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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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
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.