Ultimate Guide to Subscription Pricing for CPG Brands

Looking to create or improve your subscription pricing strategy for your Consumer Packaged Goods (CPG) brand? Here’s a quick breakdown of the essentials:

• Why Subscriptions Work: They provide consistent revenue, foster customer loyalty, and simplify inventory management.
• 3 Subscription Types:
  • Replenishment: Auto-delivery of essentials (e.g., coffee, pet food).
  • Curation: Personalized product selections (e.g., beauty boxes, meal kits).
  • Access: Special pricing and perks (e.g., VIP memberships).
• Pricing Factors to Consider:
  • Understand costs (COGS, shipping, fees).
  • Focus on Customer Lifetime Value (CLV).
  • Align pricing with your brand’s market position.
• Tiered Pricing:
  • Offer three tiers: Basic, Premium, and VIP.
  • Clearly differentiate value across tiers (e.g., free shipping, customization).
  • Adjust pricing based on added value per tier.
• Tools You’ll Need:
  • Subscription management tools with automated billing, customer portals, and inventory tracking.
  • Integrate with e-commerce, marketing, and payment systems.

Quick Tip: Use upselling, cross-selling, and bundling to increase revenue and keep customers engaged.

This guide will walk you through actionable steps to build a successful subscription model while keeping customers happy and your business profitable.

Creating Your Subscription Pricing Plan

Key Pricing Factors

Building a subscription pricing plan requires balancing profitability with customer satisfaction. Here are the main elements to consider:

• Cost Structure Analysis: Break down all expenses tied to your service. Think about product costs (COGS), packaging, shipping, customer support, platform fees, payment processing, and marketing efforts.
• Customer Lifetime Value (CLV): Price your subscription to account for the total value a customer brings over time. This helps ensure your pricing covers the costs of acquiring and retaining customers.
• Market Position: Match your pricing to your brand’s image and what your target audience expects. This helps reinforce your brand’s value in your customers’ eyes.

Setting Up Tiered Plans

Why Use Tiered Pricing

Tiered pricing helps highlight the value of your offerings and encourages customers to upgrade while remaining approachable for new users.

Here’s how multiple subscription tiers can benefit your business:

• Attract More Customers: Lower-priced entry tiers make it easier for new customers to try your products.
• Encourage Upgrades: Clear value differences between tiers make it appealing for customers to move to higher levels.
• Boost Retention: Offering the option to adjust tiers helps reduce cancellations when customers need to cut costs.
• Increase Revenue: Higher tiers with extra perks encourage loyal customers to spend more.

Now let’s look at how to create and define these tiers.

Building Price Tiers

To set up effective subscription tiers, focus on clear pricing and distinct value differences.

1. Start with Three Core Tiers

A three-tier system works well for most subscription models:

• Basic: Offers the essential product or service.
• Premium: Adds extra features or popular add-ons.
• VIP: Provides exclusive perks and maximum value.

2. Make Value Differences Clear

Each tier should offer benefits that justify the price difference. For example:

3. Price According to Value

Set prices to reflect the added value at each level:

• Basic: Keep the entry price competitive to attract customers.
• Premium: Price this tier 40-60% higher than Basic, offering 25-35% more value.
• VIP: Set this tier 80-100% higher than Basic, ensuring at least a 50% value increase.

4. Include Perks for Higher Tiers

Add extra benefits to make Premium and VIP tiers more appealing:

• Premium Tier Perks:
  • Free shipping on all orders
  • Quarterly bonus items
  • Early access to sales
• VIP Tier Perks:
  • Priority customer service
  • Custom product combinations
  • Double rewards points
  • Exclusive seasonal products

5. Test and Adjust

Track performance metrics for each tier, such as:

• How subscriptions are distributed across tiers
• Patterns in upgrades and downgrades
• Retention rates for each tier
• Revenue generated per subscriber

Use this data to fine-tune your tier benefits and pricing over time.

Ecom CPG Economics | From First Order to Subscription Mastery

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Subscription Management Tools

Once you’ve established your pricing structure and tiered plans, the next step is to simplify your operations. Subscription management tools can help you handle billing, customer relationships, and more – all while supporting your pricing strategy.

Key Features to Look For

Automated Billing Management

• Secure and flexible billing with options like automated retries, prorated adjustments, and support for multiple currencies.

Customer Portal Options

• Self-service capabilities for customers to switch plans, adjust schedules, update payment methods, and review order history.

Inventory and Order Management

• Real-time stock tracking, automated reorder notifications, and streamlined batch processing down to the SKU level.

System Integration Is Key

To get the most out of your subscription management platform, it should integrate smoothly with your existing systems. Here’s what to focus on:

E-commerce Integration

• Sync your product catalog, manage inventory, streamline order processing workflows, and transfer customer data effortlessly.

Marketing Tool Connections

• Link with email marketing platforms, customer data platforms (CDPs), analytics tools, and CRM systems for better campaign management.

Payment Processing

• Support multiple payment gateways, include fraud prevention tools, integrate tax calculations, and sync with accounting software.

Performance Essentials

For your subscription management system to run effectively, ensure it can handle these core tasks:

1. Real-Time Data Sync

• Keep order statuses and inventory updates live.
• Update customer profiles instantly.

2. Automated Workflows

• Automate tasks like order confirmations, shipping notifications, and renewal reminders.

3. Security Compliance

• Ensure compliance with PCI DSS standards.
• Use strong data encryption and secure storage to protect customer information.

Reducing Cancellations and Growing Customer Value

CPG brands can cut down on cancellations and increase customer lifetime value by focusing on upselling, cross-selling, and bundling. These approaches not only bring in more revenue but also keep customers engaged.

According to Poast Ecommerce, using targeted recommendations and offering bundled deals can increase the average order value by more than 20%.

Here are some effective strategies:

• Bundling: Combine complementary products into bundles to encourage customers to make additional purchases.
• Premium Add-ons: Provide exclusive, subscriber-only products or perks that enhance the overall subscription experience.
• Subscription Tier Upgrades: Highlight the benefits of higher-tier plans, such as better pricing per unit or added features, to encourage customers to upgrade.

Conclusion

By using pricing strategies, tiered plans, and integrated tools as outlined earlier, businesses can set themselves up for success. Let’s recap the main ideas and steps to get started.

Main Points

Subscription pricing requires careful planning to balance costs, technology, and customer retention. For Consumer Packaged Goods (CPG) brands, the goal is to deliver value to customers while staying competitive. Here’s how to approach it:

• Integrated Digital Tools: Strong tech and marketing systems are crucial for building a solid foundation.
• Subscriber Incentives: Offering rewards to loyal customers helps drive long-term growth.
• Revenue Strategies: Use techniques like upselling, cross-selling, and bundling to increase the average order value.

These approaches provide a clear path to actionable steps.

Getting Started

1. Assess Your Digital Setup: Review your Shopify store to enhance subscription features and align email marketing efforts.
2. Create a Value Plan: Develop strategies that focus on loyalty and bundling:
   • Launch a loyalty program to reward long-term subscribers.
   • Introduce product bundles to encourage higher spending.
3. Apply Growth Strategies: Focus on targeted email campaigns, fine-tuned paid ads, and collaborations with influencers to drive growth.

Related Blog Posts

• 7 Proven CPG Marketing Strategies for Shopify Success
• Premiumization vs. Commoditization in CPG
• 5 Best Shopify Plugins for CPG Subscriptions
• 3 Successful CPG Brands Winning on Shopify