What Are the Most Popular Subscription Schedules?

Once you’ve decided a price for your product or service, you have to decide how often you’ll be billing your customers. Depending on your customers and industry, you might go with monthly, quarterly, or annual billing – or something else entirely.

Customers have made it clear that they prefer choices when it comes to subscription schedules, and many industries have followed suit. For example, some companies in the gaming industry have had success with three-month subscriptions and most insurance companies prefer six-month subscription schedules in order to better manage risks. One thing is certain though — customers want options, and companies want satisfied customers.

Monthly vs. annual schedules

By far, monthly subscription schedules are the most common choice. Price sensitivity on the customer’s part is the primary driver of this arrangement. Earlier this year, Pandora made headlines when they raised their monthly subscription fee and eliminated their annual subscription plan.

Following the price increase, Pandora discovered that…

• A change from $3 to $5 per month registered as a small increase to the market
• But a change from $36 to $60 annually was a significant increase that would have greatly dissuaded users from the service

As we said in our post about the psychology of subscription sales:

The biggest argument for offering annual plans has nothing to do with the customer and everything to do with your business. Annual plans get you more upfront revenue — when a customer commits to a whole year upfront, you get that money faster than you would if they were paying month by month. Because of that, you can recoup your customer acquisition cost quicker, and reinvest that in your business.

Other factors

For newer startups, restrictive rules created by merchant accounts might also come into play. Oftentimes, credit card processing companies don’t want to deal with annual subscriptions for risky startups. If the startup goes out of business, then the merchant account has to deal with a lot of extra processing and refunding.

If you aren’t sure where to start, you can offer more than one subscription schedule, and see what happens. In Rebilly, for example, you can use different pricing formulas (like tiered, flat rate, etc.), but also create multiple subscription schedules, and see which one more customers choose over time. Just keep in mind that you don’t want to present too many options. If you have five different plans and have two different ways of viewing prices, you might overwhelm potential customers and scare them away.

Focus on the users

The real answer to the question, “Which subscription schedule is the most popular?” is that it depends on the company’s user base. For example:

• In an oversaturated industry with low switching costs for customers, monthly subscription models might be more popular
• If your tool requires a long (30-90 day) onboarding process, which is common in some B2B industries, a quarterly or annual subscription model might work better for you
• In a market that has irregular changes throughout the year, like a subscription service based on games released at odd intervals, then a 3-6 month subscription model might work best

In short, figuring out the best subscription schedule is simply one piece in the larger puzzle of price optimization. If you aren’t testing your subscription schedules and prices, and the copy around them on your sales pages, you’re probably missing out on sales.

There are so many factors that it’s impossible to make any snap judgements without knowing the details of your customers, your business model, your industry, and your product. Because of this, companies should be making an active effort to learn about their customers through surveys, sales and user interviews, and customer service data.

This is why we recommend collecting as much data throughout the sales and marketing process as possible. In fact, lead sources and segments are built into Rebilly to make this easy – find out more about those features here. Then, you can use that data to make better decisions that are good for you and your customers.

Want to learn more about making the most of customer data?

In our free price optimization guide, you’ll learn how to set up and run experiments that help you get the most from every sale, with specific experiments based on your business stage, and more. Get it below: