

Ask HN: Do you have a yearly plan for your SaaS app? - fookyong

Just curious about this one.<p>I ran a yearly plan test for a month.  My findings were that this actually made for fewer conversions on the plans page, I assume because of the paradox of choice - people didn't know what to go for (the yearly plan was much better value than the monthly plan) and simply gave up trying to choose.<p>So I got rid of the yearly plan.<p>The irony of course is that the handful of customers who did choose the yearly plan actually contributed to one of my best months in terms of revenue.<p>Has anyone run tests like this?  What were your findings?
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byoung2
_The irony of course is that the handful of customers who did choose the
yearly plan actually contributed to one of my best months in terms of revenue_

I'm not an accountant, but you should recognize that revenue over the life of
the subscription, not all in one month. The revenue you collect from a client
signing up for a year's worth of service will have to pay for 12 months of
expenses that the client generates, plus a reserve fund to pay for refunds,
etc.

Take the example of a web hosting reseller with a $20/mo plan or $200/year.
Each client costs $10/mo (bandwidth, storage, maintenance, support). If I get
a client on the annual plan, I can't count that $200 as "money in the bank"
because I'll have to consider that $10/mo in expenses ($120), plus the
possibility that he'll request a refund after 3 months.

The solution is to collect the $200 now but recognize it in $16.67 monthly
increments for the life of the annual subscription.

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fookyong
true, and as as an accounting major I should know better (sadly I spent all my
time playing Counterstrike instead of studying).

your example is sound, but using it as a model I guess my question is how do
you weigh up what is more important:

1) Guaranteed 12x $16.67 payments over a year or 2) Monthly $20 payments where
the customer can cancel at any time

This is the kind of thing that attrition / churn rates can help answer but -
as is the case with many apps here I think - it's still early days and we just
don't have reliable data for that kind of thing with only 2 or 3 months of
operations under our belts.

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catch404
How long did you run the test for? The reason I ask is I pay monthly for
backpack (37signals) and after 4 months I'm considering a yearly plan.
37signals offer a lump sum option which to me is an even better option.

tl;dr: New signups may like the yearly plan after a few months, and lump sum
payments (maby with varied discounts) may be something to consider.

