VOIPoTim
VOIPo.com
Premium,VIP
join:2006-06-06
Houston, TX
4 edits | reply to voip quest
Re: [VOIPo] Any plans to raise the price of VOIPo?
The current pricing is promotional and will be changing at some point.
Standard Pricing
$19.95 Monthly or $199 Annually
$29.95 Activation.
Promotion Pricing (First Year)
$15 Monthly or $99 Annually
No Activation Fee.
I haven't decided when, but ultimately as we increase our marketing spending, we'll be moving to standard pricing.
Right now the bulk of our sales come from our HostGator customer base (2 million+ sites and counting) , so there's not a lot of spending and we're able to pass the savings on. Growth has been going up pretty drastically. In June, we've had more signups almost every day than we did every week in May.
Since we're including free equipment and free shipping, we're not going to continue to offer this pricing if we're also spending $100+ in marketing for each customer. Again, almost all current growth is from HostGator though so it's essentially free for us and we're able to be more aggressive with pricing.
Here's a rough overview how it works out at the $99 pricepoint.
VOIPo - Free Marketing (via HostGator)
$99 Revenue
-$40 Equipment
- $6 Shipping
- $30 Average Wholesale Usage Cost
----
$23
Then you factor in overhead and support costs which vary.
VOIPo - Paid Marketing
$99 Revenue
-$40 Equipment
- $6 Shipping
- $30 Average Wholesale Usage Cost
-$100 Average Acquisition Cost (Marketing)
----
-$77
Then you factor in overhead and support costs which vary.
Competition's Free Year Pricing For Comparison
$199 Revenue
$29.95 Activation
$10.95 Shipping
-$40 Equipment
- $6 Shipping
- $60 Average Wholesale Usage Cost (2 Years)
-$100 Average Acquisition Cost (Marketing)
----
$33.89 (Two Years)
Then again you factor in overhead and support costs which vary.
The math on that would be $99 (Revenue) - $146 ($100 Average Marketing + $40 Equipment + $6 Shipping (Costs). That would net us -$47/Yr for a year of service before factoring in support, overhead, and the actual cost of providing the service. So ultimately we'd lose $47 per customer right off the bat even if they never used it.
When you take out the $100 marketing cost, we net $53 per customer for the first year to pay for the service itself. Our average customer uses around 400 minutes monthly (total incoming and outgoing) which costs around $0.005 per minute on average. So with this, we're looking at around $30 in terms of the wholesale cost to provide the usage. That leaves around $23 for support and overhead.
Based on that math, it's pretty easy to see why we can't continue to offer that promotion forever. We have a huge advantage with HostGator's customer base and this allows us to be aggressive, but we have to eventually expand our marketing.
Ultimately that's the reason most companies are not doing $99/Year promotions. They'd have a loss right off the bat. Some companies do do $199 with 2nd Year Free and charge for equipment in the form of an activation fee, but if you check that math, it's eliminating the issue since they get the full $199 cashflow upfront.
We chose to pass the savings onto customers since we don't need the cashflow and while we have the advantage of not having the typical marketing cost now.
On top of all this, we have to be profitable or it's just not worth it. Since we're not playing with outside funds, I'm not really interested in operating at a loss. There are much much easier ways to make large amounts of money passively (most of my personal income is passive from internet marketing/network marketing) so if the math for VOIPo didn't work, I wouldn't have spent 3 years and a trainload of money on VOIPo. Sure, you can always bank on renewals and "figuring it out in the future", but at the end of the day profitability matters...a lot. Otherwise you lose your passion pretty quick in the real world as you grow unless you've been using outside investments, etc. Nothing is sustainable forever without profit. If we continued this promotion forever AND added in increased marketing spending, the profit would go away. Right now the promotion only works since we have a huge customer base to tap for free.
The math works on this promotion for us right now and we're cash flow positive, but again once we start adding more paid marketing, it won't. Once we do that, we'll have to go to more traditional pricing such as that offered by the competition in order to make the math work.
We also have significant cashflow from other things like HostGator's bundling of our toll-free service with some of their hosting packages, etc. That cashflow covers our fixed costs such as office space, etc which aren't as relevant long-term since they don't increase with every customer and don't increase as much over time.
So bottom line is that this promotional pricing can't last forever and could be pulled at any time. |
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IanR
join:2001-03-22
Madison, NJ | Thank you for your openess and detailed info. I respect that.
The only plan option you do not currently offer is some kind of "world plan" option. Is such an offering in the works? |
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VOIPoTim
VOIPo.com
Premium,VIP
join:2006-06-06
Houston, TX
| said by IanR  :Thank you for your openess and detailed info. I respect that. The only plan option you do not currently offer is some kind of "world plan" option. Is such an offering in the works? Not at this point.
If our service was closer to a Vonage pricepoint, we could absolutely include some of the more mainstream international destinations. At the current pricepoint, it would be difficult to include international calling.
We could do it as a second plan choice with a higher price, but then I think people would pick an chose based on their calling patterns.
We know right now that the current monthly usage (inbound and outbound) is around 400 minutes per customer and price things accordingly. The target market a company focuses on and even where/how they advertise can significantly affect the averages and if we're advertising an international plan, it'll attract user that indent to use it without people with lower usage being on it as well (they'd just opt to pay per international call with our standard plan) so it would be a lot harder to let the law of averages work in our favor on it.
So overall, it's something I don't see happening with our current pricing structure to be honest. |
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IanR
join:2001-03-22
Madison, NJ
| Hmmm and again thanks for that quick reply.
I am a longtime P8 user, very satisfied until they decided to raise prices 33-50% and my world plan was raised from $30-40pm.
I am really not that high a minute user either, but with family in the UK, Singapore etc it's so nice not to worry about pricing and have an all in plan. I probably pay more than if I broke out the minutes, but telling the wife not to count minutes is so nice. |
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Fisamo
Premium
join:2004-02-20
Apex, NC
 ·VOIPo
·AT&T CallVantage
| You could always tell your wife not to count the minutes until the bill comes in that exceeds the $40...   Seriously, that would mean almost $30 in int'l calls. I don't know how often you call or the per-minute cost to those destinations, but (with the exception of calling a satellite phone) it should take a few hours of talk time to run up a bill that size. |
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IanR
join:2001-03-22
Madison, NJ | I would just like VOIPo to make a nice profit from me then everyone is happy;) |
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