How are upgrades/downgrade handled from the money side of things?
Say a user upgrades from Plan A ($12) to Plan B ($24) in the middle of their billing cycle. Are they charged $24 right away? Or at the start of the next billing cycle?
What happens if the user upgraded to Plan B and then back to Plan A before the next billing cycle?
Ultimately just having a hard to wrapping my head around how plan changes are handled from a billing perspective.
EDIT: This discussion is a bit outdated. See this KB article for more information about plan changes.
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Support Staff 1 Posted by Marc Guyer on 01 Dec, 2009 12:27 PM
Josh -- You're not alone with this question. There are a couple of ways to do this: The easy way and the hard way.
The easy way is the default and in your example the user would simply pay the $24 on their next billing date. If they switched back to plan A before the next bill, then the next bill would be $12. This is very similar to the recurring billing models we've experienced as end users of various apps like 37Signals Basecamp. You can do some fancy prorating if you like with custom credits/debits.
The hard way is currently in development. Upon upgrade, the user can be immediately charged a prorated amount for the rest of the current billing period.
2 Posted by Josh Pigford on 01 Dec, 2009 08:51 PM
Okay, so customers are billed at the _end_ of the period? Meaning they
could use a service for almost an entire month, cancel, and never have
to pay anything?
Support Staff 3 Posted by Marc Guyer on 01 Dec, 2009 11:58 PM
Yes, the default is an "arrears" billing model. You can use a setup fee to charge up front.
A feature currently in development will allow you to bill in advance. This will be easy to migrate to from the setup charge workaround if you so choose to do so.
4 Posted by Josh on 15 Dec, 2009 03:31 PM
Marc, can you let me k now when you guys have new billing options available?
Support Staff 5 Posted by Marc Guyer on 15 Dec, 2009 04:15 PM
Will do. We always tweet updates about feature improvements. We also try to post in these threads when an upgrade is relevant.
Support Staff 6 Posted by Marc Guyer on 15 Dec, 2009 04:19 PM
Anything other than billing in advance that you're having trouble finding?
7 Posted by Josh on 15 Dec, 2009 04:26 PM
Honestly, if you guys billed at the start of a billing cycle and started new billing when a customer upgrades (instead of staying on the same billing cycle), I'd use you guys...no questions asked.
Things that Chargify has (like the dunning emails) would be a really really nice feature...but that's a "want" and not really a "need." The billing stuff is an absolute "need."
And I know there's the whole Setup Charge hack that you mentioned...but I'd prefer not to have to use a workaround for billing...would rather use something that just works out of the box.
Support Staff 8 Posted by Marc Guyer on 15 Dec, 2009 05:23 PM
We currently have dunning emails. Is there something missing there?
Billing in advance is currently in development. We'd like to have this complete and launched by the middle of next week but that's not guaranteed. Worst case: 2nd week of January.
Resetting the billing cycle on plan change is currently not possible. It is on the short list for development in order to better support plan changes in an in-advance billing environment. A workaround for the time being could be: If a customer changes their plan, an adjustment may be made to their pending invoice to account for a prorate. Settlement of the account is made on the next bill date.
Our current plan for supporting in-advance billing for plan changes is to introduce functionality that would allow you to build a one-time invoice and bill it in real time. The invoice would be entirely composed of one-time custom debits and credits. In your case, you could just generate an invoice with one custom debit. The debit would be in the amount of the difference in cost between two plans for the remainder of the billing period. The customer would then be automatically billed for the following billing period on the next bill date (i.e, the billing cycle remains the same). Would this work for you?
9 Posted by Josh on 15 Dec, 2009 06:40 PM
I could work, but the problem is this all just sounds awfully complex. In my mind (obviously can't speak for any one else's mind on this) recurring billing and upgrading/downgrading is actually really straight forward.
Someone subscribes to a Plan A for $12 a month. They are immediately billed for that and can use the service for 30 days until they are billed again to cover the next 30 days.
Say half way through one of the months they decide they need a higher plan. Cool. Pay $24 for Plan B and start using it immediately. They are effectively getting a new product, so they pay full price to start using it and their new billing starts from that day forward. Their previous plan is cancelled.
Most customers won't upgrade/downgrade all that often (maybe once or twice...ever) and the difference between pricing plans is usually a matter of a few bucks so proration just seems silly and way overcomplicated.
Support Staff 10 Posted by Marc Guyer on 15 Dec, 2009 07:08 PM
We definitely agree on prorating. However, if your fees are high or if you're billing annually (or quarterly or bi-annually) then it becomes necessary. This is why CG supports it. However, I don't think CG will ever handle prorating automagically. It can happen in too many ways.
So, I think we're in agreement here. The key is simplicity.
In your case the difference in cost is small. I suppose the question is: "would you rather give up that fraction of a month of revenue or force your customer to pay for service that they never received?" You may be compromising on goodwill.
Here's an example. A customer signs up for Plan A ($12) on 12/01 and then upgrades to Plan B ($24) on 12/15. If you charge them $24 on 12/15 then the customer is paying an extra $6 for 12/16-01/01. In other words, they're effectively paying $30 for the first month of their new subscription instead of $24.
I'm sure you've considered this. I'm just bringing it up because if you don't prorate then you have to do one or the other. Either give up a fraction of a month of revenue or make your customer pay a premium for that same fraction of a month. We think forgoing that small amount of revenue is a better option and why CG already does it that way.
Support Staff 11 Posted by Marc Guyer on 14 Feb, 2010 03:52 PM
Josh -- We're releasing a major upgrade tonight. Attached is a sneak peek at the new pricing plan config. The last section of this article has changed: http://support.cheddargetter.com/faqs/pricing-plans/pricing-plans. There's also a new article about upgrades/downgrades here: http://support.cheddargetter.com/faqs/pricing-plans/pricing-plan-changes-upgradedowngrade
Marc Guyer closed this discussion on 18 May, 2010 01:40 PM.