SAAS Billing Interval.pdf
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- 2. As a memberof a startup, whether being a founder, manager, finance professional, CFO, or CEO, we might find asking ourselves a lot of questions. A few of them that came first to my mind were: What kind of billing interval should our SAAS business have?” “Should it be monthly, annual, or both?” “Which one works best for the organization and why?” “How do we decide if the company pricing plan is right?”
- 3. Let’s take alook and discuss which option hits the spot. As nothing in the world is perfect, the customer payment in your bank account is headed with its own set of advantages and disadvantages.
- 4. MONTHLY BILLING ADVANTAGES TOTHE COMPANY Clients have a higher inclination towards monthly plans as they can cancel at any moment and lower prices appear friendlier Not required to offer upfront discounts Shorter Sales cycle and easy to close prospects Better contact with the customer and overall experience Lower credit card transaction rejections since monthly amounts are usually lower and go through lower credit limits Real-time performance of the service
- 5. MONTHLY BILLING Easy forcustomers to cancel their plans Increased churn rate and lower CLV (Customer Lifetime Value) Customers may not see the benefits in the 1st month and get disappointed quickly Higher cost of processing considering multiple transactions Uncomfortable interactions with customers pertaining to reminders about payment rejection and credit cards expiry Increased workload for Accounts receivable team Disadvantages to the company
- 6. ANNUAL BILLING Morecash for customer acquisition Secure more business upfront Reduced cost of processing Reduced churn Step up in customer lifetime value Increased engagement with customer Easier financial prognosis for long term by making revenue/expenses predictable Reduced effort for accounts receivable team considering sending invoices and collecting payments Impacts profitability due to increase retention Advantages to the company
- 7. Annual billing Makes youoffer upfront discounts, so you lose the amount attached to the discount Easy to lose touch with the customer, reduced interaction, requires additional processes to monitor real-time customer satisfaction Not suitable when products are priced based on variable volumes, such as number of ads, for example Annual billing warrants higher cash investment from customers and might impact their readiness to avail the subscription plan. You might be postponing churn but a real problem might exist that needs to be fixed for customer experience Disadvantages to the company
- 8. B2B Customers Let uslook at the advantages for B2B customers in case of annual billings. Customers will go through their internal procurement process only once a year - Phew!! Cost savings via upfront discount, justifies ROI calculation and selection of your B2B SAAS Solution
- 9. Hoping to chooseone billing mode over another is tricky as both the advantages and disadvantages go hand in hand. A few questions to as yourself while determining the right subscription plan for your company: How established is my business right now? What is my strategy and priority? What do my clients want? Is there mobility in my pricing? How am I performing with my financial metrics?
- 10. What can beideal- Maybe offering both options to the customers and let them decide what works best for them! Customers can also be offered discounts/ engagement reviews from other users of the product of the value generated which might make them accept the annual billing plan easily. Nevertheless, the challenges in both the subscription plans are majorly same i.e satisfying the customer, ensuring successful use of product and keeping them on board.
- 11. As always welcomesharing your thoughts with me! Email poojaladdha1511@gmail.com