A subscription billing plan could provide your business with a predictable stream of income. Customers who were satisfied with your company’s products or services could become repeat customers via a subscription service instead of having to make multiple individual purchases. That could help you easily cultivate a loyal customer base.
If you are thinking about setting up a subscription billing system, you will need to decide whether to charge customers on a yearly or monthly basis. Each model has pros and cons.
Yearly Billing Model
By charging an annual fee, you could keep customers for at least a year, which could help you build loyalty. You would be guaranteed a year’s worth of subscription fees for each customer who signed up for your service. Annual billing could also help keep your overhead down since you would not have to process monthly payments.
Charging an annual fee could lead to disputes if customers forgot about the subscription and didn’t recognize a new charge when a subscription automatically renewed. You might have to issue refunds to a large number of customers unless you sent reminders to inform them that their subscriptions were going to renew soon.
Customers who couldn’t afford to pay upfront might decide not to sign up at all if an annual subscription fee was the only payment option. People who were trying out your company’s products or services for the first time might also be reluctant to commit to an annual subscription.
Monthly Billing Plan
With a monthly subscription model, you would have money coming in on a regular basis. That consistency and predictability could make budgeting easier than it would be if you only got paid by each customer once a year.
With a monthly subscription billing plan, the cost would be spread out in even installments throughout the year. That means that the upfront cost for customers would be lower than it would be with an annual subscription.
Monthly billing might help you attract more customers than you could with an annual billing model. The downside is that customers might cancel their subscriptions after a month or two, which means it could be difficult to build customer loyalty.
What Should You Offer?
You could offer both annual and monthly billing options to your customers. For those who paid annually, you could charge an amount that was less than the sum of 12 monthly payments to encourage those who were able and willing to pay upfront to do so.
Subscription DNA can help your business process subscription memberships with annual or monthly payments. Our software can make it easy for you to manage your customers’ accounts, and our Secure Subscriber Portal can allow them to handle many issues themselves instead of calling customer service. Contact Subscription DNA to learn more about how we can help your business.