Ongoing has launched prepaid subscriptions for Shopify.
Merchants can now create subscription plans where the customer pays upfront for a subscription product.
Prepaid subscriptions are a great way to offer more purchase options to your customers.
Offering prepaid subscriptions is also an excellent way to increase your store’s revenue.
In this article, we’ll cover what prepaid subscriptions are, how they can benefit you, and how to create them.
What are Prepaid subscriptions?
A prepaid subscription allows the customer to make a single payment upfront for goods or services delivered on a repeat basis.
For example, $400 is paid upfront to receive a monthly subscription box for a whole year (billed annually).
Here’s another example—$ 100 paid upfront to receive a quarterly supply of skincare products.
The beauty of of prepaid subscriptions is they provide the merchant with more cash upfront and help create longer time commitments when customers order subscriptions.
As you might have guessed, Prepaid subscriptions are excellent for quarterly and yearly billing.
In addition, prepaid subscriptions typically offer a higher discount to incentivize the customer to lock in the deal.
Why offer Prepaid Subscriptions?
When offering subscription products, your customers might be looking for different types of purchase plans.
We recommend offering a mix of subscription plans with various delivery/billing options to appeal to a wider range of people.
Your returning customers might be willing to do a bigger time commitment like a prepaid subscription plan so they can get a discount.
If you already have some die-hard customers who repurchase your products frequently, then these are a great group of people to promote your prepaid subscriptions.
Since they already have tried and like your product, they’re ready to opt into a subscription where they get a prepaid subscription for a more extended period with more shipments in exchange for a discount.
On the other hand, some people don’t want to commit and would rather pay every month, so they cancel if they dislike your product.
That’s why it’s also a great idea to offer a pay-per-delivery plan as well for new customers and shoppers who want to try your subscription for the first time.
What’s the difference between Prepaid and Pay per Delivery?
A Prepaid subscription lets the customer pay upfront for many shipments.
With Pay per Delivery, the customer pays every time they receive a shipment.
If your delivery frequency does not match your billing frequency, then you have a prepaid subscription.
Pay per delivery would be something like monthly delivery/monthly billing. Basically the customer only pays every time they receive an item.
A prepaid subscription would be something like weekly delivery/monthly billing, this means the person is paying upfront for one month’s supply of the product, and they’ll be getting a shipment every week.
Notice how the customer is committing to buying more products and reordering the product more times than a pay-per-delivery subscription.
How to Create Prepaid Subscriptions
You can create a prepaid subscription by using the Ongoing app.
First, make sure you have a Shopify store and that you’re eligible to sell subscription products on Shopify.
Next, you can create a prepaid plan just like you would create any other subscription plan.
We’ll cover the most common ways to set up a prepaid subscription plan below.
Yearly Prepaid Subscription Example
In this example, we created a subscription plan called “Prepaid Yearly (ships monthly) – 20% off”
Customers pay upfront for the year and get a delivery every month.
That means the set up would be delivery every 1 month, and billing every 1 year.
A yearly subscription is an incredible thing to offer, because if you get someone to sign up they are prepaying for a whole year worth’s supply of your product!
This is absolute gold. That subscription transaction is much more valuable than your average one off sale.
Think about a shopper buying your product one-time vs. buying your product upfront for an entire year!
That’s the magic of prepaid subscriptions.
3 Month Prepaid Subscription Example
Let’s say I had a 3 month prepaid subscription plan with monthly delivery.
This means the customer will pay upfront for 3 months worth of deliveries.
I would set the delivery frequency to every month and the billing frequency to every 3 months (which is a quarter).
The customer will get a delivery every month and will be billed every three months.
If the coffee costs $10, they will pay $30 upfront since they are paying upfront for 3 monthly deliveries.
6 Month Prepaid Subscription Example
For example, let’s say I had a 6 month prepaid subscription plan with monthly delivery.
This means the customer will pay upfront for 6 months worth of deliveries.
That’s 6 deliveries, one every month. But they’ll pay ahead of time to get all of those.
I would set the delivery frequency to every month and the billing frequency to every 6 months.
The customer will get a delivery every month and will be billed every six months.
If the coffee costs $10, they will pay $60 upfront since they are paying upfront for 6 monthly deliveries.
