Test an Annual Prepay Pricing Offer

You are an agency monetization strategist who runs pricing tests responsibly (no race to the bottom). You design experiments with explicit hypotheses, clear primary metrics, and pre-committed kill criteria so the agency learns regardless of outcome.
Agency: [AGENCY_NAME] — [SERVICES] | Current offer: [CURRENT_OFFER] @ [CURRENT_PRICE]/mo | Win rate: [WIN_RATE] | Avg deal: [AVG_DEAL_SIZE] | Test audience: [TEST_AUDIENCE] | Hypothesis: [HYPOTHESIS] | Current avg tenure: [AVG_TENURE] | Cash discount rate: [DISCOUNT_RATE] | Refund policy: [REFUND_POLICY]
Design a test for an annual prepay variant of the current offer, including the incentive level, refund/cancellation handling, target take rate, and how to read whether prepay is incremental revenue vs cannibalized monthly revenue.

- Prepay discount must be ≤ true cash value of 12-month prepay (don't over-discount)
- Refund policy must be explicit and contractual (pro-rata vs none vs milestones)
- Track take rate AND incrementality (is prepay cannibalizing 12+mo monthly clients?)
- Primary metric: 12-month cohort revenue vs control
- Include risk of locking in poor-fit clients you can't easily offboard

Sections: (1) Variant table (Monthly Control vs Annual Prepay), (2) Cash-Value Math (justifying discount), (3) Refund/Cancel Policy, (4) Take Rate Target + Incrementality Test, (5) Primary Metric + Decision Rule, (6) Kill Criteria.

• [AGENCY_NAME] — Your agency name
• [SERVICES] — Core services
• [CURRENT_OFFER] — Current offer description
• [CURRENT_PRICE] — Current monthly price
• [WIN_RATE] — Current close rate %
• [AVG_DEAL_SIZE] — Current ACV
• [TEST_AUDIENCE] — Segment to test against
• [HYPOTHESIS] — What you expect
• [AVG_TENURE] — Avg client tenure in months
• [DISCOUNT_RATE] — Your cost of capital % (often 8-15%)
• [REFUND_POLICY] — Your current refund stance

Agency: Lumen Studio — Webflow dev retainers | Current offer: $7,500/mo dev retainer | Win rate: 26% | Avg deal: $56k LTV | Test audience: net-new clients, post-build phase | Hypothesis: 10% annual prepay discount lifts 12mo cohort revenue 8% by reducing month 3-5 churn | Avg tenure: 7.5 months | Discount rate: 10% | Refund policy: 30-day pro-rata

1) Variants:
| Variant | Term | Price | Total Yr 1 |
|---|---|---|---|
| Monthly | Month-to-month | $7,500/mo | $90k (at avg 7.5mo: $56k) |
| Annual Prepay | 12-mo upfront | $81k ($6,750/mo equiv, 10% off) | $81k locked |

2) Cash Math: 12-mo prepay at 10% cost of capital is worth ~$4.5k present value vs monthly billing. 10% discount = $9k cost, so net $4.5k cost — justified only if it lifts cohort revenue +$4.5k via reduced churn.

3) Refund: pro-rata refund after 90 days minus 15% admin fee; first 90 days non-refundable.

4) Take Rate Target: 25% of new closes. Incrementality: A/B by offer-shown — half of pitches see prepay option, half don't; compare 12-mo cohort revenue per pitch.

5) Primary: 12-mo cohort revenue per pitch. Decision: adopt if prepay-shown cohort >= +6% vs control.

6) Kill: refund requests >15% of prepay cohort, or take rate <10% (signal nobody wants it).

• Don't over-discount — compare your discount to your actual cost of capital, not a competitor's number
• A/B by offer-shown to measure incrementality; otherwise you can't tell if prepay is new revenue or cannibalized monthly
• Make your refund policy explicit in the contract — vagueness creates disputes that cost more than the discount