High upfront or low monthly - What payment do you prefer and why?

by gananathan 27 replies
I have always preferred to pay monthly instead of upfront payment. The reason being, if I am interested in buying something, I prefer it to be monthly because it provides the incentive for the product owner to keep it updated. Of course if the product is such that it is a one time deal and does not need updates, then I would prefer to pay upfront. But for things like software i prefer monthly instead of upfront.

But there are valid reasons for paying monthly instead of upfront.

So what do you prefer? And why?
#main internet marketing discussion forum #high #low #monthly #payment #prefer #upfront
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  • Profile picture of the author jbuah
    I prefer low monthly payments because people set them up and then forget about them. Psychologically, they really only pay attention to the first monthly payment when buying a product.
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  • Profile picture of the author JamesGw
    I prefer one payment if I have the money for it. If I don't, then obviously I'd prefer monthly. Then again, I don't buy any products that need constant updating, like IM courses, exercise programs, or whatever. So I guess I'm referring more to credit vs cash.
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    • Profile picture of the author gananathan
      What about software specifically? Obviously software requires constant updates usually and so I think it would be better to pay monthly instead of one time upfront.

      Do you agree?
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  • Profile picture of the author Andyhenry
    I prefer to pay upfront.

    I have enough things to think about and pay for each month that I prefer to get the cost out of the way and focus on using it. I don't like things that add to my regular outgoing costs.
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    • Profile picture of the author gananathan
      Originally Posted by Andyhenry View Post

      I prefer to pay upfront.

      I have enough things to think about and pay for each month that I prefer to get the cost out of the way and focus on using it. I don't like things that add to my regular outgoing costs.
      I see where you are coming from. But don't you think that it is better from a cashflow perspective to do it month on month? What if the creator does not provide regular updates? Is that an acceptable risk to you?

      Btw, were you involved in a program run in 2005 by me (through journal.wintheweb)? I remember there was an Andy there, not sure if it was you though.
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      • Profile picture of the author Andyhenry
        Originally Posted by gananathan View Post

        I see where you are coming from. But don't you think that it is better from a cashflow perspective to do it month on month? What if the creator does not provide regular updates? Is that an acceptable risk to you?

        Btw, were you involved in a program run in 2005 by me (through journal.wintheweb)? I remember there was an Andy there, not sure if it was you though.
        Hi,

        I can understand your perspective on cashflow but for me I prefer to make my spend up front and know that there's no more cash required than to have it hit my bottom line on a continued basis.

        If I was short of cash and needed every penny each month then maybe I would rather have a lower recurring amount but that's not the case right now.

        As for the developer - I would hope/expect that they would not create something they weren't passionate about keeping working and up to date.

        If there was any reason to think that they would not do so - I wouldn't buy it in the first place.

        Yes - that was probably me in 2005. I do remember you.

        Andy
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        • Profile picture of the author gananathan
          Originally Posted by Andyhenry View Post

          Hi,

          I can understand your perspective on cashflow but for me I prefer to make my spend up front and know that there's no more cash required than to have it hit my bottom line on a continued basis.

          If I was short of cash and needed every penny each month then maybe I would rather have a lower recurring amount but that's not the case right now.

          As for the developer - I would hope/expect that they would not create something they weren't passionate about keeping working and up to date.

          If there was any reason to think that they would not do so - I wouldn't buy it in the first place.

          Yes - that was probably me in 2005. I do remember you.

          Andy
          Thats an interesting perspective.

          Ah, it is you. It's a shame we couldn't continue the coaching program. Are you in touch with any of the other participants?

          I see you are doing well for yourself. Good work. I thought you were pretty motivated based on your questions and knew you were going to make it. Happy to see you doing great.
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  • Profile picture of the author Footynutjack
    I even do prefer to pay upfront in order to not to bear any delays or any excuses from the service providers.
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    • Profile picture of the author gananathan
      Originally Posted by Footynutjack View Post

      I even do prefer to pay upfront in order to not to bear any delays or any excuses from the service providers.
      But if it is a software, there is no incentive for the software developer to keep providing updates right? I can understand this idea for an info product, but what about software products or products that require constant updates?

