Membership organisations play an essential role in communities worldwide, gathering together people of different interests and backgrounds and creating a sense of community and belonging. And while yearly memberships have long been the standard, many organisations have started switching to monthly billing, reshaping their subscription billing strategy. You might not be convinced at first but let us tell you that switching to monthly membership subscriptions can bring several benefits to both, your company and its members.
In this blog post, we look at numerous advantages bought to membership organisations by monthly subscription payments. Whether you are on the board of your membership organisation or someone considering starting one, this article will provide valuable insights into the benefits of monthly subscriptions.
But first...
What does a monthly subscription mean?
A monthly subscription refers to a recurring payment plan where a customer pays a predetermined amount of money at regular intervals, typically on a monthly basis, to access a product or service. This payment arrangement allows customers to enjoy ongoing access to a service or product for as long as they continue to pay the subscription fee.
Now we know what a monthly subscription is, let's take a look at all the benefits of monthly subscription payments for membership organisations!
1. Monthly subscriptions lead to consistent and predictable revenue
Let's start with the most essential aspect: cash flow.
With monthly subscriptions, your organisation can obtain a steady stream of income each month, rather than a lump sum payment once a year. This provides a predictable and consistent source of revenue that you can count on, making it easier to budget and plan for future expenses and initiatives.
In contrast, yearly memberships can be more unpredictable and lead to fluctuations in revenue. For example, if a significant number of members renew their memberships at the same time, you may receive a large influx of funds all at once. However, if the renewal process is spread out over the year, your organisation may experience gaps in revenue, making it more difficult to plan effectively.
Monthly subscriptions bring organisations security and stability.
2. Monthly subscriptions are more profitable than yearly plans
You might have come across annual memberships that offer a significant discount when paying annually. According to Inner Trends, most companies and organisations offer from 5 to 20% discounts on annual memberships, with some cutting the yearly price by as much as 35%. And while some customers might be in a position to pay a large sum of front and take advantage of the savings, many will prefer to pay a smaller amount month by month.
The important thing is to cater to your members' needs. Offering monthly and annual subscriptions would be the ideal strategy for any membership organisation.
3. Reduced churn rate with monthly payments
Monthly subscription payments make it easier for members to maintain their membership as they don’t require any additional action. This is particularly true when members sign up for automatic recurring payments, like Digital Autogiro in Sweden. The convenience of automatic withdrawals leads to a lower churn rate and a more stable and loyal membership base as the process is automatic and doesn't require any effort from the member.
When compared to annual memberships, monthly subscriptions allow members to continue their membership even if they are not actively using all the offered benefits. Members are more likely to stick with a membership for a longer period of time, hoping to eventually take advantage of all the benefits.
On the other hand, paying a large annual fee for a membership they are not using is likely to prompt members to cancel their membership altogether, instead willing to give it another go.
4. Monthly subscriptions mean more engaged members
Members who subscribe monthly are more likely to stay engaged or involved with your organisation as their commitment is ongoing. Additionally, someone who regularly sees outgoing payments on their bank statements is likely to try and make the most out of their membership, becoming an active member less likely to cancel their subscription.
When it comes to annual memberships, some of your members might have long forgotten about their membership, while others might be counting the days down to the next renewal date to cancel. This directly results in a lack of engagement and decreased membership retention.
5. Monthly subscriptions offer increased flexibility and lower entry barriers, resulting in higher conversion rates
Offering the option of monthly subscriptions provides increased flexibility and lower barriers to entry for potential members. This type of membership is less of a commitment compared to a yearly membership, making it more attractive to individuals considering joining the organisation and simply trying it out. The ability to change or cancel at any time leads to higher retention rates and a more satisfied membership base, as members feel confident in their ability to adjust their membership as needed.
Not only does this increased flexibility result in a more dedicated member base, it also attracts potential new members who may have been hesitant to commit to a yearly membership. This in turn leads to increased conversion rates and more predictable revenue for the organisation. By providing options for monthly payments, the organisation is able to tap into a wider pool of potential members and build a stable and committed member base.
6. Flexibility to increase prices
Running an organisation or association generates different kinds of costs which can increase due to factors such as inflation and rising utility costs; it’s important to regularly review the benefits offered to members and adjust the price accordingly. While it may not always be possible to maintain the same level of benefits for the same price, regular evaluations and recalculations can help ensure that the organisation is able to continue providing valuable services without losing profits.
Increasing prices, while never an easy decision, is often more accepted by members who are paying on a monthly basis compared to those who are subscribed to an annual membership. For example, a 5% increase in prices is likely to be more manageable for members paying monthly, as opposed to those who are paying a lump sum annually.
7. Manage refunds with monthly payments
Managing refunds or cancellations can be a delicate matter for membership organisations, especially when it comes to refunding annual fees. It’s important to maintain a positive relationship with members, even if they need to cancel or request a refund; this not only protects your organisation’s reputation but also leaves the door open for the member to potentially rejoin in the future. With monthly subscriptions, processing refunds and managing cancellations is much easier and causes less impact on your organisation and its revenue. Refunding a single month’s fee is less noticeable for your budget than a large portion or the entire annual membership fee.
Do you understand all the benefits of switching to a monthly subscription plan? Is there an important benefit that we have missed? Or maybe you just want to talk to us about our payment solutions? Don’t hesitate to contact us!
