Software Pricing Models: Monthly vs. Annual

Today, software is the reason most businesses are able to operate as smoothly and efficiently as they do. You need sophisticated programs to monitor your documents, finances, marketing, case files, and more. While buying many business software programs used to be a one-and-done purchase, these days, many businesses instead use annual or monthly subscription plans to let customers use their products.

Figuring out whether an annual or monthly subscription for some piece of enterprise software is the right choice for your business can be a headache, but it’s a job to take seriously. There are advantages and disadvantages to both annual and monthly subscription plans, and you need to balance costs alongside other considerations.

Keep reading to learn more about monthly vs. annual software pricing models and how Client Chat Live can help your business thrive.

Annual Subscription vs. Monthly Subscription: Cost

Before choosing any software subscription plan, it’s important to know exactly what you’re paying for and at what intervals. Software companies use many different tricks and strategies to get you into the plan that they think will benefit them the most.

Case in point, you may see a company advertise that the month-to-month subscription price is $30, while the annual subscription price is $25 per month. This makes sense because companies typically offer discounts for longer-term subscriptions to the products. However, when you go to make your payment, you may find that you’re paying $300 all at once for 12 months of service.

This is why it’s so important to get as much detailed information as possible about any software service plan. Using the example above, you would technically be paying less “per month” for the annual plan, but what if you don’t end up liking the service? Can you cancel the rest of your subscription, and if so, do you get a credit for the months of service you didn’t use? And can you afford the $300 upfront payment for an annual membership? You need to ask yourself these questions for every software subscription you have to make sure you’re making efficient use of your resources.


Annual Subscription vs. Monthly Subscription: Flexibility

You have to weigh multiple trade-offs when deciding on an annual vs. a monthly software subscription plan. One of these trade-offs is how much control and flexibility over your subscription you want.

Annual plans are, by their nature, less flexible than monthly plans. That said, the particulars of an annual software subscription can vary greatly between software providers. Some plans require upfront payment for a whole year and don’t allow you to cancel your service. Others might allow you to cancel your service, but they might keep part or all of your payment without refunding you for the months you didn’t use. If you’re lucky, they’ll provide you a refund for the balance of the contract.

While annual plans aren’t as flexible as monthly plans, they are simpler. If you have a service you need, are happy with, and don’t see yourself changing anytime soon, you can make that payment once every year and forget about it.

Monthly plans are best for businesses with tighter cash flow and/or those who prize control and flexibility over the services they use. You might pay a bit more for your service over the long term, but you’ll avoid hefty upfront payments and being locked into a lengthy contract.

Furthermore, if you’re a new customer, committing to a year of service before getting a chance to really put the software through its paces can be a risky move. If you try the product for a month and are happy with it, you can always switch to an annual subscription later on. Lastly, a month-to-month subscription can be the ideal answer for software that you don’t always need, as you’ll save money by not paying for a whole year of service at a time.

Annual Subscription vs. Monthly Subscription: Availability

Increasingly, an annual subscription might be your only option for many services. Around 12 percent of software-as-a-service providers now require annual plans, and many more companies appear to be leaning in that direction. If you’re choosing a service that requires an annual plan, be sure it’s worth the upfront investment.

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