How To Propose Annual Contracts To Your SaaS Customers [Phone Scripts And Email Templates]

Posted by Steli Efti on Thu, Apr 10, 2014

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SaaS customers love the freedom and flexibility that monthly subscriptions give them. But you as a SaaS business want to sign them up for annual deals when possible since that's going to increase cashflow and predictability and decrease your churn. How can you make them "give up" freedom and flexibility and commit to your product for a whole year?

The scripts and templates you find below will answer that question and help you close more annual deals. But first, let's find out if now is the right time for your SaaS company to start selling annual contracts and pre-paid deals.

When Should You Start Selling Annual Deals?

If your SaaS startup is below $1MM ARR then you probably should not focus on this. Instead, keep your customers on monthly plans. Why? Because you want to understand churn first and see how long people stick around by choice and learn from that process.

If you're above $1MM ARR it's probably a good time to offer annual plans, either pre-paid or monthly.

A Word Of Caution

Be aware that annual plans are not only a good thing, there are issues you need to be aware of choosing this route in SaaS: 

Benefits & Downsides of Annual Plans

+ Lower churn 
+ Red flags when customers don't want to commit 
+ Cashflow with pre-paid deals
+ Predictability 
- Forcing unhappy customers to stick around 
- The great churn illusion*

* (including annual contracts in your churn math instead of only including customers who can churn in your churn numbers)

Crafting Your Pitch

The core idea you're selling them is basically this:

  • Long term commitment once they know they love it (sell this when they are ready to commit)
  • Give them a Discount / Benefit
  • Position it as an Investment in the relationship (we can work harder for you / you commit longer term to us)

Email Your Customers

Here's the email template you can use to schedule phone calls. We're getting a 89% open rate and 60% response rate on this email.

Subject: I want to offer you a better price for [product]

Hi [firstname],

Hope you're doing well. You've been with [product] for a while now and we would like to thank you and deepen our relationship by offering you a better price for [product]. Let's jump on a quick call this week and explore all ways to make this happen for you!

What's a good time for a 15min call this week on either Wednesday or Thursday afternoon?

Cheers!
[your name]

Here's a template you can use for self-signups:

Subject: I want to offer you a better price for [product]

Hi [firstname],

Hope you're doing well. You've been with [product] for a while now and we would like to thank you and deepen our relationship by offering you a better price for [product]. 

Do you see yourself using [product] over the next year? If so, then here are 2 great options to get a better deal before the end of April:

Option 1: 1 Year contract - You pay monthly and save 10%
Option 2: Annual Prepaid - You pay annually and save 15%

All you need to do is to let me know by April 30 which options works best for you and I can take care of the rest. 

Cheers!

[your name]

Phone Script

Hi [Name],

How’s it going?

[Answer]

Great, is this still a good time for us to chat?

You’ve been with us now for months, and I wanted to first check-in with you to see how things are going?

[Answer – Going great]

What have you enjoyed to most about using our software? (remind them of why they love your product)

[Answer – Going well but with issues or questions]

Manage issues, answer questions and follow up with:

Other than that, are things going well?

[No]

Manage objections.

[Yes]

Do you see yourself using our product for the next 6-12 months?

[Yes]

That’s great, then why don’t you guys switch to annual billing and save money?

[How does that work?]

Pretty simple, you could pre-pay for the year, switch to annual billing, and get 15% discount , so you don’t have the haste of paying monthly and you save $$$.

[Objection – cash flow]

That makes sense. So if you could pay monthly, and still get the discount, would you be interested? 

[Yes]

I have a great option, you can sign a 1 year contract with us, and you get a 10% discount. You still pay monthly, and save money doing it. Sound fair?

Objections:

1) We don’t want to commit for that long. We’re a small business and things change.

I hear you. Do you think it’s a safe bet that you will be around in a year? Do you think you’re likely to hire more people later this year?

If yes, then you’re just making a sound financial decision by taking the discount now.

Plus anytime you hire anyone new, you would automatically save money on each new license, without actually committing to keeping those licenses. Makes sense?

2) We want to have the flexibility to switch if we outgrow you.

I hear you. You want the flexibility of being able to switch to other tools as you grow. But let me ask you, do you really want to make the switch once again this year (remind them of the pain of switching), specially when you already have our solution working well for you? You still have the flexibility to re-evaluate after 12 months.

3) We’re a startup, so cash-flow is the most important thing.

Exactly, which is why the 1 year contract is such a great option. You save 10% on your bill every month. That’s hundreds of dollars saved and makes your cash-flow situation even better.

Need more help?

If you need more advice on SaaS sales, check out our Startup Sales Success Email Course and pick my brain in a Sales Office Hour

 

Topics: startup sales, sales basics, saas churn, annual contracts, pre-paid, saas sales

    
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