Latest / Pricing Power Podcast with Fexingo: How Businesses Set Prices, Raise Margins, and Win Customers / How Subscription Fatigue Is Reshaping Pricing Models
Transcript
- Lucas: The era of the endless subscription bundle is cracking. Look at Adobe. For years, they sold Creative Cloud on a flat monthly fee that felt like a no-brainer. But recently, they’ve started rolling out more granular, usage-sensitive options alongside those legacy plans. Why? Because consumers are exhausted. They’re looking at their bank statements in September twenty twenty-six and realizing they pay for tools they barely touch. Luna: Exactly. And it’s not just creative pros. It’s everyone. I was looking at my own dashboard last week and realized I’m paying for three different project management tools I haven’t opened in months. The guilt is real. Lucas: That guilt is what companies call 'churn risk.' If you keep raising prices on a static model, customers leave. But if you tie price to usage, you keep the ones who get value and you lower the barrier for the casual users. It’s a subtle shift from selling access to selling outcomes. Salesforce has been doing this in enterprise for a while, but now it’s bleeding into consumer tech. Luna: So the value proposition changes from 'here is the box' to 'here is what you actually did with the box.' Does that make accounting harder for these firms? Lucas: Significantly harder. Recognizing revenue becomes a nightmare when every user’s bill looks different. But the trade-off is loyalty. When a customer feels like they’re paying only for what they use, they don’t feel ripped off during slow months. They stay subscribed because the pain point of cancellation feels less severe. Luna: But doesn't that expose them to volatility? If usage drops, revenue drops instantly. Lucas: It does. That’s why most hybrids exist. You have a base platform fee, which covers fixed costs, and then variable add-ons for heavy users. It’s the difference between a buffet and an a la carte menu. In a tight economy, people prefer a la carte. They want control. Luna: Right. Control is the new currency. If I can cut my spend by switching to a pay as you go model, I will. No questions asked. Lucas: And that’s the trap for legacy SaaS companies. Their entire valuation model is built on predictable, recurring revenue. Usage-based models introduce noise. Investors hate noise. So you see massive internal tension between sales teams who want simple flat rates and product teams who know usage is where the margin lives. Luna: I bet the sales teams are fighting tooth and nail against this. Simple numbers close faster. Lucas: Absolutely. A salesperson can sell a five thousand dollar annual contract tomorrow. Selling a dynamic model requires trust and transparency that takes months to build. But here is the kicker: the dynamic model often yields higher lifetime value because it scales with the customer’s success. Luna: If the customer grows, the vendor grows. That sounds sustainable, but only if the customer actually grows. Lucas: Which brings us to the other side of the coin. Not every company wants to share upside. Some still cling to the premium subscription model, raising prices annually regardless of usage. Microsoft Office is a prime example. They raise the price, you grumble, you pay. Why? Because switching costs are too high. Luna: Because nobody wants to reformat all their documents or learn a new interface. Lock-in is powerful. Lucas: Lock-in is powerful, but it has a ceiling. Once you hit the maximum price sensitivity threshold, even lock-in breaks. And right now, in late twenty twenty six, we are seeing that threshold drop across almost every category. From gym memberships to streaming services, the tolerance for passive spending is evaporating. Luna: Streaming services are the perfect example. Everyone canceled at least one. They didn't cancel because they stopped watching; they canceled because they couldn't justify four separate bills. Lucas: So what happens next? We see bundling return, but smarter bundling. Not just throwing ten channels together, but creating curated, vertical-specific bundles. Or we see a rise in ad-supported tiers that act as the entry point. It’s about meeting the customer where their budget anxiety is highest. Luna: Ad-supported tiers are tricky though. Do they really lower the barrier enough to offset the ad load? Lucas: They do, if the ads are non-intrusive. The data shows that a significant portion of users will tolerate mild interruption if it saves them fifteen dollars a month. It’s a psychological win. They feel smart for opting into the ad tier. It gives them agency. Luna: Agency matters. People hate feeling priced out, but they love feeling like they made a clever choice. Lucas: Precisely. So for business owners listening, the lesson is clear. Don't assume your customers will accept a blanket price hike. Offer flexibility. Let them choose their level of engagement. Even if it complicates your backend, it simplifies the sale. Luna: Complicating the backend to simplify the front end. That is a classic trade-off worth making. Lucas: It is. And it preserves the relationship. When you force a price increase, you create friction. When you offer a usage-based option, you create a partnership. You’re saying, 'we grow when you grow.' Luna: I like that framing. It shifts the narrative from extraction to alignment. Lucas: Alignment. Yes. And that’s going to be the defining theme of pricing strategy for the next few years. Companies that treat pricing as a static lever will lose market share to those who treat it as a dynamic conversation. Luna: So, if you’re running a business, stop thinking about your price list and start thinking about your value metrics. What actually drives the cost for your customer? Lucas: Spot on. Storage used? Active users? API calls? Find the metric that correlates with value and price against that. It’s fairer, and frankly, it’s more profitable in the long run. Luna: Fairness sells. Especially when wallets are tight. Lucas: Now, before we wrap up, I want to take a quick second to talk about how we keep this show running. If today was actually useful to you, the way these stay ad-free is listener support — buy me a coffee dot com slash fexingo. Luna: Yeah, it really helps. Knowing you’re there keeps us digging into the details so you can save time. Lucas: Thanks for keeping us going. Back to the topic. One final thought on this pricing shift. Are we going to see a backlash against usage-based models if the costs spiral out of control? Luna: Definitely. If a small usage spike doubles my bill, I’m leaving. Transparency has to be absolute. Lucas: Transparency is the key. No hidden overage fees. Clear dashboards. If companies can’t show you exactly what you’re paying for, they won’t earn your trust. And in this market, trust is the only moat left. Luna: So, the question isn't just how much to charge, but how clearly you can show the value behind that charge. Lucas: Exactly. Price is a number. Value is a story. Make sure your pricing model tells the right one.