Searching for a way to offer a prorated membership option on your WordPress membership site?
Giving your members the option of a prorated subscription is a great way to reduce doubts that new members have when signing up and encourage existing members to upgrade (or downgrade instead of churning).
We’ll share a proration example below, but the basic idea is that a prorated membership option gives people the ability to apply their existing payment to a new plan.
For example, if they upgrade to a higher-tier plan, they can apply the existing balance from their current plan to reduce the price of the upgrade. And if they downgrade, they might get a free credit (or potentially a refund).
With the Pro-Rate add-on for Paid Member Subscriptions, you can easily add a prorated membership option to your site. Here’s an example of what it looks like:
In this detailed guide, we’ll first start by explaining what proration is in general, how it works for membership sites, and the benefits of allowing prorated payments.
Then, we’ll get into a step-by-step tutorial on how to set up prorated membership plans on WordPress using Paid Member Subscriptions and the Pro-Rate add-on.
Let’s dig in…
Prorated Payment Meaning: Explaining How It Works
For membership sites, offering a prorated payment means that customers can apply the value of the unused portion of their existing membership plan to upgrade or downgrade to a different plan.
For example, if someone signs up for a plan that costs $100 per month and then wants to change plans after 15 days, that person could apply the remaining $50 from their membership to upgrade or downgrade to another plan.
Where does the $50 come from? Well, the customer paid $100 for 30 days (one month) when signing up. They’ve already been a member for 15 days at the time of changing their membership, which means they’ve used half of the “value” of their membership.
That is, they’ve used $50 of the original $100 that they paid. Therefore, there’s still $50 of “value” remaining in the membership.
Without proration, the customer would essentially just need to forgo/waste that remaining value if they wanted to change plans. But with proration, you let your customer keep the value that they’ve already paid for.
You can either let them apply this value to both upgrades and downgrades. Or, some membership sites will only let customers apply the value to an upgrade.
We’ll talk about the benefits of this strategy in a second, but the basic idea is that offering these types of prorated payments reduces the friction of customers changing their minds, which can boost your revenue in a few different ways.
How to Calculate Pro-Rate Discount/Fee
We’ll get into some very specific examples of how to calculate the pro-rate amount as it applies to Paid Member Subscriptions, but here’s the basic idea…
All you need to do is multiply the amount that a person paid by the percentage of the billing period that’s still remaining.
Let’s look at some examples assuming someone paid $100 for a one-month membership. Here’s the proration value based on the day that they initiated the change:
- Same day as signup – $100 proration amount ($100 * 100% remaining).
- 10 days after signup – ~$66.7 proration amount ($100 * ~66.7% remaining).
- 15 days after signup – $50 proration amount ($100 * 50% remaining).
- 20 days after signup – ~$33.3 proration amount ($100 * 33.3% remaining).
- ~30 days after signup – $0 proration amount ($100 * 0% remaining).
Once you have the proration amount, you can use it to subtract from the price of an upgrade. If you allow downgrades, you can either offer a free credit equal to the difference or you can refund them.
The Benefits of Allowing Prorated Memberships
We touched on this a bit in the introduction, but let’s go more in-depth into the benefits of offering prorated memberships to your customers.
Reduce Friction of Initial Purchase
When a visitor is considering signing up for your membership site, one of the first points of friction is which plan they should choose.
If a person doesn’t feel confident in their purchase, they might purchase the cheapest plan to be safe or even just walk away.
By offering prorated memberships, you can do a lot to eliminate this friction.
If the person knows that they’ll be able to upgrade (or downgrade) without losing any money, they can be confident that they’ll get value no matter which plan they start off with.
Increase Revenue With Upgrades
Prorated memberships can also help you get more money out of people who are already members.
Let’s say someone joined on your cheapest tier. Now, they’re debating upgrading to a higher plan because they’re interested in some of the benefits of that plan.
If the customer has to pay the full purchase price on top of what they’ve already paid for the lower-tier plan, it’s pretty tough to convince them to actually upgrade.
Even if they’re interested in the extra content, they’re going to feel like they aren’t getting good value because they’re essentially paying double.
With a prorated subscription, you flip that dynamic on its head. Now, the customer feels like they’re actually “saving” money because they don’t have to pay the full price to upgrade (even though they technically are because they already paid some of the money for the lower-tier plan).
You can enhance this effect by making it really easy for people to upgrade and highlighting that they’ll only need to pay the difference.
For example, look how Paid Member Subscriptions frames the proration as a “discount” so that customers feel like they’re getting a deal (even though they’re still technically paying the regular price):
Reduce Churn With Downgrades
If you allow prorated downgrades, one worry you might have is that you might “lose” money in the short term if a customer decides to downgrade to a lower tier.
While no one likes to make less money, even downgrades can be a positive in the long term because the alternative might have been that the customer stops paying at all (AKA “churn”).
Basically, if your choices are between offering a prorated downgrade or letting that customer churn, the downgrade is still a positive because at least you’re getting some revenue from that person.
How to Set Up Prorated Membership Payments on WordPress With Paid Member Subscriptions
Now that you know more about how a prorated subscription works, let’s look at how you can set up this functionality on your WordPress website.
