Recurring payment or single payment: which one is better?

Ash Baggott

Can’t decide on the pricing strategy for your membership site? Welcome to one of the most difficult and frustrating decisions to figure out. How are you supposed to know whether you should choose a single payment or recurring payment, should you charge a one-off fee? Or should you bill your clients monthly? And most importantly, which one is better?

There are a number of things to consider when you’re weighing up how important it is to price your product or service, and which business model you’re going to choose. Let’s take a look at a few pros and cons of both;

Most importantly, let’s consider money. 

If revenue is the biggest pain-point when considering your pricing strategy, then single payments will in fact boost your bank account in considerably less time than recurring payments. However, longer commitments are needed from your clients, and it will produce lower conversion rates. 

Recurring payments have higher conversion rates, and are more appealing to clients who want shorter commitment periods. However, they produce a slower revenue. Choosing a recurring payment method, will mean more pressure on your managing and spending of your revenues to keep your business growing. 

Finding the perfect price straight away is basically unheard of, so you will have to test both approaches through gritted-teeth for a little while to learn about what your clients want, but also you need to learn what your business can handle. Don’t go into it blind though, make sure you test, learn and eliminate mistakes with each iteration until you find a strategy that works best for your revenue stream.

What about my cash flow problems?

Single payments will drop a lump-sum into your bank account, great! However, that lump sum is the complete amount you will receive from your client until the next time you ask them to renew. Meanwhile, you still need to pay your repeating overheads, which may differ from the initial cost.

Recurring payments will ensure your cash flow will grow along with your business. However, it may take a while to feel comfortable with this type of income. It may feel like your operating a hand-to-mouth business, and if recurring payments stop, you’ll need to make sure you can cover your repeated overheads.

Are my customers going to stay?

If you decide to get the ground running with a single payment method, your users will usually keep using your tool(s)/service(s). They will know that they’ve paid for a service/tool and now they’ll feel like they own it, they will aim to get the most out of their investment. 

Recurring payments make your product feel more like a service being provided by you, and your clients may be tempted to go elsewhere. As a business, you’ll need to pay more attention to detail and focus on retention and remarketing to retain your clients. 

So, what’s the best option?

Well, I can’t answer that for you. Now it’s your turn to make a decision based on how you want your customers to interact with your product. After weighing up your options, you need to manage customer expectations, make it clear from the get-go how you would like them to pay. You also need to understand what is the lifetime of your service, if it’s a single payment model, does it last one month, one year or forever? If a recurring method is for you, do you have the resources and technologies in place to monitor it?

Whichever you decide, you should have a powerful software in place to handle the demand. With Holded’s online billing software you can manage your clients needs within a flexible, user friendly interface.

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