To price a subscription, work out what customers are subscribing to, model the cost of your heaviest users, set a cost floor (cost to serve plus fees, divided by one minus your target margin), estimate the value ceiling from what customers pay today, then choose two or three tiers between the two. Add a usage cap, test with a small group, and review the price every year.
Key takeaways
- Model your price against your heaviest 10% of users, not the average. They join first.
- Your floor is cost to serve plus fees, divided by one minus your target margin. Add GST on top in Australia.
- Your ceiling is what the customer pays today for the same result. Price between the two.
- A clear cap ('a coffee a day', 'two visits a month') makes the maths safe without killing the appeal.
- Launch to a small group first, and set the date of your first price review before you go live.
Pret A Manger had a problem. Its best customers.
Club Pret in the UK gave members up to five barista drinks a day, plus 20% off food, for £30 a month. For a daily regular, that was a brilliant deal. For Pret, the people who loved it most were the ones who cost the most to serve.
In July 2024, Pret said it was "time to rethink." The UK club changed from free drinks to a £10-a-month subscription for half-price drinks. The heavy users were furious. The Guardian reported customers "left fuming."
Here's the lesson I want you to take before we touch a single number: the first people to join your subscription are your heaviest users. If your price only works for the average customer, it doesn't work.
This guide walks you through seven steps to price a subscription properly. I'll use one worked example all the way through, a neighborhood cafe launching a coffee club, so you can see every calculation.
Step 1: Decide What People Are Actually Subscribing To
Before you think about price, decide which kind of subscription you're selling.
In The Subscription Playbook I describe eight models, from member benefits and consumables to bundled services and the insurance model. You'll find them all on the 8 subscription business models. The model matters because it tells you what drives your costs.
A coffee club could be built two ways:
- Unlimited content style. "Your daily coffee, included." Pret's original model.
- Member benefits style. "Pay a small fee, get every coffee at half price." Pret's new UK model.
The first sells habit and convenience. The second protects margin on every cup. Neither is wrong. They just suit different customers.
Ask yourself: does my cost go up every time a member uses the service? If yes, you need a cap or a member-price model. If no (a course library, a software tool with little running cost), unlimited is safe.
Step 2: Model Your Heaviest Users, Not the Average
This is the step most people skip.
List your customers by how much they use you. Then look hard at the top 10%. They're the ones who'll sign up first, because the subscription is the best deal for them.
For our cafe, the owner looks at loyalty-card data (the numbers here are illustrative):
| Customer group | Coffees a month | Share of regulars |
|---|---|---|
| Light | 6 | 50% |
| Regular | 16 | 40% |
| Heavy | 26 | 10% |
If the plan is "unlimited," a heavy user might drink 40 a month. That's why Panera dropped the word "unlimited" from its Sip Club in August 2026 and capped it at 30 drinks a month. A cap like "a coffee a day" keeps almost all of the appeal and removes the risk.
Step 3: Calculate Your Cost Floor
Your floor is the lowest price at which a subscriber still makes you money.
Floor price (ex GST) = (Cost to serve per month + Payment fees) ÷ (1 − Target gross margin)
In Australia, add 10% GST on top for consumer prices. GST is one-eleventh of the GST-inclusive price (ATO).
The cafe's floor (illustrative, A$)
Variable cost per coffee (beans, milk, cup, a share of barista time): A$1.70.
Regular member, 16 coffees: 16 × A$1.70 = A$27.20 a month to serve.
Target gross margin: 55%. Payment fees: about 2%.
Floor (ex GST) ≈ A$27.20 ÷ 0.45 = A$60.44, plus fees ≈ A$61.70.
Add GST: A$61.70 × 1.1 ≈ A$67.90 inclusive. Round to A$69 a month.
Now check the heavy user. At 26 coffees, the cost to serve is A$44.20. After GST and fees, A$69 leaves about A$61.35, so the cafe still makes A$17.15 a month from its heaviest members. Not a lot, but positive.
And the cap? The cafe only loses money on a member who drinks more than 36 coffees a month (A$61.35 ÷ A$1.70). A 30-coffee cap makes that impossible.
That's the job of a cap. It makes the maths safe.
