Your subscription pricing and plan structure directly impact acquisition and retention, and nailing the formula requires a test plan and benchmark data. Join this VB Live event for an in-depth look at essential SaaS benchmarks and best practices to maximize revenue, improve acquisition, and spur adoption.
SaaS is booming, Gartner says: By 2020, all new entrants and 80 percent of historical vendors will offer subscription-based business models. That’s because when services are monetized through the subscription model, it creates significant additional benefits for a business: consistent, predictable revenue, an ongoing relationship with subscribers, and multiple touchpoints that deliver rich, actionable data.
But in such a crowded market, filled with upstarts and big-deal behemoths, it’s more important than ever for SaaS businesses to consider the structure for their subscriptions, which is one of the biggest factors in subscriber acquisition, retention, and revenue.
To stay competitive, you need to be on top of trends in your industry and evolving behaviors and expectations from your subscribers, to be ready to pivot. And alongside that, it’s essential to also stay aware of potential new customer segments and the new opportunities that are regularly emerging, and be in a position to take the leaps you need to maximize those opportunities.
A subscription model offers you ongoing subscriber and prospect data, allowing you to identify patterns, stay on top of trends, and conduct meaningful, directed experiments with different pricing, packaging, and plans to uncover optimal business models — whether fixed cost, seat- or usage-based, or even hybrid models with one-time add-ons to your core service or product.
Your marketing department also gets the data it needs to test customer acquisition methods, whether it’s leveraging special offers or promotions or accessing different channels, giving you insights to determine the optimal mix of promotions, pricing, and plans that results in the greatest subscriber LTV.
But benchmark data is key to creating a full 360-degree picture of your competitive landscape, as well as the trends that you need to keep an eye on. Comparative benchmarks help you make decisions on how to structure subscription plans to maximize revenue and spur adoption.
Recurly Research released their most recent subscription plan research, which studied how subscription plans are structured in the SaaS industry. This study included data from over 1,000 SaaS businesses and was conducted over a nineteen-month period. Here’s a look at just some of the findings.
Popularity of monthly vs. annual plans
The study found that the majority of SaaS businesses offer both monthly and annual plans, whether they serve a B2B or B2C audience — but 27 percent of all companies in the survey offer only monthly plans, while businesses with the highest ARPC are the most likely to offer only annual plans.
B2C businesses were more likely to only offer annual plans, but overall, if only one plan option is offered, it is more likely to be a monthly plan. The data suggests, however, that providing a choice of plan options may spur increased conversion and retention.
One of the most popular adoption strategies is offering a discount on annual subscriptions, as well as free trial subscriptions, which appear to spur conversions, when prospects are able to sample your service before they hand over their cash and commit.
Top annual plan discounts
Most companies offer a 16.7 percent — which sounds odd, but actually maps to a two-months-free offer on an annual plan, while the second most popular discount, 8.3 percent, is a one-month-free offer on an annual plan.
Because lower-priced plans — those under $10 — tend to have higher churn, a common retention strategy is to offer larger discounts for annual commitment, the study found.
Free trial conversion rates
34 percent of SaaS businesses offer free trial subscriptions. For annual plans, the median trial conversion rate decreased as the prices increased, but overall, conversion hovered around 80 percent for trial plans of monthly subscriptions across price tiers.
Your subscription plan structure, your discount strategy, your free trial tactics, and more are all critical decisions that directly impact your business’s success — and benchmark data like this is vital in making informed, successful decisions. Understanding the effectiveness of different plan options is the first step, taking action is the next.
For an exclusive, in-depth look at Recurly’s benchmark data and research, data-driven insight into the game plans that will help you maximize revenue and boost retention, plus a look at how to build a test-learn-and -iterate framework that works, register now for this VB Live event!
Don’t miss out!
Attendees will learn:
- Important SaaS benchmarks by industry segment
- How to structure your SaaS subscription plans and pricing to maximize revenue and retention
- How successful SaaS companies use a test, learn and iterate framework to optimize revenue
- The key metrics — and reports — to monitor for success and maximum LTV
- The results of an in-depth case study on SaaS testing and pricing
- Panelist: Emma Clark, Chief of Staff, Recurly
- Moderator/Analyst: Sean Joyce, Recurring Revenue Technologies, Navint
More speakers to be announced soon!
Sponsored by Recurly