Upgrade or Downgrade Memberships & Subscriptions with Ease

Customers aren’t happy with rigid subscription plans anymore. They don’t want to be locked into a certain tier which they can’t change unless they cancel subscription and re-subscribe. Such rigidity is a recipe for churn. It also acts as an upsell blocker since customers might opt against upgrading at all if that means subscribing to a new plan all over again.

That is where the requirement for seamless plan switching comes in. Upgrade and downgrade are must-have options for subscription companies and memberships. These features give customers the flexibility to move between plans at will. This makes them powerful retention agents giving customers choices beyond cancellation.

What Do Upgrade and Downgrade Mean in Memberships?

Memberships offer customers different service tiers. Each tier is priced according to the value it delivers. When a user signs up for becoming a member, they choose and pay for one such tier. Imagine a gym membership as an example. This certain membership offers three distinct tiers named Beginner, Plus and Pro.

The Beginner tier offers access to the basic workout equipment only. The Plus tier involves protein drinks, gym gear, and separate workout rooms too. And the Pro tier includes professional coaching sessions in addition to all the other perks. These tiers are priced from lowest to highest, with the Pro tier being the most expensive.

Now suppose there’s a customer who wants to go from Plus to Beginner. They basically want to ‘downgrade’ their membership plan, and adopt the cheaper tier. This customer must have the capability to do so effortlessly. If the downgrade process requires too much effort or lengthy sign up forms, then the shift won’t be seamless. It’ll become burdensome instead, and might prompt customer to cancel altogether.

And that’s what businesses need to prevent. They have to make upgrades and downgrades just as easy as cancellation. Otherwise, if it’s easier to cancel than to switch, then that’s exactly what customers will do. And that way, the upgrade and downgrade options will lose their purpose.

Why Flexibility Matters in Subscriptions

Flexibility in subscriptions is added when customers are given the option to modify their plans. Plan modification takes place in many ways, such as when users opt to upgrade, downgrade, pause or cancel. Upgrade and downgrade options are two essential and flexible choices that every subscription with multiple tiers must have. Here’s why:

Users don’t feel stuck

Users feel stuck inside a plan when there’s no way to modify it, and the only way out is cancellation. But when they are allowed to switch between plans through upgrade and downgrade, they can enjoy subscription with more peace of mind.

That’s because they can try out a plan without lifelong commitment, evaluate what they need and don’t need from it, and then move to a plan that fits them better. There’s no complication of cancellation and resubscription involved.

Churn is reduced

Instead of cancelling subscription outright due to high costs or unwanted features, customers can easily downgrade instead. By guiding customers toward the downgrade path, businesses can actually decrease churn. Because customers are given an option through which they can keep utilizing the service while paying lower fees.

You have done your part.
Let SubscriptionFlow take it from here!

Let us help your business grow with our powerful
subscription management software.

ARPU increases

In the opposite scenario, if a customer upgrades, their average revenue per user (ARPU) automatically increases. That’s how upgrades translate into higher revenue. With only one click, a user can move to a higher plan and become a high-value customer.

Higher lifetime value

The longer the customers remain with a company, the longer their lifetime value, and the greater the revenue earned by the company. Upgrade and downgrade flexibility also ensures long-term retention since customers are able to toggle between differently priced plans easily, based on what their requirements and budget support.

More Upsell Opportunities

Businesses can design smart upsell campaigns aiming to convert loyal subscribers into high-value ones. They can utilize a smart billing engine such as SubscriptionFlow to examine a subscriber’s usage habits. If the subscriber’s usage is high, then they can be offered a customized upgrade offer that opens up additional benefits for them, and increased revenue for the merchant.

Challenges Businesses Face

Offering upgrade and downgrade options isn’t easy with traditional billing systems. These are the problems businesses have to face:

Tracking mid-cycle changes for revenue recognition

Customers don’t always change plans at the end of a billing cycle. They can do that midway too at their convenience. But that makes things complicated for businesses because they have to update the billing cycle dates accordingly. Updating billing cycle involves changing the date on which customers are billed, and monitoring new renewal periods for them.

This can disrupt revenue recognition calculations too. Businesses have to recognize revenue according to the billing cycle. They cannot immediately convert all deferred revenue into earned. For example, if a customer has paid $10 for a monthly plan upfront, this amount is completely recognized as earned revenue by the end of the month.

But plan changes complicate revenue recognition. Because if a plan change occurs midway through a cycle, then the customer’s initial payment can’t all be converted into earned revenue. And revenue for the remaining days needs to be calculated according to the new billing terms. This requires complex adjustments.

Bill proration

Mid-cycle plan switches also require proration. It is the adjustment of charges based on how many days of the previous plan the customer has consumed. And how many remain. If the customer downgrades a plan, then the value of the unused days is deducted from the new plan’s price.

And if the customer opts for an upgrade, then that same value offsets part of their new plan’s bill. If these calculations are not automatically done by the billing system, they are prone to human error, resulting in the production of inaccurate invoices.

Providing instant access to new plans

Legacy systems don’t support real-time operations. They rely on manual review and verification for making any change. This can impact the upgrades and downgrades negatively. Because when customers switch plans, they need instant access and control. If they have to experience a significant waiting period instead, that erodes trust and causes frustration.

Advanced Billing Wins Against Complexity

SubscriptionFlow brings robust billing to the table. It allows customers to smoothly upgrade and downgrade plans from their customer portal. And it also ensures that plan changes don’t become a headache for your business. Here’s how:

Proration is automated

Proration no longer needs manual calculations. SubscriptionFlow minimizes manual input by executing all the complicated workflows automatically. It smartly adjusts new bills according to the unused days left in the previous plan.

So customers are always billed fairly. If they change plan midway through, they don’t have to pay for the new plan in full. Their unused payment becomes a part of their new bill.

Billing cycles automatically align

When customers switch plans, businesses can adjust their billing cycles in two ways. They can either establish a new billing cycle for them, that starts from the plan switch date.

Or, they can align their cycle with the first or last of the month to maintain calendar consistency. SubscriptionFlow adjusts charges and invoices based on what the business enables.

Invoices are generated dynamically

Updated invoices are generated as soon as the customer chooses to upgrade or downgrade membership or subscription plan. These invoices present their new or prorated bills, and payment dates. When customers pay their new invoices, they get transferred to their new plans immediately without manual confirmation from the business first.

Entitlements are updated instantly

SubscriptionFlow tracks what’s allowed and what’s not allowed in a plan. When customers upgrade and downgrade their plans, they need a change of entitlements as well. Therefore, the system automatically updates their access permissions and entitlements according to the new plan. The change is instant so that customers can use their new plan immediately.

Don’t spend precious time on manual upgrades and downgrades. Leverage SubscriptionFlow to make plan switching automated and frictionless. Schedule a demo now.