Is the Recurring Subscription Billing Model Killing SAAS Companies?

Any business that doesn’t give customers what they want, in the way they want, at the instant they want, will eventually meet a sad end.

The cloud-based SAAS (Software as a Service) is a great business model for tech (and increasingly non-tech) businesses. However, as a customer, I have noticed that there is one thing that keeps me away from a few good cloud services –

Their mandatory recurring billing subscriptions.

I am sure all of us are familiar with the $10, $20, and even $99 per month pricing models of SAAS businesses.

But why force customers to pay for services customers will NOT use frequently? Most services are used infrequently unless, for example, you are a cloud-based CRM/ERP business used daily by customers.

Consider an example of the latest fad: AI-based text, image, video, or music generators.

Even if I am a creative professional, why would I want to use AI-based automatically generated creatives daily? Like many other cloud-based services, customers will use this one too infrequently.

Then, why mandate customers to get into a monthly subscription billing cycle? Even if you offer unlimited usage, as a customer, I don’t need, let’s say – 999 AI images on any given day or even a month!

Let’s say I want 5 AI images for a particular project. Is there a way to buy just five? Most probably not. I will be forced to get into a monthly recurring subscription, not knowing when or if I will use that service again.

So, as a customer, what will I do? I will skip that service and opt for a simpler alternative that doesn’t keep billing me every month, irrespective of my usage.

The biggest problem with mandatory monthly billing

Do you know what’s the biggest problem with the mandatory monthly billing models of SAAS companies?

Lack of confidence in the usage of their product.

If companies are sure customers will keep using their product, they would offer a pay-as-you-go pricing model – at least as an alternative to the monthly recurring billing model.

Except for a few legacy SAAS companies, who have been in the field long enough to know the pulse of their customers, none of the modern cloud-based businesses offer this.

Some clever companies price their pay-as-you-go payments so high in order to – you guessed it right – force customers into their compulsory monthly or yearly recurring billing cycles.

Forget changing the billing model. If you are not confident of your customers using your product without locking them into a recurring subscription, it’s time to reevaluate the existence of your business.

What’s the Alternative?

While we welcome monthly subscription pricing models as an option (in some cases), the Pay-as-you-Go pricing models should be the default and the most inexpensive option. If your cloud-based SAAS business doesn’t give that, it’s time to reevaluate your business model – not just your billing model.