Monthly vs. Annual subscription business model – Which one must you focus on?

Featured • March 15, 2020

We all love subscriptions!

Whether it’s YouTube subscription, subscription for Times of India, Netflix subscription, Hotstar subscription, subscription for Amazon Prime, and many other businesses, this market has become a part of everyone’s daily lives.

That’s how popular a subscription business model is today. Hence businesses across the globe also want to get into this and gain as much as possible.

How do subscription businesses lure in customers?

There are many subscriptions that one can use. These are renewed weekly, monthly, semi- annually, or even annually. The costing will vary as per the duration. Businesses lure customers with low costing for higher durations and high costing for lower durations.

How do you decide which one is better for your business model?

If you’re running or planning to start a subscription business model, this question will surely take a lot of your time. Planning the right subscription plan for your customers can be difficult whether monthly or annually.

If you don’t know how to choose between a monthly or annual plan, then there are a few ways you can find out. To make it easy for you, we will compare the benefits and disadvantages of both models.

Monthly subscription business model:

Whether it’s an entertainment show or a game, multiple businesses offer the monthly subscription model to their renewable customers.

  • Minimum investment for your customers: -
  • Assume you’re a business that offers a monthly subscription of 750 INR ($10) and an annual subscription of 7500 rupees ($100). While most will see a discount on the annual subscription, the monthly subscription becomes an obvious choice for many.

    Why? It’s simple. Many don’t have that much money to spend one-time on a subscription. Hence opting for a monthly subscription is a minimum investment they can afford.

  • Simple and Flexible: -
  • Just think about it, you charge your customers a monthly plan of 750 INR ($10). They can utilize your services and renew them as per their liking. Shortly when your business offerings might evolve, your customers can choose to either continue with the same plan or change to a new plan.

  • Faster growth in subscribers: -
  • As mentioned in the above 2 points, as this is a minimum investment and the customer can opt-out anytime they wish after the month ends, subscribers love this option. Since there is no commitment issue, a customer can join, use your Saas service and choose to continue/end anytime.

    While you do add faster growth to your subscriber list, monthly subscription plans are prone to a higher churn rate (customers leaving more than staying).

Annual subscription business model:

As the term suggests, the annual subscription model is a yearly service provided to customers.

  • Increase in the capital: -
  • The major benefit for any subscription model with annual plans is that they get a year’s worth of revenue upfront. This money can be used to reinvest in the business, grow your team, develop your offerings, promotions, and much more.

    Customers who like your service will opt for the annual plan simply because it will cost them lesser than the other plans.

  • Higher chance of retaining customers: -
  • Customers who opt for your service have researched, weighed the pros, cons, and finally made their choice to subscribe. Hence you stand a higher chance to retain them for an entire year.

    Throughout this year, you can show them why this service is the best and why they have made the right decision. Businesses get an entire year to not only provide value offerings but also work on promoting the major benefits of staying subscribed.

  • Predict revenue with ease: -
  • When more subscribers are opting for the annual plan, you can predict revenue like a BOSS. It becomes easier to know how much you will grow by the end of the financial year. Knowing your revenue prediction can help you improve your business’s future plans.

    Decision-making can be based on revenue predictions. Moreover, your business can benefit from stable revenue prediction as investors prefer ventures that offer a stable cash flow!

Is there a unique solution?

A Unique Way of understanding the best subscription business model for your business will help you make better decisions. Yes, if the software can help you recover lost revenue and manage deferred revenue while maintaining the right level of compliance, audit, and taxation, you’ve got a winner.

But how can my subscription business model ensure all of this?

There are multiple options for businesses such as manual spreadsheets, basic software, and finally a subscription billing software. But the best subscription management software that can sort all your issues is ChargeMonk.

What is ChargeMonk?

ChargeMonk is a subscription billing software that helps recurring business models to manage their business seamlessly.

How can ChargeMonk help your subscription business model?

Over the years, ChargeMonk has understood industry trends and all the daily problems that a subscription business can face. Keeping these in mind, we came up with the best subscription management software. This is an all-in-one solution for your subscription business that will help you save time, effort, and money!

If this is what you want for your secure subscription business, do connect with us today and get a FREE TRIAL! Click here for more details!