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Monthly subscription vs Annual payment

by MJ Schaefer
10 replies
Hi Warriors.

I am putting the final touches to a membership site (the payment processor will be Paypal). I've become quite interested in the idea of a free trial leading to an annual subscription, approximately $197 for a year.

The problems I see with this are twofold:

1. That people may balk at seeing a three-figure fee on the subscription page (despite the free trial), thus lowering conversions

2. That I lay myself open to chargebacks any time during the course of the year

I am wondering whether any of you have experience of testing monthly vs annual subscriptions, and whether my concerns are justified or not.

Thanks for any feedback!
#annual #monthly #payment #subscription
  • Profile picture of the author dave147
    [DELETED]
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    • Profile picture of the author reynald2790
      Annual Payment is more often liked by the subscribers because they can save 10% of an monthly payment.
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    • Profile picture of the author Brad Mc Bard
      Originally Posted by dave147 View Post

      I always like to see both options of being able to pay monthly eg: $19.95 or one annual payment of $197 I can see straight away that I am saving money ($42.40) by going for the annual payment so I'd be inclined to take that option
      I agree - offer Either an expensive monthly or Quarterly subscription (3 months), and a yearly subscription that saves them money.

      This enables every visitor to find a subscription matching his/her style.
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      • Profile picture of the author jmidas
        I offer both: monthly at a price higher than I want and annual at the real price I want. (ie, if you want 197, charge that for your annual and 20/mth for the monthly). Then, I hope for people to take the annual.

        Jason is right - the average stick rate is only about 3-4 months, so the more you get to your "discounted" annual price, the better.
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        • Profile picture of the author JohnMcCabe
          If you go with an annual subscription, I'd suggest adding language stating that cancellation during the term will get a pro-rated refund. If you feel bold, you could even calculate that based on the monthly fee.

          Make it part of the sign-up process and it could help protect you against some chargebacks...
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          • Profile picture of the author jmidas
            Originally Posted by JohnMcCabe View Post

            If you go with an annual subscription, I'd suggest adding language stating that cancellation during the term will get a pro-rated refund. If you feel bold, you could even calculate that based on the monthly fee.
            John, I have to disagree with that. If I am giving someone a discount for an annual purchase - I am making a commitment to them and they to me. I have the expectation that this person will honor their commitment, just like I will honor my commitment for a year. I don't offer refunds on annual subscriptions. If someone is not sure if they want the subscription long term, that is what monthly term is for, which has an easy cancellation policy. And, I have never had a charge back on an annual purchase.

            I will say, though, that it is important to spell this out in your Terms and Conditions (which I do, and have a check box in my order form that makes them acknowledge they read it.

            Just my opinion.

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  • Profile picture of the author LMC
    RedBeard,

    In my past I have run three memberships, in my experience it all depends on the niche, a lot of the times in the business related niche most people opt for the monthly subscription because they are skeptical if the service or membership will be of any use for their business.

    However, in Health and Fitness niches, I have seen more yearly options, because they save more money, and usually I have prepared these sites around New Years, it has shown that one of the top new years resolutions is to get healthy.

    In any case, from my experience I present the monthly option in a more dominant position, and then have a link that usually says something like ( want to save 15% ) and that goes to my yearly option sales page.
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  • Profile picture of the author jasonl70
    I've read of people having a lot of chargeback issues when they go the annual route and the rebills hit. Maybe it would be best to simply not rebill?

    It's an interesting question though.. if the average stick rate in a continuity program is 3 or 4 months, then even if your conversions dropped by 2/3rds by going with a one-time annual fee, you are still ahead vs the monthly model.
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    -Jason

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  • Profile picture of the author James Seward
    I would go with both options and maybe also a quaterly payment... Only because it really depends from person to person: some like to pay month by month and some like to pay the whole thing in once... I mean if you offer them both you are reaching a wider audience and make it available for everyone...
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    • Profile picture of the author JohnMcCabe
      Quote:
      Originally Posted by JohnMcCabe
      If you go with an annual subscription, I'd suggest adding language stating that cancellation during the term will get a pro-rated refund. If you feel bold, you could even calculate that based on the monthly fee.

      John, I have to disagree with that. If I am giving someone a discount for an annual purchase - I am making a commitment to them and they to me. I have the expectation that this person will honor their commitment, just like I will honor my commitment for a year. I don't offer refunds on annual subscriptions. If someone is not sure if they want the subscription long term, that is what monthly term is for, which has an easy cancellation policy. And, I have never had a charge back on an annual purchase.

      I will say, though, that it is important to spell this out in your Terms and Conditions (which I do, and have a check box in my order form that makes them acknowledge they read it.

      Just my opinion.
      No disagreement here...

      If you spell out a 'zero refund on annual subscription' and I take you up on it, we're cool even if I decide to cancel later.

      And I'd take it a step further and put it right on the order form rather than burying it in the TOS. When was the last time you read the entire TOS on a membership site or a software license?

      For that matter, if you make it perfectly transparent, I'd have no problem with pulling the same thing the cellular companies and satellite TV companies do - charge a penalty for early cancellation.

      Just be upfront about it...
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