The Rise of Prepaid Subscriptions: Why you should add it to your pricing strategy
Pricing is one of the most underrated tools in a company’s business strategy, yet it can be one of the most powerful to increase profit, customer satisfaction, and brand loyalty. In a study, 75% of baby boomers and 62% of millennials highlighted price as one of the top drivers of brand loyalty. But with pricing being ever-evolving it can be hard to keep up with the latest trends, all while keeping your company profits growing.
In the last couple of years multiple new pricing models and strategies have become more and more popular, including Usage-Based Billing, Events-Based Billing, and Value Based Pricing, amongst others. While these are all useful and impactful, none of them offer the monumental benefits Prepaid Subscriptions bring to the table. With 2020 being the year of ups and downs, and the economy constantly taking turns, stability is what businesses are hungry for. Prepaid Subscriptions allow you to use your current pricing models while lowering your risk of churn and unpredictable revenue. What does that equate to? Increased business stability for B2B SaaS.
So what are prepaid subscriptions? Prepaid subscriptions are when customers pay up front for your product and then draw down against that balance over time. This drawdown may occur from using any of your products and services (such as those billed on consumption, events or simple subscriptions) or be limited to specific consumption based services. As your customers consume, their prepaid balance is kept up to date in real time so they, and you, always know where they stand. When your customer gets close to depleting their total prepayment amount, or approaches the ‘threshold’ amount, you have set for them, you have the option to:
- Allow your customer to deplete their prepayment entirely, ending their engagement to your product and service
- Automatically top up your customers’ prepaid balance to a predetermined, and agreed upon, amount so they can keep consuming without interruption
- Be notified of prepaid levels, so your sales or customer success teams can individually reach out for a personalized customer experience
From here, prepaid can be combined with any pricing model you already have. The flexibility even extends to usage based billing. By dynamically calculating the prior consumption you can predict future usage and form a prepaid subscription to fit each of your customers needs specifically. Not only do you improve your forecasted billing, you also provide a customer-centric approach to those clients that prefer to pay up front for a prepaid subscription offering.
Not only do prepaid subscriptions offer business stability and predictable revenue forecasting, but it can increase customer value by 94%. Prepaid customers are more valuable as this group commits to longer-term engagements, instead of a month-to-month subscription that they can cancel at any time. B2B SaaS companies that take advantage of prepaid commitments advance their business planning and budgeting through improved strategy. This model allows you to reduce your risk by collecting money upfront, enabling you to seamlessly plan and execute your business strategy.
Prepaid subscription benefits are not limited to the companies offering this billing model, they also extend to the end consumer purchasing this way. Prepaid billing gives your customers the seamless customer experience they desire. It’s not only businesses that want predictable revenue and expenses. Customers want to be able to forecast expenses and predict their spending long-term as well. Allowing them to select a prepaid model gives them the opportunity to lock-in pricing and strategically plan around it.
Prepaid Subscriptions are on the rise amongst B2B SaaS Subscription companies due to the immense benefits to not only your company but also your customers. In a time where stability is essential, prepaid subscriptions can be a powerful tool to give your business an extra peace of mind and safety net.
