While many statistical trends apply to all subscription businesses, it’s important to also understand the unique challenges different subscription industries face. For example, how best to structure one’s product offerings, what discounts if any should be given to customers willing to commit long-term, and what role does pricing play?
The Recurly Research team set out to answer these questions and more for the Software as a Service, or SaaS, industry. Our analysis included data from over 1,000 sites over a 19 month period, including segments by price point, sub-industry, and plan type.
We found that nearly 70% of SaaS subscription businesses offer both monthly and annual plans. The monthly option allows new subscribers to sign up without having to commit long-term, whereas annual subscribers generally get a 10-20% discount on the monthly amortized price in return for a longer commitment.
One interesting trend our team observed was that SaaS businesses with higher Average Revenue Per Customer (ARPC) were more likely to offer only annual subscriptions. Many of these SaaS companies provide B2B enterprise software. We posit that for these subscribers, features, functionality, and suitability are more important criteria than price. SaaS businesses with a lower ARPC were most likely to offer only monthly subscriptions.
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The value of Recurly is that we no longer have to worry about the different aspects of subscription management. Instead, we can focus on things that are our core competency, like adding value to our service and expanding our offering. That’s been a huge win for us.