There’s a growing tourism threat — and, no, I’m not just talking about Barcelona in the summer. I’m talking about the rise of AI tourists.

A flashy AI demo can go viral, and even translate into real revenue, then quickly turn into a churn nightmare. New AI products often coincide with greater volatility in both usage and spend. More project-based, non-recurring use cases. Experimental revenue that’s not in production. And even three month opt-out clauses where 70-80% opt-out.

I’ve published before about the surprising UX patterns that help power repeat usage and sustainable growth. Today, I’m tackling another way to motivate customers to stick around: selling more annual plans.

The impact of annual plans on retention is real. When the team at ChartMogul investigated billing practices at 2,500+ SaaS companies, they found median net revenue retention (NRR) is 10 to 20 percentage points higher for annual plans compared to monthly ones.

Since folks have already invested their money, they’re more likely to invest sweat equity into learning and using the product. And having a full year before the renewal affords a grace period in the event there are any hiccups, hallucinations, support issues or product gaps. (Annual plans also bring in cash upfront, helping to quickly recoup customer acquisition costs.)

I’m sharing 14 of the best ideas for increasing annual plan adoption within your customer base. The advice comes from my personal experience along with polling some of the smartest product and growth leaders from Canva, Duolingo, Grammarly, Pleo, Unbounce, WaveHQ and more.

Before I jump into tactics, let’s start with a cautionary tale.

One growth leader I interviewed described a scenario where they managed to 5x the share of new customers on annual plans. This was a huge win, but it had a cost. Dramatically shifting the annual plan mix led to a massive spike in refunds, which required much more customer support resourcing and ate into the revenue uplift.

For added context, this was a business that required users to provide a credit card before starting a free trial; this model typically coincides with above-average refund rates. The refund rate for monthly plans was around 2-3% while it was 10-14% for annual plans. When customers forgot to cancel an annual plan, they noticed it on their credit card bill.

The learning: don’t force annual plans onto customers. Focus on nudges and opt-ins instead.

Annual plans weren’t always the default on SaaS pricing pages. Now they are.

I recently investigated the pricing pages of every company in the Forbes Cloud 100. A quarter (25) of these software companies had a public pricing page that included both monthly and annual plans. Of these, an overwhelming 88% defaulted to their annual plan while quoting the price as monthly. This is the classic “$9.99 per user per month (billed annually)”.

Shifting the default can have a big impact on adoption. And, if you only offer a monthly plan today (looking at you ChatGPT Plus 👀), slotting in a new annual plan could allow you to continue communicating the same price (now billed annually) while rolling out a price increase (when billed monthly).

I’m a serial adopter of software products. And I’m consistently surprised how little real estate is devoted to promoting annual plans to monthly users.

One growth leader I interviewed recalled an experience where their change plan option was hard to navigate within the Settings page. This led to a surprising number of customers cancelling their monthly plan and then quickly re-subscribing to annual. The odd pattern happened most frequently during the first two to three months post-purchase.

The learning: make the switch to an annual plan easy to find! The homepage sidebar, for example, is a prominent placement without being as intrusive as an unexpected pop-up or in-your-face ad. You might look to Canva (above) for inspiration.

Looking again at the Cloud 100 companies, the median annual discount was 20% off compared to the monthly price. That’s equivalent to getting 2.5 months for free over the course of a year.

If you look more closely, there’s a fairly wide range of discounting behavior. Companies with presumably stickier products offer only a modest discount (see: Intercom); others are far more generous. Grammarly is a notable outlier – they offer 60% off.

I’d encourage you to tackle your annual discount in two ways:

While you might opt for a modest annual discount at signup, especially if a more aggressive discount doesn’t materially shift your annual mix, you could sweeten the pot when upgrading monthly users onto annual plans. Several growth leaders mentioned examples of letting users roll prior payments when they convert monthly seats to annual.

I’d recommend only making this option available during a user’s first six months and/or before the retention curve starts hitting its “smile”. Otherwise, you’re providing a big discount for folks who are already likely to stick around.