For this tutorial, we’re going to use the new Pro-Rate add-on in Paid Member Subscriptions.
We’re going to specifically focus on the prorated subscription part of this setup, so we’ll assume that you’ve already set up your basic membership site using Paid Member Subscriptions.
If you haven’t yet, you can follow one of these guides to set up the basics:
Once you’ve set up your membership site, come back here to learn how to add prorated membership payments.
How the Pro-Rate Add-On Works – A Real Proration Example
Before getting to the tutorial, let’s quickly run over how the Pro-Rate add-on works with a proration example. Having this context will make it easier for you to follow the tutorial.
The Pro-Rate add-on only works with membership levels that you’ve set up in a tier. This is because a user needs to upgrade or downgrade within that tier in order to get the prorated price.
Without a tier, there’s no upgrade or downgrade “path” for the customer, which is why there’s no proration option.
Users will be able to switch between plans from their frontend account dashboard. When doing so, they’ll see information about the prorated discount that they’ll receive.
Proration will work with both upgrades and downgrades with that tier:
- For upgrades, the customer will get a discount equal to the remaining value.
- For downgrades, they’ll get a free credit equal to the remaining value.
Let’s look at a proration example and say you have three tiers:
- Gold – $100 per month.
- Silver – $50 per month.
- Bronze – $25 per month.
Let’s say that the customer initially signs up for the Silver plan and pays $50 for the first month.
Then, let’s say they change their mind right after ordering and want to change plans on the same day:
- If they switched to the Gold plan, they would only need to pay $50 extra (the plan’s price is $100 minus the $50 that they already paid for the Silver plan).
- If they switched to the Bronze plan, they would get two months free (they already paid $50 which covers two months of the Bronze plan. Basically, it’s like they prepaid for two months of Bronze).
Here’s an example of the upgrade message:
And here’s an example of the downgrade message:
If they decided to switch later on, the same principle applies but the extra charge/discount would be prorated.
For example, let’s say they switch exactly halfway through the first month. In this scenario, there would be $25 “leftover” from the value of their $50 payment for one month of the Silver plan:
- If they switched to the Gold plan, they would pay $75 to upgrade to a full month of the Gold membership (the remaining $25 knocks the price down from $100 to $75).
- If they switched to the Bronze plan, they would get one full month for free (the remaining $25 is good enough to cover the full Bronze fee for a month).
Now that you know how the Pro-Rate add-on works, let’s go through how to set it up…
1. Activate Pro-Rate Add-On
To get started, you’ll want to make sure that you’ve activated the Pro-Rate add-on on your Paid Member Subscriptions site.
The Pro-Rate add-on is available on the Pro license of Paid Member Subscriptions, so you’ll want to make sure that you’ve upgraded to the Pro license if you haven’t done so already.
Paid Member Subscriptions Pro
The best membership plugin to set up prorated subscriptions on your WordPress membership site.
To activate the add-on, go to Paid Member Subscriptions → Add-ons in your WordPress dashboard:
2. Set-Up/Verify Your Subscription Tiers
Next, you’ll want to set up your subscription plan tiers if you haven’t done so already. Or, if you have, you’ll want to make sure that they’re in the proper order.
To view your plans, go to Paid Member Subscriptions → Subscription Plans.
To add a new upgrade or downgrade, hover over the plan and click the relevant option:
You can also use the arrows to move a membership tier up or down in the hierarchy.
3. Enable Subscription Switching
Next, you’ll want to make sure that you’ve enabled the ability for people to switch their own subscriptions.
Otherwise, people won’t be able to upgrade/downgrade and take advantage of the proration.
To check this, go to Paid Member Subscriptions → Settings → Payments.
Make sure to check at least the Allow Subscription Change box.
If you want to allow prorated downgrades, you’ll also want to check the Allow Subscription Downgrades box:
4. Test Your Prorated Memberships
At this point, your site’s prorated memberships should be functioning.
To test them, you can add a payment to your own account for a membership (Paid Member Subscriptions → Payments → Add New).
If you open your account’s frontend account page and choose the option to change your subscription, you should see the relevant options to upgrade or downgrade, along with an explanation of the prorated discount.
Start Offering Prorated Memberships Today
With the Pro-Rate add-on for Paid Member Subscriptions, you can easily offer prorated upgrades (and downgrades) for your members.
By letting members change their plans and benefit from proration, you can remove friction during a customer’s initial purchase decision, boost your revenue by encouraging upgrades, and reduce churn by encouraging people who would’ve churned to downgrade instead.
If you’ve already purchased the Paid Member Subscriptions Pro license, activate the add-on today to start benefiting from proration right away.
If not, click here to upgrade your license and access not just the Pro-Rate add-on, but also all of the other Pro add-ons for Paid Member Subscriptions.
Paid Member Subscriptions Pro
The best membership plugin to set up prorated subscriptions on your WordPress membership site.
Do you still have any questions about how to add prorated subscriptions to your WordPress site? Let us know in the comments!
Source: https://www.cozmoslabs.com/394162-prorated-membership-payments-tutorial/
