James: James Schramko here from SuperFastBusiness.com chatting with John Lint from 10XPRO.io. Hey, John.
John: Hello, hello. Hi!
James: So I’ve got a couple of memberships. And you have quite a few clients on the 10XPRO platform who have recurring subscriptions and I thought it would be good to chat about the difference between monthly versus annual billing.
Of course, there’s also other ones like quarterly, etc. And I’ve tried all sorts. Over the last 10 years, I’ve tried a lot of different things. And I do get this question a lot. So I’m interested to know, if you’ve seen a trend between your members of what they prefer and how they structure their pricing from a strategic point of view, and what some of the sort of ups and downs might be in favor of either?
John: These days, when you see a sales page offering access to a membership site, usually you’re going to find both prices, both pricing options there. So, a monthly option and a yearly option. Now, of course, with the yearly, there’s always going to be an extra discount sometimes, not all the time. But what I’m seeing is that, yeah, there is, it might be traditional strategies that some members are using, for example, the yearly will be 10 months, right? So instead of 12 months, 10 months. You don’t have to do it but that’s what some people do, you have some type of, obviously, bonus. You can also package that with extra bonus. So if they get the yearly, they get this, this and that. Maybe it’s a strategy session, or maybe some extra coaching calls or something like that, you know? Just to entice people to go to yearly.
So, obviously, the big advantage when you have someone who is committed to yearly is that you’re not dealing with billing issues, the credit card expired, or there’s a problem to charge the card and you need to follow up, because that’s the issue when you have a membership site. And you need to make sure your team is ready, is trained to handle those situations and to follow up with people because it will happen. And it will happen for many reasons.
Like, maybe there’s not enough funds in the card, maybe the card expired, maybe the bank of the customer is actually blocking the transaction. And that’s very common these days. I actually had Facebook, actually, my bank blocking Facebook from allowing them to charge my card, right?
James: That’s very kind of them.
John: Oh yeah, very nice. But you know, so it happens all the time. The banks are trying to protect themselves, so they just want your authorization. So that would happen, as well. So, you need to have, maybe your team in place to be able to handle that. Obviously, that problem will happen more often with a monthly billing versus to a yearly.
The cool thing with the yearly is that now, they pay once, they have one year access. It’s a more committed type of customer. Usually, they’re going to stick longer. Obviously already longer, so a year paid upfront. But usually, if you do a good job then those guys are the ones that you want, because they are going to likely, unless you screw up, they’re going to renew, you know? So that’s kind of like the goal. And I like to see it as Okay, we can get them started on monthly but then our job as well on the back end is to try to motivate them as much as possible to get to yearly. Not only they might save a bit, but also it just makes everything easier. And the commitment is basically increased.
So that’s what I’m seeing. I see both to be honest on the page, or another strategy is just start with the monthly, you focus only on the monthly. That way, there’s no distraction. Because one of the things, when you have a sales page, if you’re offering too many options, like for example, monthly, quarterly, yearly, and you get this bonus, this bonus, people get stressed out. And they’re like, well, I don’t know what to choose. And if they don’t know, they are not buying. We don’t want that. I’d rather, okay, focus on making that one sale, maybe it’s the trial or maybe the monthly, and then do a good job on the backend, deliver that value, help them out, help them get results. And then remind them that, hey, if you’re enjoying it, you might want to think about going to yearly.
That’s exactly what I do with 10XPRO.io. I don’t talk about the yearly upfront. I try to make sure that people get on board, we help them, I want them to get started fast. I want them to start building their website, building their funnels, accepting payments online, selling their first product. That’s my focus for next few months. And then later, as I see that they’re getting results, they’re enjoying it, then I might start telling them about, Hey, there’s the yearly if you want to and it’s right there just to take them to the next step. And that’s something that works as well, really well.
