Comment by matco11 | Hacker News Reader

Comment by matco11 | Hacker News Reader

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Because the discount rate of the yearly plan is financially very attractive (17% off), there are really two main reasons people go for the monthly option: 1) they are unsure if they are going to like your product enough to be willing to go for the bigger commitment of the yearly subscription 2) they can’t afford the yearly payment upfront (this is especially valid for very expensive subscriptions)

On the yearly subscription, do you charge for the entire year upfront? If not, you are eliminating reason 2) above to go for monthly

How is the distribution of vintages of your user base? Depending on your growth (and churn) rate, the distribution of old (>1 year old) vs. new (<1 year) users might drive more yearly subscriptions: the slower you grow, the more old users you will have in your mix of paying users. Old users already know they like your product and are much more willing to take the commitment of the yearly subscription to get the financial savings.

...so that might explain why you have a majority of annual plans. It’s always a good idea to experiment with your prices and segment the market, it’s almost always a good idea to do it without disrupting (too much) your existing user base.

> On the yearly subscription, do you charge for the entire year upfront?

I mean, to my knowledge, that's the whole reason to give a discount for the yearly payment. Isn't it?

Also, but not only. Yearly subscriptions in itself guarantee that the user commits to 12 months and can't cancel during those 12 months

> can't cancel

That's how you get angry posts on social media. See: Adobe.

I suspect that has a lot to do with billing monthly for an annual plan. That leaves people deciding whether to continue paying for a service that they are not using or paying out a penalty in excess of the monthly rate to terminate the service. Both options leave the impression that the company is trying to punish the customer. Contrast that to paying for a year upfront, where the customer is more likely feel foolish for paying for something they did not need.

I think the angriness was from Adobe refusing to cancel now effective at the end of the contracted year - i.e. making a simple "does not renew" note - more than 30 days before end of contract, or somesuch. Therefore catching forgetful customers paying for a second unwanted year. "Understandable", as they say.

I think GP means "cancelling doesn't get you a pro rata refund" (which you wouldn't expect if billed annually) rather than you literally can't cancel :)

if it's not upfront, they can always stop paying. you don't want to sue your users for breach of contract over a $5/month subscription.

It's predictable revenue. I've committed for a year but paid monthly before. You generally get more of a discount if you pay up front, though.

Yearly contracts paid monthly give a great income predictability already which mitigates risk. Also customer retention / CLV might be better, because users pay until the end of the 12 months despite stopping using the product earlier.

There's more risk there, though, no? A customer could cancel before the end of the year and simply stop making the remainder of the payments. Sure, there's recourse, both through the credit card companies and courts, but that takes time and effort and possibly lawyers (aka money).

If you require annual customers to pay the entire year up front, you get the money, and that's that, barring credit card chargebacks.

and they're a pita for business users -- they have to deal with either reimbursing or at least tagging 12x the charges on their personal or business card.

>On the yearly subscription, do you charge for the entire year upfront?

Yes. The annual subscription is < $250/year, so I don't believe it's expensive enough to stop people purely because it's a big charge.

>How is the distribution of vintages of your user base?

My startup is fairly new (12-18 months old), so I don't have much insight into such statistics. However, I will note that growth has somewhat stagnated (<4% MRR growth every month). While I'm not looking to grow rapidly and I don't have any external pressure to grow (no VCs :)), perhaps the stagnation is a good motivation to introduce segmentation, higher prices, etc.

>it’s almost always a good idea to do it without disrupting (too much) your existing user base.

Absolutely. I always grandfather existing users and I have a few dozen very early users who are paying peanuts compared to the current pricing. I value their super early feedback a lot in shaping my startup, so I'm happy to grandfather their subscriptions forever. I even get emails every now and then from some early users asking if I could "upgrade" them to the current, higher pricing!

> Yes. The annual subscription is < $250/year, so I don't believe it's expensive enough to stop people purely because it's a big charge.

One point to add - If I bought it for a month and liked in enough, I'd get annual for that price just to save me the hassle of getting invoices/receipts each month and having to run them through accounting. One payment, one invoice, done for the year.

Sounds great. Maybe, in addition to working on price segmentation, one way to leverage the behavior (“stickiness” as you call it) of your users is to create a mechanism to make them refer new customers to you: you can create an inexpensive growth engine, for example like Dropbox did with its referral program.

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