      Also, how do you handle cashflow? Do you prefer to write off a one time payment or do you prefer to writeoff monthly?
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  • Profile picture of the author RichardF
    Definitely upfront, as long as there is some kind of money-back guarantee in place. Not that I have ever had to use one so far, but it's nice to know you can get your money back if the product doesn't live up to expectations. I also prefer to get ALL content delivered at once so I can digest it in my own pace.

    I definitely see the upsides of monthly payments as a vendor though...

    Edit: I see you mention software updates. In the case of software I would prefer a bigger one-time fee and a smaller fee for updates when they're released. That way I can decide for myself if I want to upgrade. If it's software that breaks if it's not updated constantly, however, I guess there is reason to have a monthly fee for updates.
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  • Both as a vendor and as a consumer, I prefer a high one-time payment than a monthly payment.
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    • Profile picture of the author gananathan
      Originally Posted by Anonymous Affiliate View Post

      Both as a vendor and as a consumer, I prefer a high one-time payment than a monthly payment.
      First of all congrats on a great launch and a great product. I am a customer

      As a vendor, would it not make sense for you to charge a bit for updates as it makes much more business sense to keep developing it with an update pricing.

      On the other hand, if you charge full amount/discount for existing customers for a new version altogether, then it makes sense from that perspective too. But is there an incentive to keep developing a product which does not have a recurring stream of revenue?

      While I understand the business model of creating an unparalleled product and expecting new customers, the market size is limited for any product and so would it not make sense to charge for updates?

      P.S: I am not complaining about your lack of update pricing for your product though
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  • Profile picture of the author EugeneA
    It depends on the product, usually I'd prefer one-time payments. I don't like keeping records of other fees I have to pay......
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  • Profile picture of the author DavidTT
    meh. I get low monthly recurring membership payment and honestly I feel like I could be doing so much more if it was a one time, high upfront payment. Not to mention, not everyone stays so sometimes you only make peanuts.
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  • Profile picture of the author celente
    I think most the people are missing the point here.

    It doesnt really matter how much it cost, it is going to education you enough to make twice that amount. That is the most important.

    I will pay high or low, depending on if it is going to give me high quality info and help me with my business.
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  • Profile picture of the author ckrieger
    I'd still rather pay for a product once rather than adding more monthly expenses.
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    • Profile picture of the author The Wizard of Oz
      I've got enough things to stress about on a monthly basis (not periods ... I'm a bloke) so I like to get the payment over and done with. Easy as long as the money flows.
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  • Profile picture of the author SebastianJ
    I personally tend to go for a low monthly payment since that's what I'm mainly used to when paying for e.g. web hosting, vpses, proxies and a lot of other stuff.

    I haven't really bought any IM/info products but for those I guess I would rather go with a high one-time upfront payment.

    When it comes to Software I'm a bit undecided...

    I'm a Web/Software developer myself and I'm soon about to release my first product. I've been contemplating the ins and outs of the two payment methods for a while now.

    Initially I was pretty sure about going with a monthly cost since this specific software/web app will require constant updates - it will scrape and interact with a lot of websites, Google Keyword Tool etc. and as soon as any 3rd party site change something I have to update my web app.

    Having a monthly cost (rather than a high upfront cost) I think would give me more incentives to continually upgrade the software - people are paying for the updates and they sure as hell need to get their updates then.

    But at the same time I've seen that a lot of people (not just here on WarriorForum) actually prefer to pay everything upfront and then be done with it.

    In one respect that should also give me incentives to update the product (besides the fact that I really want to deliver an awesome product) - I've basically gotten e.g. 12 months worth of subscription fees at one given point in time - and rightfully the customer should then have access to 12 months of free updates.

    I'm just a bit afraid that this is not as motivational as having to feel the pressure to update the app every given month since people are paying on a monthly basis. I guess this is what gananathan talked about a bit earlier in the thread.

    The thing that makes this even harder is that I have to have affiliates in mind as well. How would affiliates like to get paid - a high one-time commission or smaller monthly commissions? I would personally prefer the first option since as an affiliate the sooner I get my commissions - the better. What do you guys prefer?

    Then there's the thing about refunds. I have the impression that high upfront payments usually leads to more refunds - the customer has taken a greater risk and invested more money up front and will thus be more eager to get their money back (sometimes demanding unreasonable refunds).

