Monthly billing is a norm in modern SaaS. Customers are expected to pay a monthly subscription fee each month. Meanwhile, most billing gurus and Twitter philosophers urge you to do annual billing, "Instead of charging your customers a flat rate per month, you can offer them an annual fee that is typically lower. Cash flow is important, and it's better to get money from clients sooner rather than later."
However, we’re doing things differently. Our website, Listen Notes (the best podcast search engine), provides daily billing for our Premium Membership customers.
Our podcast search engine is free for most users to use. It offers a basic set of tools for discovering podcasts, but those who want enhanced search features subscribe to our Premium Membership. They can choose to be Premium Members for 2, 5, or 10 days. Their subscription will automatically end after their selected number of days and they will only pay for these days. Therefore, our customers do not have to pay for an entire month at a time.
Of course, we also offer monthly and annual billing plans, but we make daily billing the default choice.
Why do we choose to do daily billing?
We started with monthly billing for our Premium Membership because it is the standard option for SaaS companies. As a result, we didn't even consider daily billing as a possibility because there are so few SaaS companies that offer this type of service. Can you think of any examples without Googling?
We have customers of all types who join the Premium Membership, including individuals who listen to podcasts, freelancers who work in PR and marketing (prosumers), and companies with large content curation apps/websites. Our traditional monthly and annual plans are not well suited for individuals and prosumers because they are more price-sensitive than business customers, and only need our premium membership occasionally.
Soon after we launched our subscription-based Premium Membership in 2020, we began receiving quite a few refund requests and credit card chargebacks from customers -- mostly from individuals and professionals. This led to many customer service issues for us. After talking to some of our users, we confirmed that they wanted to pay for our service, but thought it was unnecessary to pay a full monthly fee if they only used our product for two days.
So we decided on a billing schedule based on daily usage, which we think is fair for both customers and our company. Customers can try out our service for a small daily fee and then decide whether it would be more cost-effective to continue monthly. And as a for-profit company, we can generate revenue and reduce customer support issues.
Before signing up for the daily billing plan, customers indicate how many days they want to be a Premium Member, and then we automatically unsubscribe them. We have found that many customers often subscribe to our Premium Membership for a few days and then unsubscribe, but then often return. We believe that good service will generate revenue. Therefore, we don’t want to overcharge our customers.
Can other SaaS companies benefit from doing daily billing?
Customers benefit greatly from SaaS's daily billing. They're saving money by paying a daily fee rather than a monthly fee - some may argue that hourly / minutely billing is even better!
But as a SaaS company, you need to consider various factors when deciding whether or not to offer daily billing to your customers. The following list summarizes the most important conditions:
- You have customers with different needs and preferences, and a big portion of them are price-conscious.
- Customers may not be willing to pay a monthly fee if they do not use your product frequently.
- Your daily fee is high enough that you don’t need to worry about transaction fees associated with payment processors (e.g., Stripe, PayPal…).
- You hit a wall with your monthly plan growth. In such situations, daily billing will enable you to obtain revenue from customers that are not ready to pay a monthly fee.
- Your customer support staff is dealing with issues related to monthly billing plans, including refunds and credit card chargebacks. A small daily fee would be fair to both customers and you as a business.
The real key is that you should never stop testing your pricing models, which are living, breathing things, and they will change and evolve as you continue to test, learn, and grow as a company.
You can learn more about SaaS pricing by listening to podcasts. Just search “SaaS pricing” on Listen Notes.
