4 ms·

FTA: > 5) The advantages of annual billing How do you encourage customers to choose annual billing?

jaxn 8y ago
I'd love to know the same question. We are making our way to $1mm ARR and have very low churn, but no annual billing option. Do you give a discount at all?
- Cthulhu_ 8y ago
  Not an entrepreneur, but, 12 months at 10 months of subscription fee is still more than 6 months at 6 months of subscription fee. Always offer a "loyalty discount" if it means they commit to paying for a minimal amount of time.
  - jaxn 8y ago
    But our churn is really really low with an average subscription length several years long. So 12 months at 10 months fee is less than 12 at 12. There is work to help people update info, etc. And an annual check or ACH would save card fees. But it doesn't sound like OP offered a discount, so just curious.
    - scrollaway 8y ago
      At the end of the day, you know your customer base better than anyone on HN, so you are the best-placed to do this research. I will say that in SaaS, unless you're extremely enterprise, a several-years-worth LTV is very rare. If you are in enterprise, you might gain customers by having annual billing at all. If you're unsure then I second the other commenters' opinions, do 12 months at full price. If you want to try a discount for some time to see if it helps conversion, that gives you a comparison point. There are advantages in annual billing beyond "it's cheaper", so you can't compare directly to monthly billing.
- evermike 8y ago
  We don't offer a discount except for volume. If the client has 50+ employees, then we negotiate.
- option_greek 8y ago
  If you are in B2B segment, try offering annual plans (or even multi year plans) without any discount. It is very tough to get approval for spending any amount of money on products in corporate setting. But the amount in the approval request is not something any one cares about.
rorykoehler 8y ago
I dunno specifically about this particular instance but our CFO encourages us to select annual plans for apps that are cheap enough to not impact cashflow in a meaningful way and where we get a discount if we choose the annual plan.
briandear 8y ago
One way is to only offer annual billing, but couple it with a 30 day trial. Hubspot operates like this and it results in a more invested user and substantially reduces churn and lowers support costs. It lowers churn because of you are going to pay for a year of something, you are going to be really sure it solves your problem. This approach only works though if you have a clear product-market fit.
- evermike 8y ago
  I would like to note that in my opinion 30-days is a bit long. It's more efficient to offer 14 days. This motivates leads to try your product ASAP without postponing at a later date. Some people ask to prolong their trial and we do it, but again, in general it helps.
evermike 8y ago
No special tricks. Firstly, it's cheaper and we try to emphasize this in our interface, and secondly, some do not want to receive an invoice each month, they want to pay only once.
- martin-adams 8y ago
  This is me. I’m only a freelancer and I got fed up of monthly recurring expenses. Doing it yearly is much more convenient.

jaxn 8y ago

I'd love to know the same question. We are making our way to $1mm ARR and have very low churn, but no annual billing option. Do you give a discount at all?

Cthulhu_ 8y ago
Not an entrepreneur, but, 12 months at 10 months of subscription fee is still more than 6 months at 6 months of subscription fee. Always offer a "loyalty discount" if it means they commit to paying for a minimal amount of time.
- jaxn 8y ago
  But our churn is really really low with an average subscription length several years long. So 12 months at 10 months fee is less than 12 at 12. There is work to help people update info, etc. And an annual check or ACH would save card fees. But it doesn't sound like OP offered a discount, so just curious.
  - scrollaway 8y ago
    At the end of the day, you know your customer base better than anyone on HN, so you are the best-placed to do this research. I will say that in SaaS, unless you're extremely enterprise, a several-years-worth LTV is very rare. If you are in enterprise, you might gain customers by having annual billing at all. If you're unsure then I second the other commenters' opinions, do 12 months at full price. If you want to try a discount for some time to see if it helps conversion, that gives you a comparison point. There are advantages in annual billing beyond "it's cheaper", so you can't compare directly to monthly billing.
evermike 8y ago
We don't offer a discount except for volume. If the client has 50+ employees, then we negotiate.
option_greek 8y ago
If you are in B2B segment, try offering annual plans (or even multi year plans) without any discount. It is very tough to get approval for spending any amount of money on products in corporate setting. But the amount in the approval request is not something any one cares about.

rorykoehler 8y ago

I dunno specifically about this particular instance but our CFO encourages us to select annual plans for apps that are cheap enough to not impact cashflow in a meaningful way and where we get a discount if we choose the annual plan.

briandear 8y ago

One way is to only offer annual billing, but couple it with a 30 day trial. Hubspot operates like this and it results in a more invested user and substantially reduces churn and lowers support costs. It lowers churn because of you are going to pay for a year of something, you are going to be really sure it solves your problem. This approach only works though if you have a clear product-market fit.

evermike 8y ago
I would like to note that in my opinion 30-days is a bit long. It's more efficient to offer 14 days. This motivates leads to try your product ASAP without postponing at a later date. Some people ask to prolong their trial and we do it, but again, in general it helps.

evermike 8y ago

No special tricks. Firstly, it's cheaper and we try to emphasize this in our interface, and secondly, some do not want to receive an invoice each month, they want to pay only once.

martin-adams 8y ago
This is me. I’m only a freelancer and I got fed up of monthly recurring expenses. Doing it yearly is much more convenient.