Why do all SaaS have monthly and annual plans? Why not 6 months or 3 months?
I am working on the pricing page for my saas and was wondering if I should test other pricing than yearly since it can be high why not have 3 months or 6 months option which might be more affordable for some?
thoughts?
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For the most part, because enterprise customers want to pay Annually and everyone else is risk averse and wants to be able to dump your product on a month to month basis.
After (probably too much) research and planning I decided to go with only quarterly and annual options for Be Inclusive. To make it as clear as possible I have the toggle at top mention "Quarterly" and "Annually", and I display pricing per month (more prominently) in addition to the quarterly or annual pricing they'd pay when subscribing below.
A couple points to consider when you're deciding on which way to go and how to display it on your pricing page:
I think part of the reason why most offer only monthly and annual pricing is because ...everyone else mostly offers monthly and annual pricing, too. Customers expect to see one of those two if not both, but if no-one is clamoring for a different pricing period, it doesn't necessarily make sense to put it on a roadmap.
Your post got me thinking though that it would be really cool to see someone offer a "commitment-based" pricing where customers can commit to whatever length of subscription they want, with the price linearly decreasing to some fixed floor based on the length of commitment. That way you can support whatever billing period works best for each individual customer!
Offering both monthly and annual plans is a common practice among SaaS companies because it gives customers the flexibility to choose the option that best fits their needs and budget.
Offering a 6-month or 3-month option could potentially be a good way to provide additional flexibility for customers, but it is important to carefully consider the potential impact on your revenue and profitability.
For example, a 6-month plan may not provide enough of a commitment from the customer to justify the discount, while a 3-month plan may not provide enough time for the customer to fully realize the value of the service.
Ultimately, the decision to offer different pricing options will depend on your specific business model and the needs of your target market.
In my opinion, It may be helpful to test different pricing options to see which ones are most effective in attracting and retaining customers.
There are products with 3 months and 6 months tiers, I have seen these especially with B2C focused (mobile) apps.
For large Enterprises contract durations of 3 years (or even 5 years) are quite normal: Sometimes these orgs take 6-12 months just to integrate and adopt the product (employee training, API integrations, customizations etc.).
In general I think the best pricing is what works well for you and your customers: Experiments and direct feedback help uncover these. If there is demand for a 3 months and 6 months tier, why not add it?
I echo what everyone else has said. I’d also say “decision fatigue”
When there are too many options for plans it can be easy to feel overwhelmed and not make a decision at all.
It's a very good point! We were asking the same questions at Scraping Fish (https://scrapingfish.com).
We came up with a blend of usage-based, pay-as-you-go and subscription pricing model: pre-paid packs of requests which are valid for 1 month, 3 months, 6 months, or 1 year. We also have an option for customers to opt in for auto-renewal to automatically buy a new pack when they're about to use up all requests from their current pack.
We got very positive feedback for this pricing model. The main advantage for the customers over our competitors was that it adapts to their needs without any effort on their side. They don't need to commit to any monthly usage or manage to scale up/down their subscription plans.
This worked for us but it's probably not suitable for all kinds of SaaS which are access-based (offer access to some service, e.g. Asana).
Any data you're open to sharing on a rough percentage-based breakdown of which pricing options are selected? I'd imagine sheer familiarity would drive 80%+ of customers to either the 1-month or 1-year?
It's actually the opposite, at least if you exclude the first $2 purchase which is mostly used to try the product.
80% of our customers are on 6-month ($200) or 3-month ($20) "plans". I believe this is related to uncertainty of how much they will need and to have an option to opt out at any time. I think that aversion to pay a larger sum up front is also a factor here.
Some customers use $20 pack in 2-3 months whereas some of them use it in one day. There are also customers with $20 "plan" who use it at different pace depending on their needs, sometimes in 1 day and sometimes in 1 month. For all of the customers who opted in for auto-renewal, a new pack is automatically added for their account once they use up their current pack.
We noticed that users usually first buy a couple of packs manually (one-off purchases) and they they opt in for auto-renewal.
I think that the choice between 3-month, 6-month and 1-year options might also be related to the customer cash flow. Scraping Fish is a tool which helps companies build their product around data obtained with web scraping. They want to start with a smaller a plan which will automatically scale as their user base and needs grow. In other words, they want uninterrupted service without significant up front commitment. Opting in for a larger "plan" gives better discount but otherwise there's no difference.
With our competitors who only offer monthly subscriptions, there's a number of customers who fall in-between two plans. Let's say you estimate that you need 20,000 requests per month and offered subscription plans are either 10,000 or 100,000. As unused requests don't roll over to the next month, you actually end up paying 5x more for your subscription.