Recently Postmates came out with their Plus Unlimited Subscription model for consumers where they are providing free deliveries for all orders > $30 from Plus merchants for a monthly fee of $10. In addition, for subscribers Postmates will not have any delivery surcharge or charge the standard 9% service fee which they generally tack on all orders.

It seems a pretty smart play. On demand deliveries is a very competitive space with a large number of well funded startups trying to vie for businesses’ and consumers’ attention. My sense is that there is a segment of the market who utilize these on demand delivery services on a regular basis — which is what Postmates may be trying to target with this subscription offering. Through this offering, Postmates is trying to lure these high value regular users (since order size has to be >$30) by giving them unlimited free deliveries and, since they’ve already paid the subscription fee, essentially nudging these users to look for a merchant on Postmates first before trying another on demand delivery service. Also, the subscription fee is not very high and, from my experience, is almost equal to the delivery charge of 2 meals. So, if someone is placing an order of >$30 more than twice in a month (which is the definition of a high value regular user), this subscription plan is something worth considering.

To build a pricing plan like this, Postmates analysts must have gone through a number of different scenarios and modeled them. In this post, I wanted to explain how these could have looked like.