The Subscription Price CalculatorWork out a profitable monthly price after costs, GST and fees.Open the free tool → does all of this for you, including GST and card fees.
Step 4: Find the Value Ceiling
The floor tells you what you must charge. The ceiling tells you what you could charge.
Start with what customers pay today for the same result. A regular buying 16 coffees at A$5.50 spends A$88 a month. A heavy user spends A$143. That's the reference point in their head.
So for the regular, A$69 saves A$19 a month. For the heavy user, it saves A$74. Both will feel it.
If you don't have a clear reference point, ask. Four simple questions, the Van Westendorp price sensitivity questions, tell you where a price feels too cheap, a bargain, getting expensive and too expensive. You can run them with 30 to 50 customers and paste the answers into the Van Westendorp CalculatorPaste survey answers, get your acceptable price range.Open the free tool →. I explain how to read the results on the Van Westendorp guide, and how to dig deeper on willingness to pay.
For bigger-ticket subscriptions, especially B2B, go further and work out the value you create: hours saved, revenue gained, risk avoided. That's value-based pricing.
Work out your minimum price in two minutes
The free Subscription Price Calculator turns your costs, GST and card fees into a profitable monthly price.
Step 5: Choose Your Value Metric and Tiers
Now decide what the price grows with, and how many options to offer.
Your value metric is the unit you charge for. For the cafe, it's coffees. For a software tool it might be users, locations or projects. For a cleaning business, rooms or visits. Pick the unit that tracks the value the customer gets. I cover this properly in value metrics: how to choose yours.
Then build your tiers. Most small businesses need two or three. Here's where the cafe lands:
| Plan | Price (inc GST) | What's included | Who it's for |
|---|---|---|---|
| Member Price | A$12 a month | Every coffee half price | Light regulars, 4 to 10 coffees a month |
| Coffee a Day | A$69 a month | Up to 30 coffees a month, 10% off food | Daily regulars |
| Coffee a Day, annual | A$690 a year | Same as above, two months free | Committed regulars |
Look at what the two-plan design does. The light customer who would never pay A$69 now has a reason to join. Ten coffees on Member Price cost them A$12 + (10 × A$2.75) = A$39.50 instead of A$55. And the cafe still earns a margin on every cup.
The 10% off food matters too. Panera's whole case for its drink subscription was that a member who comes in daily often buys a bagel or lunch as well.
If you want more structure, read good-better-best pricing.
Step 6: Set Your Billing Terms
Three choices here.
Monthly or annual? Offer monthly by default. About 70% of subscription services bill monthly, because a smaller number is easier to say yes to. Then add an annual option. Panera charges $14.99 a month or $119.99 a year for Sip Club, which makes the annual plan the obvious choice for regulars and brings the cash forward.
How big should the annual discount be? Big enough to be attractive, small enough that it beats what you'd lose to monthly churn. The annual discount calculator in our tools section runs the numbers, and annual vs monthly plans explains the trade-offs.
Free trial? A coffee club doesn't need one. The first coffee is the trial. Software usually does. If you offer a trial in Australia, note that the new subscription-trap rules start on 1 July 2027 and are expected to require a reminder before a free trial rolls into a paid plan. The timing will be set by regulations, which hadn't been made as at October 2026.
Minimum term? Keep it month to month for consumers. Lock-ins create resentment, and from 2027 cancellation will need to be easy. A minimum commitment makes more sense in B2B, where it's paired with a lower rate.
Step 7: Test, Launch and Set Your Review Date
Don't launch to everyone on day one.
Offer the club to your 50 best regulars first. Watch three things for a month:
- Who joins. Are they mostly heavy users? If so, your cap matters more than you thought.
- How much they use it. Compare actual coffees per member with your model.
- What else they buy. Food spend per member versus before.
Then adjust, and launch properly.
Before you go live, put a date in your calendar 12 months away to review the price. Planet Fitness held its $10 price for 26 years before testing a rise in several markets and moving new members to $15. You don't need to wait that long. You need a plan.
When a Subscription Is the Wrong Answer
I'm a big believer in subscriptions. But I'll be honest with you.
