Customers on an annual plan have a lifetime value (LTV) that's two to four times higher than customers paying monthly, and they're less likely to churn. Term Optimization, part of Paddle Retain, analyzes customer engagement and other subscription metrics to proactively upgrade customers to annual plans.
Term Optimization automatically suggests plan upgrades to the right customers at the right time — no intervention required on your behalf. You can integrate with Paddle Billing in a couple of clicks, with no additional scripts required.
Customers upgraded to annual plans are two to four times more valuable than monthly.
You control the upgrade strategy based on your appetite for churn.
Use machine learning to identify customers ready to upgrade using 14 datapoints
Offer 1-click upgrade experiences to customers who are likely to accept.
Strategically identify customers based on what you want to achieve.
Send whitelabeled upgrade offers by email and to users logged into your app.
How it works
Customers on annual plans have a higher lifetime value and are much less likely to churn, but most customers aren't ready for a long term commitment when they first sign up.
Term Optimization, part of Paddle Retain, uses machine learning to analyze customer engagement and thirteen other data points to identify which customers are primed to upgrade to a longer-term plan. Once customers are identified, Retain automatically prompts customers to upgrade.
Term Optimization strategy
You're in control of how Retain identifies customers who are likely to upgrade. You can choose from three strategies:
Less churn
Designed to:
Target less engaged customers who are more likely to churn—lock them in on a longer plan.
Works well for:
Turning potential churn risks into long term paying customers.
Keep in mind:
Your churn rate might increase if dormant customers subsequently cancel their subscription.
Sweet spot
Designed for:
Identify a balance—reach both likely churners and highly engaged customers.
Works well for:
Identifying a good balance of customers who are at risk of churn and also engaged.
Keep in mind:
You may be leaving cash on the table or missing a chance to lock in customers at risk of churning.
More cash
Designed to:
Focus on highly engaged power users who are most willing to upgrade and pay in advance.
Works well for:
Getting an upfront boost in revenue from annual payments.
Keep in mind:
Your monthly recurring revenue (MRR) may dip as customers move to longer-term plans that cost less.
Automated actions
If you use Paddle Billing, Term Optimization automatically takes actions on the related subscription in Paddle Billing for you. There's no need to build logic to handle this yourself.
| User action | Action in Paddle Billing |
|---|---|
| Upgrade subscription | Monthly plan price replaced with corresponding annual plan price on customer subscription. Change applied using prorated_immediately, meaning that proration is calculated and the customer is billed right away. |
Customer experience
You can choose how Retain reaches out to customers who are identified as likely to upgrade to a plan with a longer term length:
Retain emails eligible customers
Term Optimization uses machine learning to identify customers who are primed to upgrade, then sends them a short, personal plaintext email to suggest switching to a plan with a longer term length. It includes a prominent link to a one-click upgrade form.
If the customer doesn't take any action, Term Optimization sends a follow-up email a few days later.
Customers get in-app notifications
Term Optimization notifies customers that they're eligible to upgrade when they're using your web app.
In-app notifications reach customers when they're using your product, maximizing the likelihood of uptake.
Retain offers upgrades during payment recovery
Retain can prompt customers to upgrade in payment recovery emails and on the payment recovery form.
As customers are already engaged with billing during payment recovery, this approach feels natural and non-intrusive. Customers are more receptive to cost-saving opportunities at this point.
