When you are building your subscription business or looking to see if your model is as effective as it could be; you need to check your billing frequency is optimal. There are many different considerations to make when you are looking at the frequency. Here are some of your options with the advantages and disadvantages.
This is probably one of the extreme options you have for frequency billing. However, it can also be one of the best if you are in a market with a short customer lifespan.
The advantages of this frequency is you have a regular daily income that you can clearly manage and you can see on a day to day basis the net effect of your marketing efforts based just on the income.
The disadvantages of this model could be very serious. For instance, daily invoicing requires significant management of the subscriptions and most auto-billing platforms charge per transaction and sometimes a percentage of the transactions (N.B. Fusebill charges on subscriber per month basis). If you don’t have a significantly high subscription charge, you could find that profit margins are too low for this to be financially feasible.
This model is probably still for those who have a short customer lifespan or have regular deliveries of their product (i.e. food, magazines / newspapers). This is more feasible than daily payments but the cost of managing the subscriptions can still be expensive. Also, the regularity of these payments can make the payments seem high to the customer, even if the same rate could be offered on a monthly or yearly basis (i.e $1 a week would be $52 per year). Therefore weekly payments have a higher chance of being cancelled.
On a positive note, customers can often manage weekly payments very effectively so you are likely to have few subscribers default on their payments. Although, the end of the month can be a tricky financial time and this would be when you are likely to have higher defaults.
Having your billing set so your payments go out every two weeks is an unusual method to set your billing schedule to. One of the biggest problems with this is that not every month would have the same number of payment dates. This can make planning difficult for customers who manage their finances monthly. It can also be hard for you to justify the billing schedule if you have an evenly distributed product (i.e. software) as payments on a month to month basis would be uneven.
A big advantage of this however is that you can distribute your bill processing across a wider range of dates making billing management easier.
Probably one of the most commonly used frequencies. Monthly billing is very easy to manage both from your business’ point of view and your subscribers’. There is also the added bonus that you could separate your billing dates into different groups to spread out your workload. For instance you could split your subscribers into four groups; each pay on a different date i.e. 1st of the month, the 10th of the month, the 15th of the month and the last day of the month.
This is a great model for those who are providing a consistent service over the longer periods, like software, publications and membership sites. However, if the size of the payments per month is too high, some customers may be dissuaded from buying your product whereas a weekly schedule would have suited them much better.
Once a year payments are an extreme case and are often used by businesses that are confident their customer lifespan is significantly long. There are some advantages such as less management is necessary for the payments. This means businesses can offer discounts to tempt new customers into signing up for annual plans.
The problem with this model is your subscribers may forget about renewal and therefore not have the funds available when the time comes. This can lead to you having poor retention. To combat this, ensure you are informing your customer in advance of when their renewal is due.
Having the balance between your customers needs and desires and your own is important when it comes to deciding what frequency your business needs to bill your clients. You also need to consider your product and how often it is delivered when coming up with the billing model. With these thoughts in mind you should come to a conclusion of which billing frequency is best for your business.