Annual vs Monthly Pricing Calculator
Whether an annual plan at a discount earns more per customer than a monthly plan that some customers cancel — and the largest discount that still comes out ahead.
A monthly customer pays every month until they leave, so the expected revenue over a year is the price times the months they are likely to stay.
How the annual vs monthly pricing calculator works
A monthly customer pays every month until they leave, so the expected revenue over a year is the price times the months they are likely to stay. An annual customer pays the whole discounted year at once and cannot cancel inside it.
Compare the two per customer over twelve months. The break-even discount is where they match: any discount smaller than it earns more on the annual plan, and the cash arrives up front besides.
Formula: monthly expected = price × Σ (1 − churn)ᵐ for m = 0…11; annual = 12 × price × (1 − discount); break-even discount = 1 − monthly expected ÷ (12 × price)
Worked examples
| Inputs | Annual plan advantage per customer | Note |
|---|---|---|
| Two months free is too much? | $29.74 | 540 annual against 510.26 expected monthly |
| Sixteen percent off, low churn | -$68.10 | annual 499.98 against 568.08 — the discount gives away too much |
| High churn | $50.87 | annual 288 against 237.12 |
FAQFrequently asked questions
Why does churn favor the annual plan?
A monthly customer who leaves in month five has paid five months; the same customer on an annual plan paid twelve. The discount is the price of locking that in, and it pays whenever it is smaller than the revenue churn would have removed.
What about churn at the annual renewal?
The comparison covers one year. Annual customers also leave, at renewal, and a business with heavy annual non-renewal should compare over two or three years — but within the year itself the annual plan cannot churn, which is the effect measured here.
Is a bigger discount ever right?
Yes, when cash matters more than revenue: an annual payment funds a year of growth up front. The upfront row shows that cash difference; a business valuing it may accept a discount past the revenue break-even.
Does this account for customers who would have stayed anyway?
No — it assumes the churn rate applies to whoever would otherwize be on the monthly plan. If only the most loyal customers choose annual, the discount is given to people who would have paid twelve months regardless, and the real advantage is smaller.
Where these figures come from
- Reichheld (2003), Harvard Business Review — The One Number You Need to Grow — the paper that introduced Net Promoter Score
- US Securities and Exchange Commission — the US securities regulator
Last checked: September 2026. These are the industry-standard definitions; where companies commonly disagree, the page says so.