Arguably the most beautiful aspect of SaaS or subscription based businesses is the recurring revenue that comes with them. As a business owner or founder, you worry far less about how much cash is in the bank with the predictability that Monthly Recurring Revenue (MRR) brings.
Then comes the opportunity to expand revenue with the help of upgraded subscriptions. Upgrading or downgrading subscriptions can be as simple as effecting a price change for your current features and products. In the situation that upgrades go well, your customers get more of what they want, while revenue shoots up to the right.
As my dad says, “Well that’s not hard to take.”
When considering expansions and offering customers upgrades, two things need to be considered:
- What are the best ways to shift product offerings and pricing?
- How can we do this in line with the payment system we use, like Stripe?
In this article, we’re going to talk about just that: how can you best monitor expansion for customer upgrades in Stripe.
How do I upgrade a subscription in Stripe?
An upgrade is simply a change to an existing subscription plan.
Suppose your pricing plans and features are well-structured. In that case, these changes should be a regular occurrence that allows your company to identify patterns and determine if they will be termed recurring, adding to MRR values. Two ways a subscription can be upgraded is by changing the price or changing the quantity.
1. Changing the Price
In the subscription plans your SaaS company currently offers, there is most likely more than one plan for your customers to choose. SaaS subscription plans feature an average of 9 plans with varying and incremental prices. To change the price to effect an upgraded subscription, consider this example.
Customer X signs up for the monthly basic plan on your website or marketplace. The basic plan costs $16; after the first month, Customer X opts for a different plan that costs $25 because it has more features or allows more functionalities with your product, or has a more extended billing period.
In Stripe, a series of API codes initiate the switch from one subscription plan to another using Customer X’s retrieved ID. If the switch is between two monthly subscriptions, the billing dates will remain the same. However, when the upgrade is made from a monthly subscription to a yearly subscription, the billing date automatically changes to the day when the upgrade was completed.
2. Changing the Quantity
Where the most common way of upgrading subscriptions in SaaS is by changing price, changing quantity is also a way to go. It isn’t unheard of that custom offers are given to clients who request them.
Often, SaaS companies develop pre-set quantities for each subscription plan. However, for the proper negotiations, quantities may be moved around, and sometimes for higher price rates. Regardless, an increase or add-on of quantities can be classified as an upgrade.
How do you downgrade a subscription in Stripe?
It’s an unfortunate part of business, but customers will need to downgrade subscriptions from time to time: rough couple of months, unforeseen financial changes, changes in product needs, etc.
Similar to upgraded subscriptions, subscription plans can be downgraded by changing the price or changing the quantity.
1. Changing the Price
If Customer X decides after the first month of the upgraded version that costs $25, that they would prefer to go right back to the basic plan, the switch will result in a downgraded subscription. The price for Customer X’s subscription will be moved down to $16 once more.
As with the sequence for upgrading subscriptions in Stripe, you’ll downgrade a subscription in Stripe using a different set of API codes. Once the downgrade is initiated, the codes will run automatically.
2. Changing the Quantity
Let’s say Customer X decides that they don’t need particular features in the subscription plan they are currently paying while retaining some other remaining perks. To downgrade a subscription in this situation, simply change the quantity available in that subscription plan.
Now you know how to manually upgrade and downgrade subscriptions in Stripe. Let’s move on and talk about how to best manage plans and features for your SaaS.
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How do I manage plans and features for my SaaS?
Many established SaaS companies have a leg up on the early stage startups that can’t be overlooked. Companies that have been around understand well what pricing plans features work best in each package.
But how’d they get there? It has all come through trial and error.
For a SaaS company with only a few years under its belt, figuring out the best strategy for subscription plans takes diligence, attention, and experimentation. If this is you, here are a few things to keep in mind early on:
1. Design plans with upgrades in view:
When deciding what units, quantities, or features should go into each package, consider the best positions that will prompt your customers to get an upgrade. This strategy is tried and proven, and you can find it almost everywhere.
Let’s say that you start with three subscription plans with incremental pricing; understanding that one out of the three will keep your MRR in tip-top shape can be your plus. For some SaaS companies, you’ll find that the subscription plan in the middle is often positioned to be the “one.”
Your “one” preferred subscription plan should then contain features that the basic plan does not have but which a customer could use if they want to make the most out of your product.
Compared with this preferred plan, the advanced (or in some cases “enterprise”) plan may contain all the same features, but include more perks that the customer can do without and still enjoy your product. Those additions in the advanced package won’t typically do much to sway their interest in the preferred plan (unless a customer’s needs are more aligned with an enterprise plan).
2. Integrate Subscription Management Software:
In addition to keeping track of subscription payments and reducing churn, subscription management software can provide several more perks. For example, Baremetrics provides financial metrics that can help your company hit the ground running.
Also, if you’re wanting to pull information on SaaS companies in your industry, Baremetrics Open Benchmarks offers insights into things like the Average Number of Plans that SaaS businesses operate with and more.
This kind of information can be a game-changer when trying to position your subscription plans as well as (or better than) your competition.
3. Pick an efficient online payment system:
Nothing hurts an intended upgrade like a failed charge or declined payment.
More often than not, payments fail due to your billing system that’s integrated with your website. Keep in mind though that there are multiple other reasons why failed payments fail. Whatever the reason, an efficient payment system, such as Stripe, is meant to work hand-in-hand with your customer service to help both your customers and team seamlessly handle upgrades.
Monitoring MRR Increases From Upgraded Subscriptions
Tracking your company’s MRR as subscriptions are upgraded or downgraded is essential. Hopefully you’re still not one of the few manually making those calculations in a Google Sheet. Instead, you should be using a tool that presents all the necessary revenue metrics in an easy to access dashboard. Insert Baremetrics. 😉
Monitoring MRR Increases with Baremetrics
Baremetrics is a business metrics tool that provides 26 metrics about your business, most especially your MRR, ARR, LTV, total customers, and more. From there you can integrate directly with your payment gateways, ensuring information about your customers is automatically piped into a central, crystal-clear dashboard.
Additionally, you’ll have the ability to see more clearly into Stripe Analytics when it comes to metrics like:
- Active subscriptions
- Upgraded subscriptions
- Downgraded subscriptions
- Segment MRR by upgraded/downgraded subscriptions
- Identify and calculate MRR changes due to changing subscriptions
Join the other 90% of our customers using Stripe analytics to monitor MRR increases seamlessly.
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