Monthly or Annual Subscriptions Plans
A lot of the SaaS products I've seen and used offer monthly and annual plans but if I was considering subscriptions from an MVP point-of-view I would recommend monthly only (or at least to pick one). My main rationale is this is relatively easy to deliver compared to having both and then dealing with the switch from monthly to annual, refunds for 9 months of unused plan etc.
That's completely ignoring the business point-of-view and annual might have more significance than I'm aware of and justify that time being spent, so, I was wondering if anyone has any insights on
- how important is it to allow annual plans?
- what motivates a customer to purchase annual over monthly?
- how their monthly/annual plans compare to each other (i.e. the number of subscriptions of each, the overall percentage of revenue from each, does the 20% of annual sales account for 80% revenue)?
As a user, annual is a saving on something you are committed to using for years. Yearly cash saving beating cashflow.
As a SaaS company, annual is instant cash over regular cashflow. Cash upfront can often prove valuable in those early stages, boosting growth if spent wisely. BUT regular monthly cashflow has its benefits for sustainability too.
You mentioned refunds of unused plans, never heard much of that. You gain a discount paying year in advance but the right to a discount if you change your mind just doesn't fit that model or typical expectations.... The commitment is your gamble with the discount as your potential reward.
My SaaS is probably 80% monthly, 15% yearly and 5% lifetime payments at a guestimate without the exact figures to hand. Highest churn comes from monthly though.
Thanks, that's given me a good bit to think about.
I thought monthly would always be better for bootstrapping a startup for gradual and sustained growth but my point-of-view will be skewed to that of bootstrapping a side project. I can see the appeal of annual subscriptions for those who are bootstrapping their startup and have left a day job to do it.
"You mentioned refunds of unused plans, never heard much of that." - This is very interesting. Most of the conversations I've had on this has been based on the theoretical rather than hard data about purchasing habits which have probably lead to things being more complicated then they need to be.
Would you apply a "no refund" policy to both monthly and annual subscriptions then? Is there many transitions from monthly to annual plans or do you find most subscribers just stick to whatever they signed up with initially?
Monthly is best for predictability.
All yearly would be dangerous, need careful calculations and predictions.
But the odd yearly is a nice cashflow boost... if your CAC<LTV then speeds growth if reinvested.
No refund policy is quite normal on SaaS, with a little common sense discretion.
Only refunds we gave in last 5 years were where a cancellation request came in but hadn't been actioned before the rebilling (that feature is in my automate when needed list).
Few monthly have moved annual, none the other way that I recall.
Thanks! That helps with a few misconceptions I had and simplifies things massively in my head 🙂
I'm motivated to purchase annually if it saves me money vs monthly. However, I also need to be sure I'm gonna use the product enough. For instance, I will typically pay annually for skills training, but only if I believe they have enough courses. And only if I need ongoing training.
If paying annually wasn't an option, would having to pay monthly be a big enough issue for you to look at alternatives?
I'd be fine with monthly. But if I found an alternative that offered roughly the same value, and I could save money be going annual, I'd have to consider the alternative.
There are so many variables, that it's tough to account for all of them as a saas provider. For instance, I'm evaluating a notification service for my non-indie-hacker day job. The biggest reason I am leaning towards them is that they have a facebook integration, and the other offering doesn't.
Makes sense. The annual thing has always been more of an upsell for me, there are very few products I would subscribe to annually outright and often the evaluation periods have expired before I actually get to evaluating anything properly.
This tends to result in me paying monthly initially to do a proper evaluation of the product over a few months with no commitments, and if I'm really making use of the product then I would consider switching to an annual plan, although usually by this point I've forgotten annual is an option and just continue to pay monthly.