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If people are willing to give you an interest free loan it's probably a decent indicator that you could charge more per month. Since cash is vitally important

by kriro 12y ago

If people are willing to give you an interest free loan it's probably a decent indicator that you could charge more per month. Since cash is vitally important for startups you should certainly encourage as much up front as possible. It probably makes sense to use the "behavioural trick" of having an offer like X per month, Y<(12*X) per year, Z=Y+free month per year where Z/13 is what you intended to charge per month in the first place to nudge customers in the right direction (even though I'm somewhat meh on the idea and would personally prefer very simple options with no trickery) As an aside it's a great validator for your business model if a lot of people are willing to pay a year up front.

ylg 12y ago
> If people are willing to give you an interest free loan it's probably a decent indicator that you could charge more per month. I'll second that. As a customer given the option of paying $1 a month or $12 a year, I'll chose the former unless I've had a stroke. Yearly prepayment is wasteful, that money could be put to use for me instead of you. So, if a customer agrees to pay me annually the same they'd pay monthly rather than staying monthly or leaving if that's not an option, I've made a mistake in valuing my product. Moreover, by replacing apples with oranges, I'm risking turning away customers for whom the price is right but not the structure in exchange for income statement foofaraw (and I still haven't addressed my original mistake.) > As an aside it's a great validator for your business model if a lot of people are willing to pay a year up front. That or the sales context is one where rational thought is …limited; candy bars at kid height in the checkout aisle. And, now I'm imagining buying a giant box of a years worth of candy. Time to go outside.
notahacker 12y ago
The customer shouldn't view paying for the service in advance as an "interest free loan", they should view it as "purchasing the service", up front like most other things they buy. It's one thing to acknowledge that most customers prefer to starting with a smaller amount, but if they're perceving the annual price as a "loan" to help you develop the product then you have an image problem
notahacker 12y ago
The customer shouldn't view paying for the service in advance as an "interest free loan", they should view it as "paying what the service costs, up front, like most other things they buy". It's one thing to acknowledge that most customers view starting with a smaller amount as preferable, but if they're viewing the annual price as a "loan" to help you develop the product then you have an image problem

by kriro 12y ago

ylg 12y ago

> If people are willing to give you an interest free loan it's probably a decent indicator that you could charge more per month. I'll second that. As a customer given the option of paying $1 a month or $12 a year, I'll chose the former unless I've had a stroke. Yearly prepayment is wasteful, that money could be put to use for me instead of you. So, if a customer agrees to pay me annually the same they'd pay monthly rather than staying monthly or leaving if that's not an option, I've made a mistake in valuing my product. Moreover, by replacing apples with oranges, I'm risking turning away customers for whom the price is right but not the structure in exchange for income statement foofaraw (and I still haven't addressed my original mistake.) > As an aside it's a great validator for your business model if a lot of people are willing to pay a year up front. That or the sales context is one where rational thought is …limited; candy bars at kid height in the checkout aisle. And, now I'm imagining buying a giant box of a years worth of candy. Time to go outside.

notahacker 12y ago

The customer shouldn't view paying for the service in advance as an "interest free loan", they should view it as "purchasing the service", up front like most other things they buy. It's one thing to acknowledge that most customers prefer to starting with a smaller amount, but if they're perceving the annual price as a "loan" to help you develop the product then you have an image problem

notahacker 12y ago

The customer shouldn't view paying for the service in advance as an "interest free loan", they should view it as "paying what the service costs, up front, like most other things they buy". It's one thing to acknowledge that most customers view starting with a smaller amount as preferable, but if they're viewing the annual price as a "loan" to help you develop the product then you have an image problem