SaaS Benchmarks for Subscription Plans
How SaaS businesses structure their subscriptions can have a significant impact on subscriber acquisition and retention, as well as increase revenue.
To provide benchmark data on the effectiveness of different options, Recurly Research studied how subscription plans are structured in the SaaS industry. This study included data from over 1,000 SaaS businesses and was conducted over a nineteen-month period.
These comparative benchmarks will help you make decisions on how to structure subscription plans to maximize revenue and spur adoption.
Popularity of Monthly vs. Annual Plans
The majority of SaaS businesses offer both monthly and annual plans, whether they serve a B2B or B2C audience. However, 27% of all companies in the survey offer only monthly plans. Providing a choice of plan options may spur increased conversion and retention.
Distribution of Monthly vs. Annual Plans
Data/Analytics
Legal/Finance
Marketing
Mobile App
Productivity
Sales/CRM
Web Development
Miscellaneous
80%
70%
60%
50%
40%
30%
20%
10%
0%
28.6%
1.3%
70.1%
Monthly
Annual
Both
We categorized each SaaS business into one of eight segments. The “Miscellaneous” category includes all businesses where the segment could not be determined.
All Segments
Monthly
27.0%
Annual
4.2%
Both
68.8%
B2B
Monthly
27.8%
Annual
3.8%
Both
68.4%
B2C
Monthly
27.1%
Annual
8.5%
Both
64.4%
Key Takeaways
- While the majority of SaaS businesses offer both monthly and annual plans, a greater percentage of B2C businesses offer only annual plans. This may be because B2B plans tend have higher price points, making one-time, annual payments a less attractive option. If only one plan option is offered, it is more likely to be a monthly plan.
- Web Development was the most likely segment to offer both monthly and annual plans. This may be because businesses in this category have customers that are at all stages of growth. A fledgling business is more likely to have budgetary restrictions and thus prefer to pay monthly. On the other hand, a more established business might have a greater ability to pay an annual upfront cost in return for a discounted annual price.
- In the Legal/Finance segment, all businesses offered a monthly plan option. This may be due to higher average price points for this segment, making annual plans with one-time payments a less attractive option.
Strategies to Encourage Adoption: Discounts and Free Trials
To encourage adoption, many SaaS businesses offer a discount in return for an annual commitment. In addition, free trial subscriptions are a popular tool which spurs conversions by letting prospects sample the service before committing to purchasing a subscription.
Top Five Discounts on Annual Plans
The most popular percentage discount is 16.7% which may appear to be unusual. However, it maps to a 'two month free' offer on an annual plan. Similarly, an 8.3% discount reflects a 'one month free' offer for an annual plan.
ONE
16.7%
TWO
10.0%
THREE
20.0%
FOUR
8.3%
FIVE
5.0%
Discount Offered by Price Segment
Our research showed consistent results across all price points. However, the research revealed exceptions at both the lowest and highest price segments.
The lowest-priced plans (less than $10) offered the greatest percentage discount on annual plans. Lower-priced plans tend to have higher churn, so promoting retention by offering a larger discount for an annual commitment is a common strategy.
Conversely, higher-priced plans offered the lowest percentage discount. Many businesses in this price segment may provide enterprise software in which features, functionality, and suitability are more important criteria than price.
Discounts According to Industry Segment
A wide range of price points within each segment results in large variances in median discount percentage.
30%
25%
20%
15%
10%
5%
0%
Data/Analytics
Legal/Finance
Marketing
Mobile App
Productivity
Sales/CRM
Web Development
Miscellaneous
Industry Segment
Free Trial Conversion Rates
While the median trial conversion rates were similar for monthly vs. annual plans, monthly plans had slightly higher conversion rates. Annual plans had a larger spread between the first and third quartiles.
Trial Conversion Rates for Monthly vs. Annual Plans by Price
For annual plans, the median trial conversion rate decreased as the prices increased.
Monthly Plans
Annual Plans
100%
80%
60%
40%
20%
0%
All
$0-10
$10-25
$25-50
$50-100
$100-250
$250+
Price Segment
Summary
The structure of subscription plans and whether you offer discounts or free trials are critical decisions impacting the success of your business. Comprehensive benchmark data can help inform strategic decision-making. When critical decisions are guided by data, adoption and revenue can increase significantly.
Understanding the effectiveness of different plan options is the first step, taking action is the next.
General Methodology
We examined a sample of over 1,000 SaaS sites which used the Recurly platform. The study encompassed a period of nineteen months, from January 2017 to July 2018. All data was aggregated and anonymized. Our study uses median, 25th, and 75th percentile values which eliminate outliers and provide a more accurate representation of the data.
For annual plan discount rate, we used this formula to determine the rate, with M equal to Monthly Price and A equal to Annual Price: (12 x M) – A / (12 x M)