    With a low monthly payment you give people less incentives to refund your product (given that the product does not suck - then the fees should rightfully be refunded!).

    And then there's the thing about getting more or less customers depending on the payment plan you choose to go with. Will a high upfront payment turn some customers away (who would've been able to pay if the payment was divided and payed on a monthly basis)?

    Or will you in fact, as DavidTT wrote, actually make less money since people skip their subscriptions after a few months anyways?

    As I said, I haven't released any products yet and I've been going over this for quite some time. It would be awesome if someone that actually sells products (preferably software/web apps) could chip in and describe the reasoning behind their payment plan. That would be awesome and I would be totally thankful
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    • Profile picture of the author gananathan
      Originally Posted by SebastianJ View Post


      I'm a Web/Software developer myself and I'm soon about to release my first product. I've been contemplating the ins and outs of the two payment methods for a while now.

      Initially I was pretty sure about going with a monthly cost since this specific software/web app will require constant updates - it will scrape and interact with a lot of websites, Google Keyword Tool etc. and as soon as any 3rd party site change something I have to update my web app.

      Having a monthly cost (rather than a high upfront cost) I think would give me more incentives to continually upgrade the software - people are paying for the updates and they sure as hell need to get their updates then.

      But at the same time I've seen that a lot of people (not just here on WarriorForum) actually prefer to pay everything upfront and then be done with it.

      In one respect that should also give me incentives to update the product (besides the fact that I really want to deliver an awesome product) - I've basically gotten e.g. 12 months worth of subscription fees at one given point in time - and rightfully the customer should then have access to 12 months of free updates.

      I'm just a bit afraid that this is not as motivational as having to feel the pressure to update the app every given month since people are paying on a monthly basis. I guess this is what gananathan talked about a bit earlier in the thread.
      This is exactly what I was referring to by providing incentive to the creator to keep it updated.

      BTW if your product will require constant updates as you have mentioned, I would suggest you go with a mix of both worlds, an upfront payment and pay for upgrades every quarter or year depending on your upgrade fee. If the work involved is fairly mundane, then it is probably ok to skip it, otherwise for the kind of software you are looking at, I would probably go for a monthly one. I am sure your customers will understand once they see the value.

      Originally Posted by SebastianJ View Post

      The thing that makes this even harder is that I have to have affiliates in mind as well. How would affiliates like to get paid - a high one-time commission or smaller monthly commissions? I would personally prefer the first option since as an affiliate the sooner I get my commissions - the better. What do you guys prefer?
      As an affiliate I would prefer upfront commissions. hmm..This is an interesting one, looking at it from the affiliates perspectives.

      Originally Posted by SebastianJ View Post

      Then there's the thing about refunds. I have the impression that high upfront payments usually leads to more refunds - the customer has taken a greater risk and invested more money up front and will thus be more eager to get their money back (sometimes demanding unreasonable refunds).

      With a low monthly payment you give people less incentives to refund your product (given that the product does not suck - then the fees should rightfully be refunded!).

      And then there's the thing about getting more or less customers depending on the payment plan you choose to go with. Will a high upfront payment turn some customers away (who would've been able to pay if the payment was divided and payed on a monthly basis)?

      Or will you in fact, as DavidTT wrote, actually make less money since people skip their subscriptions after a few months anyways?
      These are valid points. I did not think of this. How would your refund rate be affected due to this? And how would your customers prefer to buy? I think to get the best of both worlds, offer payment plans. But there is a risk involved in that you may loose a certain percentage of customers not paying the rest due to whatever reasons, sometimes not being their fault.

      Originally Posted by SebastianJ View Post

      As I said, I haven't released any products yet and I've been going over this for quite some time. It would be awesome if someone that actually sells products (preferably software/web apps) could chip in and describe the reasoning behind their payment plan. That would be awesome and I would be totally thankful
      I would be interested in hearing this as well. So if you have any firsthand experience on selling software, can you pls. share your experiences?
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  • Profile picture of the author Big Al
    I prefer upfront and knowing what you're getting for your money.

    A few memberships kinda stung me when they were slow or late to update their content... and that made me feel a little cynical regarding membership sites.

    Also... one that was good... eventually I just got bogged down with trying to do stuff and digest the content. It put me off thinking I'm paying for content I can't get around to using.

