The customers who took your annual discount were never going to leave

Prepayment looks like cheap capital and free retention. The arithmetic, and who actually accepts the offer, usually tell a different story.

By Steve 5 min read
Abstract bridge artwork for The customers who took your annual discount were never going to leave

Offer two months free on an annual plan and you have not given a discount for a year. You have cut your price by about 17% for as long as that customer stays, because the discount almost never comes off at renewal. It becomes the price. And because it is usually expressed as a percentage off whatever the prevailing rate is, it scales up with every future increase you make. The concession compounds; the reason you granted it does not. That is not an argument against annual billing. It is…

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Important: General information only. Rialto Bridge articles describe patterns and considerations that may apply to a business; they are not financial, legal, tax or accounting advice, and they take no account of your particular circumstances. Consider your own situation and seek advice from a qualified professional before acting.

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