2.5x Higher LTV by Pricing Annual Plans on Retention: Dan @ Diligent

Most SaaS companies guess their pricing.
Because they're operating from a secondhand context.

Competitor research. Pricing surveys. "Best practices."

None of that tells you what'll work for YOUR product.

And that's exactly how we had priced Chosenly.
No framework. No model. Just gut feel on what would work.

Turns out… that's not unusual.

In this episode of TLDR, I spoke with Dan Layfield from Diligent about how real SaaS companies actually figure out pricing.

Codecademy scaled from $10M → $50M ARR and eventually exited for $525M.

And according to Dan, one of their biggest unlocks came from something most SaaS companies barely think about:

How they price annual plans.

Most companies do this: Monthly: $10 Annual: $96 or $120 (10–20% discount)

Because… that's what everyone else does.

But Dan shared a much smarter approach.

Price your annual plan based on monthly retention.

Example: If your product costs $10/month and users stay 4 months on average…

Most companies make $40 LTV.

Instead, price the annual plan around 6 months of value ($60).

That pulls more users into annual.

What happens next:

• You collect more cash upfront

• Payment churn drops

• Users commit longer

• Many renew annually

Codecademy saw LTV jump from roughly $40 → $90 using this logic.

Dan also breaks down:

• Why pricing should be tested every ~6 months

• Why willingness-to-pay surveys are only 60% accurate

• How freemium models actually convert (and when they fail)

• The simple A/B testing setup used to test pricing

If you run a SaaS product, this episode will probably make you rethink your pricing page.

It definitely made me rethink ours.

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