What Apple and Netflix Understand About Optimal Subscription Pricing

What to keep in mind before setting a price for a recurring revenue bundle

Photo: NurPhoto/Getty Images

Last week, Apple announced Apple One, a new subscription service that will bundle its various existing digital subscriptions in three price tiers ranging from $14.95 to $29.95 a month. Microsoft, meanwhile, rolled out a subscription offering for its new Xbox consoles, allowing gamers to pay a monthly fee of $24.99 or $34.99 for a console and access to its Ultimate Game Pass rather than pay the $299.99 or $499.99 to own the console outright.

Right now there’s an explosion of products pivoting to subscription services, but pricing them requires just as much art as science. Here are 10 things that smart companies know about pricing subscriptions.

1. Keep it simple. New billing platforms and digital tools have opened up a range of possibilities when it comes to pricing. You can create multiple pricing tiers or layer in micropayments, onboarding fees, usage charges, extra services, and one-off purchases, just to name a few. But in smart subscription pricing, restraint is key. If your pricing gets too complex, your customers are going to worry that they might not choose what’s best for them, and they’ll need to spend a lot of time and effort making the decision…