Subscriptions cover nearly every type of product or service, from curated snack boxes to online productivity suites. They’re a popular way for customers to pay on an ongoing basis instead of spending a lump sum up front. More businesses are choosing to adopt recurring payment models because they see value in building deeper ties with customers rather than just selling a product once. In 2024, the recurring payment market was worth an estimated $166.69 billion, and it’s anticipated to grow to $240.13 billion by 2028.

The concept of recurring billing is straightforward: a user decides on a plan, enters their payment details, and is then charged at set intervals (weekly, monthly, or yearly) in exchange for repeated access to a good or service. Many types of businesses have adopted recurring payment plans, from streaming services to specialty coffee roasters. This model offers customers flexibility while providing businesses with more predictable revenue.

Building and maintaining a subscription plan that customers love takes planning, strategy, and consistent work. Businesses must consider pricing, billing cycles, payment methods, and customer communication. Below, we’ll explain what goes into subscription plans, why they’re so appealing for businesses and customers, and how to structure them for a stable, long-term outcome.

What’s in this article?

• What is a subscription plan?
  
• What are the benefits of subscription plans for businesses?
  
• What industries use subscription plans successfully?
  
• How do you create a subscription plan?
  
• What tools simplify subscription management?
  
• What are the challenges of managing a subscription plan?
  
• How can businesses refine subscription plans for customer retention?
  

What is a subscription plan?

A subscription plan is a payment model in which individuals or companies pay recurring fees at set intervals in exchange for access to goods or services. This model is commonly used for streaming services, digital storage, meal delivery kits, and personal care products. Every subscription model relies on the same premise: periodic payments in return for ongoing benefits.

Here are some elements of a typical subscription plan:

• Recurring billing: Subscribers are charged on a schedule (e.g., monthly, annually). The schedule is agreed on at sign-up and often remains consistent unless the user chooses a different plan.

• Ongoing delivery of goods or services: The subscription might grant access to an online application, or it might provide a monthly delivery of clothes, books, or gourmet food.

• Auto-renewal: Subscriptions often renew automatically so the customer doesn’t have to place repeat orders. Payment credentials remain on file to keep the process running without additional effort from either side.

• Plan tiers: Many subscription businesses structure plans with a tiered system, such as basic, plus, and premium. Each tier has its own pricing and benefits.

What are the benefits of subscription plans for businesses?

Recurring models provide more than just monthly charges. Businesses see them as a way to create ongoing relationships with customers and plan their finances in a structured way. Below are a few of the most important benefits.

Predictable revenue

Unlike one-off purchases, subscriptions let you anticipate future income. They make it easier to forecast how much money will come in next month, which is valuable when you decide how to allocate resources.

Customer loyalty

When a customer subscribes, they usually plan to stick around for a while. Because they pay at regular intervals, they tend to interact with the service more often. For example, someone who makes a monthly donation to a nonprofit is more likely to keep track of the organization’s updates and feel personally tied to its progress. That sense of ongoing connection can lead to long-term relationships with customers.

Steady product or service improvements

A recurring model gives businesses a reason to continue developing in ways that benefit subscribers, such as by introducing new features, improving customization, and personalizing packaging. The recurring payments fund improvements can bring fresh value to customers.

Easier payment flows

Subscriptions simplify the invoicing process by handling recurring charges automatically. Platforms that help businesses with recurring billings, such as Stripe Billing, can be set up in minutes.

Scalability

Once the plan is in place, you don’t have to resell the product repeatedly. You can serve multiple subscribers without manually billing them every time. This can be especially helpful for businesses that sell digital goods.

What industries use subscription plans successfully?

Many industries have discovered that recurring billing is a suitable model for their products or services. Below are some common examples.

Software-as-a-service (SaaS)

Programs such as project management software and accounting applications often include tiered subscription packages. Instead of a one-time software purchase, users pay monthly or annually. They also receive ongoing updates, support, and additional features. The SaaS setup works well because technology changes quickly, and continual development keeps the software up-to-date.