    The only exception is perhaps payment plans for big-ticket items and fixed term memberships running for a few weeks or months.

    I like the fixed term because you 'begin with the end in mind' and if they're a 'how to...' and walk through product the weekly progress is motivating - there's a start date and an end date when you hope to have results.
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    • Profile picture of the author newimwarrior
      My preference when making purchases is for a one-time fee as opposed to a monthly payment.

      The problem really is cashflow. You have to know that at any point in the month all your expenses will be covered. Adding monthly payments means there's more to try and keep track of - it's so much easier if you make a one-time payment and know that that's it.
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      • Profile picture of the author gananathan
        Originally Posted by newimwarrior View Post

        My preference when making purchases is for a one-time fee as opposed to a monthly payment.

        The problem really is cashflow. You have to know that at any point in the month all your expenses will be covered. Adding monthly payments means there's more to try and keep track of - it's so much easier if you make a one-time payment and know that that's it.
        But isin't part of doing business? Does paying upfront always keep increasing the expenses?

        As we all know if there is nothing to pay on a monthly basis won't we find ourselves buying more stuff instead of using what we have?
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    • Profile picture of the author gananathan
      Originally Posted by Big Al View Post

      I prefer upfront and knowing what you're getting for your money.

      A few memberships kinda stung me when they were slow or late to update their content... and that made me feel a little cynical regarding membership sites.

      Also... one that was good... eventually I just got bogged down with trying to do stuff and digest the content. It put me off thinking I'm paying for content I can't get around to using.

      The only exception is perhaps payment plans for big-ticket items and fixed term memberships running for a few weeks or months.

      I like the fixed term because you 'begin with the end in mind' and if they're a 'how to...' and walk through product the weekly progress is motivating - there's a start date and an end date when you hope to have results.
      So in effect you prefer to pay fixed term or a high upfront with a payment plan.
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  • Profile picture of the author svensky
    As a vendor, I prefer monthly options. I like the consistency of knowing exactly how many active members you have, when they joined, and whether they still support your product (using Clickbank after the 60 day money back guarantee, if they chose to cancel, that's a good sign something went wrong with their experience). We even switched our OTO from a relatively low up front payment to 1/3 of the price monthly payments. So far it has worked out nicely.
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  • Profile picture of the author RichBeck
    gananathan,

    I am a little late to the party. :-) But, I'll still weigh in here.

    As a developer and a consumer, I strongly prefer the lower monthly "subscription" for IM software in particular.

    What makes IM software different?


    Look at a program like QuickBooks..... Even if you have a version that is a couple years old, you can still use most of the functionality and get by.... I know many Bookkeepers and Accounts who do not run out and buy the "latest and greatest"......

    Contrast IM software. Would anyone use a piece of IM software that is a couple years old like SENuke.... No, because it simply would not work...

    Most IM software uses third party web sites that change constantly. Hence, the developer must provide constant updates. This involves time and money.

    Can't I just make one big payment up front?

    No..... Just ask many of the people here on WF.... They paid big money up front for a "lifetime license"..... A couple months later, the company and developer are long gone... What they failed to realize is "lifetime license" means for the "lifetime" of the company.... It could be two months or two decades... You are gambling money on whether the company makes enough new sales each month to survive.... I personally would not gamble my money.... on them staying in business or that I would want to use their product in the future...

    Why are subscriptions better for IM Software?

    It keeps the developer motivated to provide updates.... He is constantly working to keep your business.... As a consumer, I prefer he be "hungry" for my $27 a month... It is better than him having my $399 in his pocket and trust he will be fixing bugs and providing support.....

    Do I think all "lifetime licenses" are scams?

    Definitively not!
    I believe they fall into three groups. The first one provides support through the money back guarantee "phase" and plans to bale... with your money. The second group has honest intentions... But, they underestimated the cost of maintaining the software.... and overestimated their potential revenue.... They fail... The third group succeeds... and gets enough customers to build sales and momentum... and stays in business....

    My two cents..... :-)

    All the Best,

    Rich
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  • Profile picture of the author pacelattin
    reoccurring billing works well

    tips:
    - dont annoy consumers, they'll cancel and unsubscribe.
    - provide real value that lasts
    - find the best time to do upsells...
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