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Pricing/billing strategy, monthly vs. annual?

3 points| n_coats | 14 years ago | reply

Using a freemium model, but deliberating on whether to use annual or monthly reoccurring billing for the upgrades.

In doing so, it would divide the annual limitations by 12, limiting the amount of content needed to populate the platform (which is based on community).

On the other side, is it true that monthly plans can increase user acquisition? I understand that they may, but in the case that a user values the product enough to keep upgrading each month, wouldn't they just as well enroll annually?

I see the pros and cons to both sides, what do you all think? (keeping in mind sustainability as well)

Thanks!

9 comments

[+] sheff|14 years ago|reply

Please consider having an annual payment option ( discounted or not ) as well as a monthly one.

If its a service I've decided I want and I sign up for it, I generally want to pay once and then not think about it again for a year.

From the standpoint of a B2B purchase, the overhead of a book keeper or accountant having to keep track of lots of monthly subscriptions to services , which are usually in dollars and have to be converted to a local currency is an extra annoyance.

People wanting to pay you an annual subscription up front are essentially showing you that they are fans of your service and aren't typically as price sensitive as the monthly subscribers. Why not make it easy for them to give you money ?

[+] glimcat|14 years ago|reply

Monthly billing tends to be superior because it reduces the "just one more" barrier by a factor of twelve. You do need to have a mean customer lifetime of at least a year for this to be significant.

Big, heavily bureaucratic institutions with weird cycles and policies may be different.

[+] n_coats|14 years ago|reply

By a factor of twelve? Wow, I had no idea. Thanks very much for your input! I have decided to incorporate the monthly option. Will be sure to share the results!

[+] n_coats|14 years ago|reply

Thanks everyone for you input. I've decided to offer both (monthly and discounted annual). I will let you know the results!

[+] coffeejunk|14 years ago|reply

what about monthly and discounted annual? this way you give the incentive to pay annually but leave the option for monthly commitment.

[+] steventruong|14 years ago|reply

Agreed with this idea. The problem some users may have is, even if they like the service, and would renew continuously anyway, many don't like the idea of commitment. If people could, they would choose month-to-month renting (I know I do) over a 1 year lease and constant 1 year renewals (as an example). Especially if there is no price advantage.