Subscription boxes

There is a subscription box for almost everything, from curated meal kits to monthly sock deliveries and pop culture collectibles. The consistency of these shipments adds a sense of anticipation for customers.

Streaming services

Movies, TV shows, and music are prime examples of streaming services. Instead of buying individual titles, subscribers pay a recurring fee to access a library of content.

Membership platforms

Gyms, coworking spaces, and certain online communities rely on membership models. Subscribers receive continued access to equipment, facilities, or specialized content. These memberships typically charge monthly or yearly and provide stable revenue for the service provider.

Digital publications

An increasing number of news organizations and content creators rely on subscriptions instead of (or in addition to) traditional advertising. This supports investigative journalism, special reports, and niche newsletters. The business can keep producing new material on a predictable schedule, while subscribers receive exclusive articles or more in-depth analyses.

How do you create a subscription plan?

To structure a successful subscription plan, you need the right price points, billing intervals, usage limits (if applicable), and more. Below are some initial steps for building a well-rounded recurring model.

Decide on pricing

Figuring out how much to charge can be complicated. If you price too high, potential subscribers might refuse. But if you price too low, you miss out on possible revenue. Here are a few ways to address pricing:

• Market comparisons: Look at how other businesses in your industry are pricing. While you shouldn’t copy them exactly, this is a good place to start.

• Cost analysis: Add up the costs of supplying your product or service each month and leave enough margin to keep improving.

• Tiered plans: Consider presenting multiple levels so subscribers can choose what matches their needs. Some might want basic access at a lower price, while others might want a premium plan with extra features.

Pick billing cycles

Monthly billing is popular because it feels manageable for subscribers. Annual billing is an option as well, and it can be helpful if you want customers to make a more up-front commitment. Some businesses offer both: a monthly plan that’s slightly more expensive and a yearly plan with a discount. The type of product or service you sell will influence your decision. Streaming entertainment often sticks to monthly billing, whereas certain enterprise software vendors lean towards yearly billing.

Outline the terms

Clear terms protect you and your subscribers. These include details such as cancellation policies, trial periods, and what happens if payment fails on the renewal date. Consider whether you want to let subscribers upgrade, downgrade, or pause. As a gesture of goodwill, some businesses offer customers the freedom to switch tiers without paying extra charges.

Pick the right payment processor

If you implement recurring billing, you’ll need a way to store payment info safely, handle proration when someone switches from one tier to another midcycle, and address potential billing errors. That’s why many businesses rely on a platform such as Stripe, which works behind the scenes to do the heavy lifting automatically. Stripe Billing is designed to handle subscription creation, manage upgrades or downgrades, and generate invoices.

Stripe has a developer-friendly application programming interface (API), and the Stripe Dashboard is straightforward for nontechnical teams. You can track revenue, manage coupons, and implement trials without juggling multiple systems. Stripe can also handle a variety of payment methods, which is important if you’re selling internationally or to a large customer base with diverse preferences.

Test everything

Before you go live, run a thorough test of your subscription workflow. That includes verifying each pricing tier, checking that you can handle potential edge cases (e.g., a user changing plans midcycle), and ensuring that your cancellation flow is easy to follow. A minor issue in recurring billing can lead to confused or unhappy subscribers so give this stage the care it deserves.

What tools simplify subscription management?

Although it’s possible to create your own billing logic, it can be time-consuming to maintain. Platforms such as Stripe Billing remove a lot of that guesswork by providing a structured way to set up recurring charges and manage them in the long term. Below are a few ways Stripe helps businesses with subscription billing:

• Automatic invoicing and payments: Stripe Billing creates and sends invoices on a recurring schedule and charges the customer’s chosen payment method. It can also update expired card information, using its network to upload new card details when available. This can reduce the risk of billing errors.

