New Feature: How to deal with downgrades and penal charges in subscriptions with poise?

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Change SubscriptionQuite often customers will want to switch to different plans. In scenarios where they downgrade from a higher value monthly plan to a lower valued one, you would simply prorate the changes and settle the difference.

There are also times when users would want to downgrade from a yearly plan to a monthly plan, which is a totally different ball game. This is because by doing this, merchants may be at a loss.

For example, you get a customer who signed up for a yearly plan at $200, but the actual monthly cost is $20. Since the customer signed up for the yearly plan and they get a 20% discount because they have signed up with you for a minimum of 12 months, and because of this you decide to offer them this discount. Now, after 2 or 3 months, the customer comes back to you saying that they wish to cancel the subscription and switch over to a monthly plan. This means that, you would be losing the $40 discount that you offered them during sign up. The only reason you offered the discount is with the belief that they will be using your service for at least a year.

So what can you do to make up for your loss? Popular methods include either having a fixed contract that the user cannot downgrade or cancel for a certain period of time or applying a penalty fee. If your contract does have any of the 2, then you won’t be at a loss (albeit losing a subscription) when there is a cancelation or downward movement from one plan to another.

If you would like to impose a penalty charge for customers terminating the contract or switching to a lower plan, then ChargeBee has you covered. Our penalty feature lets you configure the % you would like to charge customers who’re changing the subscription. So, you can either specify the discount amount you offered your customers for signing up for a bigger plan as penalty, or just a % that you see fit for the downgrade or cancelation.

To read more about the penalty feature, please click on the link below:
http://www.chargebee.com/docs/proration.html#downgrade-penalty

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Posted on January 3, 2013

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  • wayne1

    Another approach is to offer a promised reward: sign up for a year, I promise you 20% money back at the end of the year; or, 2 months free after 10 months, etc – essentially a loyalty reward. Would ChargeBee support these approaches, doing this automatically without “my” service doing backend calculations and processing refunds, etc?

    • cbkrish

      @wayne1 Thanks for the comment. It is possible to award credits and refunds via virtual terminal in chargebee. You may also keep private notes about each customer to track what was promised. At this point it is not possible to schedule this at specific end of term though.

    • cbkrish

      Your approach to provide credits and retain customer who wants to downgrade would be a brilliant way to approach it.


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