Customers Prefer Simple Recurring Subscription Plans

Wed, 22 Dec 2010 06:26:27 +0100

Simple Subscription Plans

Studies show that adding usage charges and other metered billing type pricing models can be very lucrative. This could be true for large web hosting companies and cellular phone carriers but startup businesses will most likely find that more complicated pricing will negatively effect sales conversions. When selling SaaS, the simplest plans win. Take a look at a few of the leaders in the market for example: SalesForce.com and 37 Signal's BaseCamp. Additional add-ons, metered billing and usage/ overage charges creates a more complicated buying decision. When selling B2C or B2B, a set of pricing plans with a predictable, set monthly charge with specified included features will create an easier buying decision and result in increased sales conversions.

Easy Upgrades

Create a simple pricing strategy or your SaaS, Web App or Digital product and make it as easy as possible for your customers to make the purchasing decision. In most cases people will choose to "play it safe" and choose a plan that is slightly above their immediate needs. Simple subscription plans also make it easy for your customers to evaluate the decision to upgrade.

Retain Your Customers Longer

You will retain your customers longer with simple subscription plans because of the predictable nature of the subscription pricing. If they know what it is going to cost each month when they make the initial purchasing decision, they are less likely to reevaluate that decision. With a variable monthly cost they will be paying attention to each monthly charge, forcing them to make the purchasing decision again each month based on the variable charges found on their credit card statements that includes all add-ons, metered billing and usage/ overage charges.

Boost your ARPU and CLV

If you are a startup SaaS business do you need the complexity of a subscription billing software provider with metered billing, addons, usage and overage charges that can make your customers question their purchasing decisions? By keeping your subscription plans as simple as possible for your prospects and customers you will increase your sales conversions, increase the likelihood of upgrades and retain your customers longer- which will lead to increasing key SaaS metrics: Average Revenue Per User (ARPU) and Customer Lifetime Value (CLV).

Complex APIs= Increased Integration Costs

Consider complexity "overhead" when you are researching your options for selecting your subscription billing software provider. Evaluate your developer's time and costs of integrating (and supporting) sophisticated API's that include the complications for variable amounts each billing period and configurations for metered billing, add-ons and usage/ overage charges.