• Flexible integrations: If you run an online store, membership site, or software platform, Stripe can integrate with your existing technology. It has prebuilt components and an API for deeper customization.

• Tax management: Collecting taxes across different regions can be complicated, but Stripe identifies the rules that apply to your product or service. It can automatically calculate and apply local tax rates, saving you from doing manual calculations.

• Analytics and revenue tracking: Stripe Billing shows data such as monthly recurring revenue and the number of active subscriptions. You can see how many new sign-ups you’ve gained and compare that with the figure for churn (i.e., the number of customers who canceled). This insight helps you make decisions about pricing or marketing.

• Support for a variety of payment methods: Cards are just one option. Consider accepting Automated Clearing House (ACH) transfers, direct debits, and digital wallets. Stripe enables a wide range of methods, making it easier to cater to a broader customer base.

Choosing the right billing software means you don’t have to build core features from scratch. You can rely on the platform to handle protected transactions, invoices, and routine tasks, which frees you up to focus on what makes your service distinctive rather than whether your subscription logic is about to break under real-world conditions.

What are the challenges of managing a subscription plan?

Running a recurring billing setup can come with hurdles. Businesses often grapple with churn, failed payments, and the need to keep content or products fresh. Below are a few of the main challenges, along with possible responses:

• Churn (subscriber loss): Subscribers can drop off for all sorts of reasons. Maybe the product no longer meets their needs, or they just want to cut back on spending. An ongoing analysis helps you ascertain when customers tend to leave and why. A tight feedback loop—such as exit surveys—can reveal common themes that let you refine your service or pricing.

• Failed payments: Cards expire, or a charge might be declined due to insufficient funds. In a one-time purchase, you might lose that sale, but repeated failed payments can seriously damage monthly revenue in a subscription context. Stripe Billing can reduce this risk by automatically retrying a failed payment on a set schedule and letting users update payment methods without starting over.

• Need for ongoing interaction: If your subscribers don’t feel they’re getting ongoing value, they might start exploring alternatives. Continual improvement, fresh features, and customer communication all help maintain interest. Setting up email or in-app touchpoints that demonstrate new benefits can keep the subscription from feeling stale.

• Overcomplicated pricing structures: Too many tiers can confuse potential subscribers. Sometimes it’s better to start simple and expand later. This can minimize confusion and lower the barrier to entry for new sign-ups.

• Global compliance: If you sell subscriptions across different regions, you must be mindful of privacy laws and payment regulations. Attempting to handle global compliance on your own can be tedious so you can use a billing service that keeps up with regulatory changes to lessen the burden.

How can businesses refine subscription plans for customer retention?

Signing customers up when they initially subscribe isn’t the end of the story. You want people to remain subscribers because they see real value over time. Here are some methods that can help with retention.

Present flexible plans

When possible, let customers shift between plans easily. If someone wants to scale back for a few months, it’s better to have them switch to a more affordable plan than cancel altogether. Some companies even let users pause their subscriptions for a set amount of time, which can be more appealing than canceling outright.

Reward long-term subscribers

Some businesses provide loyalty perks such as discounts, early access to new products, and freebies to subscribers who’ve stuck around for six months or a year. These gestures can reinforce the feeling that the service is actively grateful for ongoing support.

Communicate regularly

Regular updates can keep customers in the loop about new additions, improvements, or upcoming features. Be careful to strike a balance and not inundate their inboxes.

Let customers manage their own accounts

Subscribers should feel they have control over their subscriptions. A user-friendly dashboard or account portal can reduce frustration and cancellations by allowing subscribers to easily update payment details, change shipping addresses, or switch tiers.

Reactivate former subscribers

Some churn is unavoidable, but that doesn’t always mean a lost subscriber is gone for good. A simple re-engagement email campaign can bring certain customers back. Offer them a discount on their first month if they return, or tease a new feature that addresses an issue. In some cases, unsubscribed customers just need a small prompt to reconsider.