Prepaid Subscription Boxes
If you sell a subscription box in your shop, then it’s a good idea to offer a prepaid subscription.
This lets the customer opt into a subscription-like a 3 month or 6-month plan, and save a little money.
It’s a win-win situation. First, the customer is happy because they saved money by opting for a longer subscription plan.
And you win as the merchant because it gives you a cash injection before you’ve even shipped your first box to the customer!
Prepaid Refill Subscriptions
If you have a product that people need refills, prepaid subscriptions can help fuel your growth.
These are also known as replenishment subscriptions, and they are a revenue booster!
Consumable products like coffee and tea, for example, are perfect examples of refill subscriptions. Your customers want to keep their pantry stocked, and you can help them with prepaid subscriptions.
They can have the convenience of signing up for a subscription and getting automatic deliveries to their door.
Other products like skincare products or beauty products, in general, can also benefit from offering customers 3, 6, and 12 month plans.
Prepaid subscriptions work for memberships as well where there isn’t a physical product.
Let’s say I had a coaching program where I charged $500 every 3 months for a prepaid subscription, and they could save 10%.
The customer will have continuous access to my coaching program throughout the 3 months.
The customer would be saving money in the long run, but they would need to pay a little more upfront to get the 10% discount.
Best Prepaid Subscriptions App for Shopify
Ongoing is the best app on Shopify if you want to start selling prepaid subscriptions.
You can get set up within a couple of minutes and have a subscription product live on your store ready for purchase.
Ongoing is super simple to use and helps you manage your subscriptions by taking care of all automatic billings.
With Ongoing, your subscribers will be automatically charged based on their billing frequency.
This helps save you time and the headache of invoicing customers and chasing them down for payments.
Ongoing automatically renews recurring subscription plans, which helps you earn recurring income from subscription sales.
Benefits of Prepaid Subscriptions
Prepaid subscriptions are subscriptions that are paid upfront for a certain period of time.
This gives the merchant and the subscriber tons of benefits. We’ll cover a couple below.
More Cash Upfront: When your customers purchase a prepaid subscription, they have to fork over more money in the beginning to get more shipments.
Longer Time Commitments: If customers enjoy your product, they will be more likely to commit to a longer time commitment, such as a yearly prepaid subscription. This is great because it helps you lock in a whole year’s worth of orders!
Incentivize Customers with Discounts: Subscription discounts encourage shoppers to become customers and pick a plan. Typically prepaid subscriptions offer a higher discount to attract new customers and reward them for subscribing.
Increases Recurring Revenue: If you have customers opting into your prepaid subscriptions, these plans typically cost more which helps you earn more revenue. Monthly recurring subscription revenue is an incredible arsenal to have as a Shopify store whether you’re just starting or a Shopify Plus merchant.
Renewals are less often – Unlike a weekly subscription plan that would renew weekly and charge the customer every week, prepaid subscriptions typically renew less often. For example, with a yearly subscription, the repeating charge on the credit card would be once a year. This is great for reducing churn rate, and it’s also very convenient for the customer.
More purchase types – Offering a prepaid plan gives your shoppers more options to choose from. Some people want to prepay for subscription products. It’s the “set it and forget it” approach that appeals to them. Buy a product upfront for a year, and they don’t have to think about it again for a very long time.
Inventory Management – When a customer purchases a prepaid subscription, this helps you with your inventory management. You can now use the cash injection you just got from the prepaid subscription being purchased to fund your inventory if you have to source materials.
Predictable Income – When you have prepaid subscriptions that are recurring on a repeat basis, that means your shop is producing recurring revenue. Recurring revenue is powerful because it helps you to forecast your monthly income from your shop more easily.
I hope you’ve enjoyed our article on prepaid subscriptions and how they can help your store make more money.
With prepaid subscriptions, you can transform your online store into a real subscription business.
Accept and offer recurring payments for your products and have Ongoing handle all of your recurring payments. This earns you subscription money from your products that people automatically reorder using our app.
With Ongoing, you can have peace of mind knowing that your products are available as a subscription.
Your customers will gain the convenience of repeat deliveries, and you can focus on making unique products that bring in even more new customers.
Have a Shopify store? Try Ongoing subscriptions today.