate Your Pricing Strategy
If you’re considering shaking things up, here are a few practical steps:
- Understand Customer Behavior: Use analytics to figure out when and why customers buy. This might lead to dynamic pricing that fits fluctuating demand.
- Segment Your Market: Identify distinct groups and create tiered offerings that cater to different needs—perfect for SaaS and services.
- Focus on Relationships, Not Transactions: Moving away from one-off sales to something deeper. Subscriptions, royalties, and loyalty pricing can turn customers into long-term partners.
Final Thoughts
Ultimately, pricing is about trust, loyalty, and creating value—growth follows naturally.
Customers today have endless choices and are driving how they perceive value, making adaptability key. Remember, a brand is all about the experience it offers in the mind of the customer, and pricing should align with their beliefs and desires.
Using tools like AI and analytics, we can offer dynamic subscription pricing based on needs, seasons, or lifestyles. Whether you want to grow your market, sustain growth, or optimize profit, a fresh look at your pricing model might be the answer.
Start by experimenting—look at what’s working in other industries and focus on building relationships, not just transactions. And if you want to dive deeper into innovative pricing models, here are some excellent reads:
