Offering both monthly and annual billing gives clients flexibility while encouraging longer commitments that benefit your business. Here is how to structure both options effectively.
Setting the Annual Discount
The standard annual discount is 15-20% off the monthly rate. This is often marketed as "get 2 months free" which is more compelling than "save 17%." Calculate your annual price as: monthly rate × 10 (for 2 months free) or monthly rate × 12 × 0.83 (for a 17% discount).
Presenting Both Options
Always show the monthly and annual prices together with the savings highlighted. "$49/month or $399/year (save $189)" makes the annual option immediately attractive. The monthly price anchors the value; the annual price shows the deal.
Implementation
Create two recurring invoice schedules for each pricing tier: one monthly, one annual. Use the same line items but adjust the amount and billing frequency. For annual invoices, clearly show the billing period on the invoice.
Encouraging Annual Commitments
Beyond the discount, there are other ways to encourage annual billing: offer exclusive features or priority support for annual clients, make annual the default option in your proposal, and highlight the total annual savings prominently.
Managing the Mix
Expect 60-70% of clients to choose monthly and 20-30% to choose annual. Track the ratio and adjust your discount if you want more annual clients. If less than 15% choose annual, your discount may not be compelling enough.