A subscription doesn't work if customers can't see the benefit of paying every month. In the book I told the story of an emergency app that couldn't get people to pay $2.99 a month for something they thought was free. If your customers buy from you once a year, or at random, a subscription can feel like a tax.
Ask: does the customer need this regularly, and do they already pay for it regularly? If the answer is no to both, a subscription may not be your best first move. A prepaid pack (ten coffees for the price of nine) or a loyalty program might be a better bridge.
The Australian Angle
A few things change the maths for Australian businesses. This is general information as at October 2026.
- Price from ex-GST up. Every A$69 consumer price is A$62.73 of revenue to you.
- Card fees on every payment. On a A$12 subscription, fixed per-transaction fees eat a bigger share than on A$69. Check your provider's rates.
- Subscription-trap rules from 1 July 2027. Clear pre-contract disclosure and easy cancellation are required, and reminders are expected once the regulations setting their timing are made. See Australia's subscription trap laws.
If you're wondering what a subscription would do to your cash flow and profit after all of that, it's worth a proper look with your accountant.
Free Subscription Profit Review
Australian business owners can book a free 30-minute review with a BPAG Accountants adviser. An honest conversation about:
- whether a subscription model could work for your business
- how recurring revenue could cover your fixed costs each month
- how it could lift what your business is worth
No cost, no obligation. General information only until we understand your situation.
What to Do Next
Here's your action list for this week.
- Pull your usage data. Loyalty cards, booking history, invoices. Find your top 10%.
- Calculate your floor with the subscription price calculator.
- Write down the reference price your customers pay today for the same result.
- Draft two or three tiers between the floor and the ceiling, with a clear cap.
- Test with 20 to 50 customers before launching to everyone.
Pret's story doesn't mean coffee clubs fail. Pret still sells an all-you-can-drink style club in the US at $40 a month. It means the price has to be built for the people who'll actually join. Start there, and the rest gets much easier.
For the bigger picture, including AI-era pricing, head back to the subscription pricing strategy hub. If you run a cafe, the cafe subscription guide has more industry-specific examples.
Frequently asked questions
Should a subscription be cheaper than buying the same things one at a time?
Usually a little, yes, because customers need a reason to commit. But it doesn't have to be a big discount. Lavelle Hairdressers in the book saved members $108 a year on services they'd buy anyway, at $64 a month. Convenience, priority access and predictability are worth something too. Aim for a saving the customer notices, not one that guts your margin.
What gross margin should a subscription have?
It depends on the business. Traditional software has run at about 75% to 80% gross margin, while 2026 research puts AI-native products at roughly 25% to 60% because every use costs money. Service businesses vary widely. Rather than chase a benchmark, set a margin that covers your overheads and growth, and check that your heaviest users still leave you a profit.
How do I price a subscription if nobody else offers one?
Look at what customers spend today to get the same result, even if it's a one-off purchase or a different kind of provider. That is your reference point. Then ask a small group of customers the Van Westendorp questions (too cheap, a bargain, getting expensive, too expensive) to find an acceptable range. Being first gives you room to price on value.
Can I change my subscription price after launch?
Yes, and you should plan to. The safest way is to raise prices for new customers first and protect existing ones for a period, as Planet Fitness did when it moved from $10 to $15. Give clear notice, explain what's improved, and in Australia make sure your terms allow the change fairly. Check the rules before you change prices on existing contracts.
Should I charge monthly or annually?
Offer monthly by default, because a smaller number is easier to say yes to. Then add an annual option with a discount, which brings cash forward and locks in 12 months. Panera prices its monthly Sip Club at $14.99 against $119.99 a year, nudging regulars toward the annual plan. Set the discount with your churn rate in mind, not by habit.
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Robert Coorey, MBA
Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.
Sources
- The Guardian: Pret a Manger customers left fuming over end of 'free drinks' (18 Jul 2024)
- Restaurant Dive: Panera adds limits to Sip Club beverage subscription (14 Jul 2026)
- CBS News: Planet Fitness raises membership fee for first time since 1998
- ATO: How GST works
- SaaStr: Inference is the new sales and marketing spend (9 Feb 2026)
Facts and prices checked 27 October 2026. Spotted something out of date? Tell us.