What methods of payment are acceptable in a SaaS company? It is almost certain that your idea is that your clients pay through a subscription model, in other words: that they pay you an amount month by month in exchange for a service and that they commit to a whole year. Maybe you even have your SaaS company up and running already and this is your way of charging your clients.
This method of payment is not exclusive to SaaS: gyms, newspapers and magazines are examples of monthly subscription services.
Advantages of subscription as a form of payment in SaaS companies
A subscription service has many advantages:
For the customers, expenses are predictable and the flat rate allows them to choose what they want to buy without having to pay more.
For the seller, it also means that revenues are predictable, that you don’t have to be looking for new buyers after every sale, and that you will have loyal customers.
It is not surprising, therefore, that this model is becoming a standard in all kinds of companies: it is convenient for buyers and sellers and the novelty of subscribing, for example, to a store and receiving a product monthly offers some kind of fun.
But not everything is good news.
Disadvantages of subscription as a form of payment in SaaS companies
Probably the most common disadvantage is that sometimes customers realize that they are not using the service they are paying for and are left with a certain feeling of having been cheated, leaving the customer with a bad image of your company.
It can be even worse if they are paying for a service without knowing it or without remembering it, because when they see the first invoice it will be even more unpleasant.
Another disadvantage is that any attempt to encourage spending, in a subscription service, can stimulate that customers unsubscribe from the service: if they pay money and we want them to pay more they can reconsider if they want to continue spending.
On the business side there are also problems:
First, there is a temptation problem: if you already have customers and they pay every month, why improve? The answer is obvious: to continue growing, but sometimes it is easy to waste time in complacency. Also, ethics: is it okay to charge customers who do not use the service but who signed up at the time?
Alternatives to annual subscriptions are emerging as a form of payment that implies more commitment from the company to the customer and, therefore, more awareness of his expenses for the customer.
Alternatives to annual subscriptions
Monthly subscriptions or less
The first and clearest is the monthly rather than the annual subscription. Word’s Office package is now offered as a service, with a month-to-month payment that offers a fully updated program without having to worry about buying an update, installing it and making it obsolete a couple of years later.
But you don’t have to stay there. And a subscription for a week or a day? If your company offers something to visit once a month at most, maybe many customers prefer to buy a day instead of opting for a whole month.
Back to the roots, to the most common thing: some companies pay for the use they are given. No flat rates. You only pay what you spend and when you spend it. Amazon Web Services is the biggest example.
The disadvantage for the seller is clear: it doesn’t allow you to plan your income exactly, but it sounds much fairer, which, in the long run, translates into customer loyalty.
A micropayment is, as its name suggests, a payment of a tiny amount. Cents, one euro, two euros, etc. For example, the euro you pay to expand Apple’s cloud space to 50 Gbs.
For the buyer, it hardly means anything, for the seller, who automates the payment, even less.
Do not charge the customer
How? So how do I make money?
Well, technically, if you don’t charge your client then it’s not the client. Think of examples of these services you use every day. You’re reading this article for free. Google you use it for free, TV is also free and online newspapers too.
More than not charging your customer, it’s about your customer ceasing to be your consumer.
Which form of payment to choose
How to charge is not easy. How much to charge is, also, not easy. We spoke about what prices to set in your SaaS company some days ago. You have to consider what kind of customer you want and how you want to reach them. It is clear that if your service is free you will have many more users than if it is paid. But it also gives the feeling, even if it is not founded, that if a service is free it has less value than a paid service, which can alienate your customers. Or you may not get enough volume of users to be able to pay for your business with advertising.
It all depends on common sense, but one thing is for sure: we want the customer to be happy to pay for your service.