1 in 5 SaaS companies offer annual pricing.

That's a big missed opportunity.

Annual pricing helps SaaS companies to:
• Increase cashflow
• Reduce churn
• Predictable Billing
• Increased LTV

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🔹 Increased Cashflow

With annual billing, you get paid upfront.

Having cashflow is never a bad thing.

With monthly, you are waiting months to recoup what you spent to acquire that customer.  

Sometimes never if they churn.

With annual billing, you get paid back instantly.

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🔹 Reduced Churn

On monthly subscriptions, customers can churn any time.

If they pay yearly, they churn after a long period.

You get longer-term customers.

You get more time to deliver in that timeframe.

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🔹 Predictable Billing

One bill per year.

No regular credit card failures.

No extra processing charges.

Predictable billing allows you to plan and model out your future.

This is crucial for strategy and getting to that next level of growth.

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🔹 Increased Lifetime Value

They are around for a minimum of 12 months.

Life time has gone up.

You have way more opportunities to upsell and cross-sell.

Here's 7 ways you can effectively use annual pricing.

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1) Actually offer annual pricing

Crisp don't offer annual pricing.

They miss out on lower churn, upfront cashflow.

Adding annual pricing could make a huge difference to their business.

Unless your pricing is very complex, you should offer annual pricing.

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2) Show the biggest discount offered

Don't show the user it’s $3 cheaper.

Show how much the user will save each month.

$3 feels small.

25% feels big.

Pick the biggest number you can when describing the saving.

3) Show the savings in time, not %.

Github shows me I get two months free.

This is rather than getting a percentage off.

2 free months is a more tangible discount..

Don't make the user think.

Do the maths for them.

This forces me to work less to see how much I get.

4) Default to annual pricing

You want your customers to go annual.

Miro defaults to the annual pricing.

This uses a cognitive bias called Anchoring.

The user is anchored to this price.

Vs the monthly price.

As a result, you will get more annual buys.

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5) Show the more expensive price crossed out.

Again this uses anchoring.

It makes it clear to me the savings I'm making.

I see the old price and the price I will get.

It reinforces how I'm making my savings.

6) Go big with the discount

In general, offer 15-20% off annual pricing.

But if your economics work, go big with the discount.

Pandadoc offers up to 34% off.

That's an appealing offer to go annual.

Don’t be afraid to go big with annual discount if you can make it work

7) Use urgency

Urgency is one of the most powerful psychological drivers.

Getting annual deals is still a deal.

Typeform uses urgency to show it is a deal.

And it might not be around forever.

They likely causes an uptick in conversion.

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