Annual plan: make it the default option

Why This Works

Making the annual plan the default leverages the psychological principle of 'default bias' or 'status quo bias'. People tend to stick with the pre-selected option to avoid making an extra decision, especially if it's presented as the recommended choice. By framing the annual plan as the standard, you position it as the 'right' way to buy, encouraging users who might have otherwise defaulted to monthly to commit for a year.

This tactic has a direct and immediate impact on your cash flow and key SaaS metrics. Every customer who chooses an annual plan gives you 12 months of revenue upfront, drastically reducing your cash flow concerns. It also locks in the customer for a full year, reducing short-term churn and increasing their potential to become a long-term, successful user. This upfront commitment leads to a higher LTV and a more stable, predictable revenue base for your business.

Three real examples

Consider adding a 'Most Popular' badge to your default annual plan to add social proof and further guide user choice.

The step-by-step playbook

1. 1

   Step 1: Decide on your annual discount

   Your annual plan needs to be attractive. A common approach is to offer 2 months free, which translates to a 16-17% discount. Anything from 15-25% is standard. The goal is to make the offer a clear win for the customer.

2. 2

   Step 2: Design the UI toggle

   Create a clear, simple toggle or button set on your pricing page. The options should be 'Annual' and 'Monthly' (or 'Yearly' and 'Monthly'). Avoid confusing language.

3. 3

   Step 3: Make 'Annual' the default state

   This is the core of the playbook. When a user lands on the pricing page, the toggle should already be set to 'Annual', and the prices displayed should reflect the annual commitment (e.g., showing the lower 'per month' price that's billed annually).

4. 4

   Step 4: Clearly label the savings

   Visually highlight the benefit of choosing the annual plan. Use a badge or a line of text like 'Save 20%', '2 Months Free', or 'Best Value' next to the 'Annual' option.

5. 5

   Step 5: Update the checkout summary

   Ensure that when the user proceeds to payment, the summary clearly states they are purchasing an annual plan and shows the full amount to be billed today (e.g., '$240 billed annually'). Transparency is key to avoid surprising the user and causing chargebacks.

6. 6

   Step 6: Implement tracking

   Use an analytics tool like June.so, Mixpanel, or Amplitude to track the conversion rate to annual vs. monthly plans. You need to know if the change is working. Track the percentage of new customers choosing each option before and after you make the change.

7. 7

   Step 7: Consider an exit-intent offer (Optional)

   If a user on a monthly plan is about to cancel, you can trigger a popup offering them a special discount to switch to an annual plan instead. This can be an effective way to save a customer and secure a year of revenue.

Template: Email to existing monthly users

After you've made the change for new customers, you can encourage existing monthly subscribers to switch. Send them a targeted email highlighting the benefit.

Subject: A special offer for you: save on your {ProductName} plan

Hi {FirstName},

Thanks for being a loyal {ProductName} user.

We recently updated our pricing to better reward long-term customers, and we wanted to extend a special offer to you.

If you switch from your current monthly plan to an annual plan, you'll save {DiscountAmount} over the next year - it's like getting {NumberOfMonths} months free.

You'll get all the same features you love, lock in your current price for a full year, and save money.

Click here to switch to your annual plan in just a few seconds: {UpgradeLink}

Thanks,
The {ProductName} Team

Questions to ask yourself

• What is a meaningful but sustainable discount for our annual plan?
• How can we make the UI clear and not deceptive?
• What is our current percentage of users choosing annual vs. monthly?
• How will this change affect our cash flow forecast for the next 2 quarters?
• Should we grandfather existing customers or offer them a special deal to switch?

The most important questions are about the discount and the UI. A weak discount won't move the needle, and a deceptive UI will create angry customers and chargebacks.

Recommended tools

Prices are indicative and change - check the vendor before buying.

Do it faster with AI Prompts

Mistakes that kill this play

• ×Making the monthly option hard to find or hiding it in small print. This is a 'dark pattern' and will lead to mistrust.
• ×Not being transparent about the total upfront cost at checkout. The user must see the full annual amount before they pay.
• ×Offering a weak discount. A 5% discount isn't compelling enough for most users to prepay for an entire year.
• ×Forgetting to update 'per month' pricing labels. If you show a price per month, you must clarify it's 'billed annually'.
• ×Not tracking the results. You need to know if the change is actually increasing the percentage of customers who choose the annual plan.
• ×Defaulting to annual for a very new, unproven product. If users are still unsure of your value, forcing a year-long commitment can scare them away entirely.

Your first 5 days

• Day 1: Analyze and Decide: Check your current metrics: what percentage of customers choose annual now? Decide on the discount you'll offer. Use a tool like Tally.so to survey a few customers if you're unsure.
• Day 2: Design and Copywriting: Design the UI for your new pricing toggle. Use one of the AI prompts to write the microcopy and the 'savings' badge. Get feedback from one person to ensure it's clear.
• Day 3: Implementation: Have your developer or use your no-code tool (like Softr.io) to implement the change. Make sure the 'Annual' option is selected by default when the page loads.
• Day 4: Test Everything: Thoroughly test the entire flow. Toggle between monthly and annual. Proceed to checkout with both options. Ensure the price, description, and total are correct in all cases. Check on both desktop and mobile.
• Day 5: Launch and Monitor: Push the change live. Set up a dashboard in your analytics tool (like June.so) to monitor the percentage of new customers choosing the annual plan. Watch the data for the next week.

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