Efficient & Instant Management of Upgrades & Downgrades Helps Subscription Businesses to Retain Customers

Subscription businesses have to come up with all the offers, convenience, and utilities that can hook a customer to their subscription product or services. Because the subscription business is based on consistency and recurrence, it is extremely important to facilitate a customer as per their current situation and present need. One way to ease them is to insert flexibility in availing the subscription services by granting them the assistance of switching in between the subscription plans.

In simpler words, “Switching the subscription plans” means to upgrade, downgrade, postpone, pause, cancel, or reactivate the subscriptions in the mid of the cycle, if, for any reason, the customer wants to.

The freedom of upgrading and downgrading the subscription plan keeps a customer in the loop with the subscription services providers and, instead of losing them, offers them the prospect to materialize the opportunity, later.

What is Subscription Upgrade and Downgrade?

Allowing subscribers to switch to the plan that costs more than their current plan in the mid of their subscription cycle is called Subscription Upgrade.

Likewise, allowing subscribers to switch to the plan with fewer features and less cost than their current plan is called Subscription Downgrade.

Managing the Upgrade and Downgrade Mid of the Cycle Changes in the Subscription Billing

Upgrading and downgrading subscriptions often involve complicated calculations and revenue logic to accurately prorate the subscription charges for the month in which these mid of the cycle changes occurred.

If the customer opts to make these changes in the mid of the subscription month or cycle, the merchants can charge the customer an additional amount of money for an upgrade, or give him or her the credit for a downgrade.

The efficient management of the subscription upgrades and downgrades requires two processes:

Updating the status of the plan or plan ID in the subscription in the subscription management software
Adjusting the subscription charges in the Billing UI of the subscription management software

Managing this mid of the cycle changes in the billing is called “Prorated Subscription Billing”, and the process is known as “Proration”.

Let’s understand this with an example. For instance, Aleyn buys an OTT (Over the top) monthly subscription plan, called “Silver” which costs $20 a month, from a streaming service. On the 15^th of the month, she decides to switch to a “Gold” plan that costs $50 a month.

Aleyn used half of her subscription plan i.e. $10 till the mid of the month. However, as she has upgraded her plan in the mid of the month. Her next half would cost her $50/2 i.e. $25.

At the end of the month or the beginning of the next month, subscribers will be charged as per their subscription plan consumption. In Aleyn’s case, it will be $35.

The same process of cost adjustments would have occurred in the billing, but in the downward spiral, if Aleyn chose to downgrade her plan to the “Bronze” plan that costs $10 a month.

Also Read: Customer Self-Service Portal for SaaS in 2022

Advantages of Subscription Upgrade and Downgrade Management

Preserves Subscription Cycle

Proration is the process through which these mid of the subscription cycles are adjusted in the recurring billing of the customers as per their consumption of the plan throughout the subscription cycle. It preserves the subscription period.

Builds Trust with Transparency

Adjusting subscription billing as per the upgrade and downgrades were chosen by the customers to build trust in customers. The transparency of the process of prorations to charge them only for what they have consumed draws the possibilities to keep them using your subscription products or services.

Increases Revenue Growth Opportunities

Offering customers the options to switch subscription plans if they want in the mid of the subscription cycle allows customers to experience and identify the best options for them while paying you for those subscription products or services. It is a win-win situation for the subscriber as well as for the vendor or merchant. Seldom, a customer chooses to downgrade the subscription plan. Mostly, subscribers opt to upgrade a plan.

Supports Product or Service Development and Business Growth

Allowing subscribers to upgrade or downgrade their plans encourage subscription businesses to focus on the development of their subscription products or services to increase the chances of the plan upgrades or exclude the products or features in a subscription service that no longer are fruitful.

Disadvantages of Subscription Upgrade and Downgrade Management

Increases Risks of Revenue Loss

Even though the subscription upgrade and downgrade can increase the chances of revenue growth, proration also incurs the risk of revenue loss with the prorated billing of downgrades.

Subscribers can stay with the fermium or basic plans for quite a long without upgrading their plans.

Interferes with Accurate Revenue Recognition

Due to the fluctuating value of the subscription charges with the upgrades and downgrades adjustment in billing, it interferes with accurate revenue recognition. The recurring revenue cannot stay stable and predictable.

Intensifies the Accounting and Finance Jobs

Adjusting the frequent billing changes increases the billing stresses and complicates the spreadsheets and calculations that may require extra resources and, of course, the workforce.

Manage Accounting Hassles and Expand Customer Lifecycle by Prorating Subscription Billing With SubscriptionFlow

SubscriptionFlow is the subscription management and recurring billing software that automates the whole process of subscription billing, payments, and revenue management, including prorated subscription billing for subscription upgrades and downgrades.

SubscriptionFlow allows customers to manage their subscription upgrades and downgrades with the self-service portals and let merchant adjust these mid of the subscription cycle changes in the billing with the user-friendly dashboard at the client’s portal.

Clients can manually adjust the subscription change status in the SubscriptionFlow dashboard that automatically takes control and manages the prorated billing, accordingly.

SubscriptionFlow also allows subscription businesses to deal with the drawbacks of subscription upgrades and downgrades offerings. It allows them to control the subscription billing proration as they want. They can choose to manage their subscription mid of the cycle changes as it suits them and whenever they want, such as

No proration at all.
Prorating Subscription Billing for “Upgrades” only.
Proration for other subscription mid of the cycle changes such as plan pause, reactivate, or cancellation to facilitate their customers and to gain their trust with transparency and accuracy.
Automation overcomes the cost expense and reduces the workload with its AI-mediated automated modules of billing and accounting.
It somehow allows the subscription businesses to control the upward growth of their recurring revenue stream. Its SaaS analytics gives you real-time projections of the recurring revenue as well as predict the projections for monthly or annual growth.
It identifies the revenue leakages in real-time by monitoring the KPIs, including MRR, ARR, CLV, and others.
Gain and share more insights with the sales and marketing departments to streamline the revenue operations with the data-driven and laser-focused product development and promotion.

Learn more about the management of subscription upgrades and downgrades and the prorated billing personalized adjustments with the experts at SubscriptionFlow. Request a demo or get a free trial and revive the idea of capitalization of the revenue opportunities with SubscriptionFlow.