SAAS product. What type of billing is good. Monthly or yearly?
Need suggestions for billing of my new product. Should I be doing a monthly billing or yearly billing model for customers.
Need suggestions for billing of my new product. Should I be doing a monthly billing or yearly billing model for customers.
Both.
Both,with discount on yearly billing amount. Makes your users feel fortunate when they get a month off on a year basis.
And you get more income upfront to invest over the year.
Thanks.
Income upfront is a critical thing for product startups. According to you, what would be the $ range a mid sized business would be ready to give out as a yearly payout?
🤔 I couldn't possibly give an answer to you that would matter to you or your product (unless it is equal to services that I know/have been working on).
All I can say is that tools/utilities (stuff that is used infrequent but on in a foreseeable interval) often go for a pricing somewhere from $5 p/month to $25 p/month and that more complete services - that perform important business process tasks can go up to 2x or 3x that.
But tbh: it all depends on:
I'm starting to disagree more and more about this strategy. I can understand a 20% off on a yearly basis for all the plans, but the implementations are getting completely ridiculous:
Some services shows you a plan at 9$ yearly, and when you switch to monthly, it become 15$, even 22$.
This. Just. Piss. Me. Off.
And as a seller, that's the last thing you want to do.
So, offerring discounts on your yearly plans: yes! But be transparent and consistent about it. Show a "20% discount on all our plans for yearly" something.
(sorry about the rant, it was not addressed toward you specifically ;) )
😎 not taking this personally.
I recognize what you're saying as in: I sometimes feel "forced" into the yearly plan OR not do it at all situation because of those extreme differences, too.
I think there is a delicate balance that needs to be carefully selected, depending on how often people will use your product versus monthly vs yearly payment plans.
Somehow, giving a few dollars off from the monthly price feels fairer than creating a big gap.
From a business perspective, I think those companies that create big gaps use this explicitly to create a wedge (especially when focussing their product as B2B).
So I agree, it's not just a roll-the-dice-and-put-it-out-there situation. This needs validating (talking to prospects and customers) and good strategy.
Agree with needing both but be careful with automatic discounts on your pricing, experiment.
B2C discount will probably most definitely be positive, for B2B annual billing, in my experience, is often better for the buyer as well as it is less hassle for the other side and they care less about the savings.
Also giving an X% discount on the annual plan for free reduces the room for additional discounts and negotiations.
Thanks @Reinder
Totally agree. I was having B2C in mind. I'm glad you pointed that out 🙌🏻
Consider your transaction costs as well. If your payment processor is taking e.g. a $0.30 fixed cost from every transaction, you're going to get more money in your pocket asking for $30 in one go compared to twelve payments of $3.
Yearly billing is clearly better from a financial/risk standpoint for your startup. However, most customers prefer monthly, assuming that you’re not in enterprise sales.
@oak Hey Stephen, Yes your assumption is right. This isn't enterprise sales. This is SME, to start with.
When it comes to what type, as in monthly or yearly, it's a good idea to have both, especially when dealing with a product that is focused on businesses vs. consumers. In my experience consumers tend to choose monthly more than businesses do, but your mileage may vary.
I've seen a lot of companies with monthly/yearly offerings, and usually with discounts on the yearly. For example $99/$999 or $10/100. That's visually appealing, and a decent discount for yearly, but I don't have any numbers to back up precisely how it affects anywhere I've seen it. You'll have to experiment with pricing to see what works best for you and your target market.
"Experimentation", is a valid point to be made. But @halfbrown, thats what I'm trying to figure out. How do I experiment on different price models if I have existing customers to whom I sold at a fixed price and they become aware of my product price flexibility. For e.g.: I have sold the product for 200$ per year for a customer, I try reevaluating the pricing to 170$ per year. What will the existing $200 customer think about this?
We did that with VoilaNorbert back in time. Simply multiply it by 10, not 12. It's really more nice on the eyes :)
hmm..interesting @cnicodeme
How's VoilaNorbert doing?
I don't know ;)
We sold it a year ago. Apparently it's all good, but I can't say more (and I don't know more ;) )
Well, that sounds great @cnicodeme. All the best for your current endeavours. :) Cheers
Thanks ! :)
Beginner Plans with $5/ month is good for yearly basis.
Pro or Expensive Plan like $100/month etc.. for yearly basis
What is your pricing model? Try out https://servicebot.io
You can use it for billing and managing SaaS
Thanks, much appreciated
And they have an open source version here https://github.com/service-bot/servicebot
Thanks @johnxie
As many others here have said you should do both.Usually the yearly plans are incetivized by giving a discount on the yearly plan.
But why give a discount on yearly plans?
Why is a yearly plan purchase better than a monthly that gives a higher monthly rate?
It's the simple fact that locking in some money today is better than gambling on getting many smaller payments.
Imagine that you've discovered that most customers leave after 8 months. If the yearly plan gives the customer two months free you've cashed in 10 months, even if the customer stops using the product after 8 months.
Also, money today is more worth than money tomorrow.
Money you have today can be used today, and that's why it's worth getting as much as possible upfront.
But, you might miss out on some customers who wouldn't buy unless there's a lower commitment, monthly plan. With both options you optimize for both types of customers.
Then again... maybe you only want the more committed customers in the first place? :)
Thanks @marcusstenbeck. Those were spot on.
it's for precisely this reason that revenue booked from annual plans is discounted in the sale price of a SaaS business. Because it's essentially used to mask churn.
Yep it is
Both!
But be very careful with expiration reminders con yearly plana.
Why? Chances are users are not payers, so send them service exporation notice with more time than monthly plan users.
Also there is a 25% chance the credit card you hace on file is expired. Take a look at this ;-)
Why not both?! Give more options to the costumers, let them pick the best for them...
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