Subscription businesses have a lot to consider when it comes to their offerings and pricing. One of the questions they must ask themselves is whether or not they should allow users to downgrade.
On the one hand, allowing downgrades can be seen as customer-friendly. It gives users the option to save money if they no longer need or want the full range of services. This can help retain customers who may otherwise cancel their subscription altogether.
On the other hand, downgrades can be seen as a revenue risk. If too many users downgrade, it could have a significant impact on the your bottom line.
So, what's the best approach? It ultimately depends on your goals. Here are a few things to consider when making this decision:
- Price points and margins: If the your service has a range of price points and margins, allowing downgrades may not be as big of a risk if you can limit it by ltv.
- Competition: If you are in a highly competitive market, downgrades may be necessary to remain competitive. Users may choose to switch to a competitor if they do not have the option to downgrade.
- User behavior: If you have data that shows users are likely to churn, downgrades can be a powerful alternative. The business could then focus on re-engaging with the user on the benefits of the premium plan.