Recurring Subscription is a payment model that considers billing per period for an access to service. This is the most common used model implemented for Membership sites and other types of services.
So there are basically three kinds of payment models enforced for subscription plans:
- Recurring Subscription – user pays in the beginning of payment period to renew subscription.
- Lifetime subscription – user pays only once for lifetime unlimited access to service.
- Fixed-time subscription – user gets an access to service for a specific period of time. Subscription is not to be renewed and service delivery ends at the end of the period. User pays once.
Each of these payment models can be enforced for Membership Site with Ecommerce extension. However, commonly recurring subscription is the best choice for membership site – no matter whether it is community or content driven.
Why to Choose Recurring Subscription Payment Option?
When making a decision for business launched it is vital to evaluate each option, consider pros and cons and forecast consequences. Here are the pros for enforcing recurring payment option:
- Subscription period can be adjusted using Ecommerce extension by Supsystic
- Revenue from one user can be potentially unlimited
- It is easier to make upsells and downsells
- It is easier to sell
- It is fair in point of user
- Better cash flow planning
- Lower Costs
Subscription Period Can Be Adjusted Using Ecommerce Addon
Based on the service parameters and type of your membership site you can have different considerations on the suitable base subscription period. When using Ecommerce Addon you can set up any kind of subscription period from 1 minute to unlimited amount of years. Usually, base period for subscription is one month. You can make base period to be 2 months, 3 weeks or 16 days – it all depends on your choice.
For example, if you are running learning membership site and your course is considered to take 2 weeks to be completed you can set up 1 weeks as a subscription period.
Period adjustment feature allows you to sell mini-courses that do not take much time and are not appropriate for lifetime sales. So you have more options for persuading potential member to make a purchase.
Revenue from One User Can Be Potentially Unlimited
Let’s consider that you have set up fixed price for life-time membership. Let it be $199. Well, that means that all you can get from a user is $199 and you are only going to be paid once by him. And subscription can last for years – you cannot cancel it as you have a contract. So paying once user gets an unlimited access for years to your content which has to be renewed constantly. Moreover, it is obvious you have to add new services and features and this user will have a free access to those as well.
Now let’s consider that you have implemented recurring subscription and you charge 39$ per month. 39$ monthly payment overwhelms 199$ single payment in the beginning of 6th month of subscription. And if you manage to retain user as your member for more than 5 months recurring subscription seems to be a better choice. So you get practically unlimited gain in income depending on the period user remains subscribed.
Consider this when you make a choice between lifetime and periodic membership.
It Is Easier to Make Upsells and Downsells
If you have several membership levels enforced on your site you are surely interested in making upsells and you need to make available downsells to retain users. And you need to ask yourself what is really easier for user – pay a couple of dollars more each month or couple of hundreds to upgrade an account?
Let’s consider that user has given high grade to your service and he want to upgrade and bring you more income. Why do you have to make it harder for user to upgrade? The more is the sum user has to pay for additional features the less motivation he has to be upgraded.
One more situation. For example, user subscribed to silver plan, but now he wants to downgrade to bronze plan as he doesn’t use advantages of silver plan. If you have enforced lifetime subscription what are you going to do? You have two options – you can make a refund or close this option. Closing downgrading option will spoil your reputation as a service. Making a refund will spoil your financial metrics.
However, is you have chosen recurring subscription business model for membership site problem is solved. User has only to refuse subscription renewal for silver plan and purchase bronze plan.
Of course it is not a positive situation when user downgrades. But it should remain as an option for service to remain fair and transparent and it should remain easy and clear both on client and company side.
It Is Easier to Sell
Is it easier to pay 29$ per month of 299$ for a lifetime? Well, there are couple of considerations affecting decision-making on this issue:
- concerns about stable quality – user cannot be 100% sure your service remains to be of high-quality for a lifetime, and it is easier for him to believe that service will be useful for at least a month or a year. If not – user can cancel subscription.
- concerns about service existence – user cannot know for sure your service won’t float in a couple of months or years. So do not force him to make a hard choice between his doubts and your reputation.
- 29$ is less than 299$ – when it is the first time user makes purchase from you he doesn’t know for sure how useful your service is going to be. He can risk with 29$, but he is going to have much more doubts when it comes around with 299$. Just consider how much time it takes from you to make a choice on a restaurant to have a meal in and on a car to buy. And what is user doesn’t mind to pay 299$ for your service, but he just can’t?
It Is Fair In Point of User
No matter what kind of business you are running it is always important to remain clear and transparent for user. When you enforce monthly subscription you seem more transparent when enforcing lifetime subscription for a much more higher price.
User knows it is easier for him to give up on your service and this argument is a strong factor influencing decision-making process. Moreover, he knows that he can get unsubscribed any time if your service gets unsatisfied (which surely won’t happen!) and this is a stimulus for you to remain competitive. In case of lifetime subscription you can give up on quality due to the fact you have already gotten paid.
And here is one more advantage of recurring subscription – you get fair and undoubtful metrics for your service – abandoning rate. When you have a lifetime subscription plan you do not know exactly whether users are satisfied with your service, however, for recurring subscription you know something is going wrong with your service if cancellation rate grows.
Better Cash Flow Planning
For lifetime subscription you get income from new users only. And new users are harder to get as the price is higher and due to all of those reasons mentioned above. On the contrary, you get stable income monthly (or weekly, annually – depends on the base period you have set up) for recurring subscription. Why is that an advantage?
- your fixed and variable costs are covered by stable income
- once you reach break-even point you know you will get guaranteed income in future periods. If you sell lifetime membership you cannot guarantee this
- you are not so dependent on marketing efforts success – you already have income and loyal clients paying
- on the specific point (number of members reached) you can concentrate on content to make your service better instead of paying for marketing
- It is easy to sell and evaluate your business or get investments if you get stable income
As already mentioned lifetime subscription is harder to sell which means you have to make more marketing efforts for sales. More efforts – more expenses. So you need to get prepared with a marketing budget over expenses.
And this is never going to end. You can get to the stable break-even point for recurring subscription, but you will get a high dependence from new subscribers for lifetime subscription.
To conclude it has to be said it is still up to you what kind of payment model to use. You can enforce any using Membership Ecommerce addon easily. It can be said that recurring subscription is commonly more reliable, fair, profitable and easier to manage in terms of business.