If Time Is Money; Think Annual

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If time is money, does that mean money is time? If that holds true, then you should commit more time to make more money — right? The same idea can be put to use when it comes to subscription models; many companies offer solely monthly plans. The monthly price option seems friendlier and lacks the hefty commitment to reduce friction for new customers. With that being said, a company can use both monthly and annual pricing plans to boost revenue.

Monthly payments may be the essence of your business, though annual subscriptions offer security the monthly option simply cannot. Annual subscriptions lock in more business upfront, increase cash flow, and reduce churn. Your bottom line will also benefit substantially from even a small percentage of larger contracts. Compromising between two pricing options doesn’t have to busy up your pricing page; keep it direct.

Take Advantage Of A Longer Commitment

Like most businesses, customer retention is the key to profitably and customers with a quick turnover rate only waste the time and money you spent acquiring them. A low barrier for entry and the flexibility of the monthly subscription is key for getting new customers, though should those customers opt out of your services you won’t have the steady cash flow you need to survive.

An annual plan guarantees the customer will be around for a minimal 12-months, a major step up in a customers lifetime value. This also provides an increased opportunity for customer engagement and encourages a surefire implementation of the product. Another plus for annual contracts is the opportunity for upfront payment(s), which will only help your cash flow. Sure, asking for payments in advance can be a turn-off to some prospects, but those who love the product may be swayed into a longer commitment if you offer a minor discount.

It’s essential to understand that both plans benefit your business, and offering clients an option won’t hurt your bookings. Be transparent with your pricing strategy and clearly display each subscription plan to the client once they’re ready to move forward. Offering such flexibility will ensure you can meet the standards of different buyers throughout multiple stages in the customer life cycle. There is a certain advantage of using discounted annual billing along with monthly plans at full price.

On-boarding new customers with the annual plan will obviously be more upfront cost so make sure the sales team is prepared to justify the value in the product. No company wants their customers to bail out after a few months either, so do what’s best for you. Whatever you go with, just make sure your pricing strategies align with the value both the customer and company are looking for.

Comments (2)

  • Rick Gilman Nov 13, 2015 at 02:11 AM

    So do you offer a discount for an annual plan? If so, how much of a percentage?

    • Mike Carnow Nov 13, 2015 at 17:11 PM

      Hey Rick,

      Great question, and thanks for reading. The short answer is yes, the one time, 12-month total cost should be less than the total cost of a client paying 12-months on a monthly basis.

      It’s common for an annual plan to offer a free month, or two, in comparison. For example, if the monthly cost is $500/month for a monthly contract — a total of $6,000 — you could offer a one-time annual fee of $5,000, which is the equivalent of 2-months free.

      Thanks again Rick and hope this helps!

      Best,
      Mike Carnow

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