James: Some really great tips, I’ll just recap there. Because I’ve seen a lot of people will offer like 10 months, sort of rate. If it’s 79 a month, they might offer annual for 790. I often say to them, Look, you’re not going to get as many annuals as you could if you show them a much better saving. I think you probably need to offer 20 or 30, or even 40% off if you really want to drive annuals.
I think it’s a great point about the billing frequency. Because if you have one billing a year, you’ve got a better chance of it going through than if you’re doing 12 times a year. There’s a huge amount of credit card failure. One thing I’ve noticed when you use PayPal, they often require a second funding source. They need a bank account or credit card attached to that account so I’ve seen lower billing failures with PayPal. PayPal also have lower rates than some of credit card facilities, as well. And you can also store up your currency in whatever you get paid in, in some PayPal accounts rather than getting converted which is something that happens to a lot of Australian marketers. If they’re using Stripe, their US dollars get converted into Australian dollars on the fly. So you don’t have any control over the currency. So it’s a separate matter altogether.
Of course, if you have annual billing, then you might make your sales and then you’ll get the rebills. Probably about 50% will rebill. That’s sort of a rough benchmark to work towards. So in a year from now, you could be making your regular sales plus rebills. And in two years, regular sales plus rebills and rebills, you know, 50, 50, 50, 50, and it sort of goes for years.
Now, here’s the thing, if you have a great product and people stick around for a couple of years, like in my case, people say about that 24 months, 26 months or so, it’s actually probably in my interest to have monthly because I might make more over the long term than if I offered a really steep discount for annual. And to speak to your point too, about the choice, when we split SuperFastBusiness into two versions, there’s the Standard version and then there’s the Intensive version which comes with my personal coaching. When we made that change, I realized, well hang on. Now I’ve got too many options. I got this one monthly and that one monthly, this one annual that one, stop. Okay, so we’re just monthly only now, this one or that one. A or B. It’s a much easier choices, it’s less overwhelm. It’s like that famous jam test.
So I was a huge fan of annual because it gets you automatic retention, it’s less billing frequency, less billing failure, it gets you a great type of customer. What you’ll find is as your rates increase, it might be a bit more of a sort of big proposition. For example, at the SilverCircle level, might be easy for me to say, Hey, you can pay $5000 per month, no contract, leave whenever you want. It’s performance-based versus saying, Okay, so send me $60,000 with a funds transfer and that’ll get you your first year. They might be, Well, hang on, I don’t even know if I’m going to get a result.
So if you have a high-performance product that actually works, monthly is probably still a reasonable thing for you. Also, you get really stable cash flow and you might get paid more as a premium because people should pay more if they’re paying monthly. Because if they were going to pay annually and put on a credit card, they’re going to be paying interest, you know, so that’s the other thing. Now, if you only offer annual payments, then, of course, refer people to Hey, look, you can put on a credit card and pay them off. They do the installment plans, not me. So there’s a whole bunch of information there to take away.
So the short answer is monthly versus annual, it depends. And if you want to get more of one or the other, you can definitely incentivize it by the amount of difference or contrast you make. You may offer just monthly, you may offer just annual, you may offer either. If you’ve only got one product, then the choice of A or B can sometimes beat the choice of just A.
And also depends how mature your businesses and what kind of results you get for people. And the other thing to keep in mind too, if you do get people to buy annually and they’re not happy, you’re probably increasing the charge-back possibilities. In monthly, it’s a little bit lower aggravation level for people. And they’re more likely to be able to realize, hey, this isn’t for them, and they don’t have this resentment or they’ve gone down the wrong path.
I’m just talking about what I’ve seen across a variety of my own clients’ accounts, because I’m looking after about 500 customers at the moment, and I see a lot of data. And for me right now, across the board, all of my programs are straightforward monthly. And that’s what’s working well for me, but I have done all variations in between. John likes annual. What do you like? Try it, try monthly, try annual.
The good news is it’s very easy to set up in 10XPRO. You can process your payments through a variety of different processors like Stripe or PayPal, and you can set it as monthly or annual. And you can play around with the numbers and see what works for your membership.
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