Annual subscription

What is an annual subscription?

An annual subscription is a billing arrangement in which a customer pays once for a full year of access to a product or service, typically at a discounted rate compared to monthly plans.

This model is common in DTC brands, software, streaming, and subscription-based businesses that aim to improve retention and predict revenue by securing long-term commitments.

Why offer an annual subscription?

Annual subscriptions help increase customer lifetime value and reduce churn. By locking in users for a full year, businesses can spend less on retention efforts and more on delivering value. Many brands also offer perks like discounted pricing, exclusive content, or gifts to make annual plans more appealing.

Differences between annual subscription and monthly subscription

These are the key differences between monthly and annual subscription:

• Annual is billed once per year; monthly is billed every month.
• Annual plans require a longer-term commitment..
• Annual subscriptions mostly offer a discount, eg, subscribe and save 15%.
• Annual subscribers are less likely to cancel mid-year, reducing churn.

Example of an annual subscription

An online store offers a curated skincare box as a monthly subscription at $25/month and an annual subscription at $240/year (20% discount).

Now, a customer arrives at this store, compares the monthly and annual subscription, decides to proceed with the annual subscription, paying $240 upfront.

This way, the customer enjoys a discount, gets the box every month without hassle and the store has a loyal customer with upfront payment locked in.

Driftcharge Tip

Offer both monthly and annual plans to give customers flexibility. Use incentives like savings or exclusive benefits to encourage upgrades to annual.

Ganesh Pawar

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Ganesh Pawar is the founder of Driftcharge, a subscription management app designed to help Shopify merchants streamline and scale their subscription businesses. With a deep focus on solving real-world pain points—like legacy account page support, flexible subscription options, and advanced analytics—Ganesh is passionate about building tools that drive growth and retention.