THE PRICING RATIO: A TRICK TO ESTIMATE CHURN IN 10 SECONDS

Summary from the TLDR Founders newsletter

You can guess a competitor's churn rate by dividing their annual price by monthly price. Most subscription companies eventually price their annual plan right above where average users quit paying monthly. Codecademy struggled with 4-5 month retention, so it priced annual at 6 months of monthly payments and saw huge wins. Hemingway Editor charges $25 monthly but $100 yearly, a ratio of 4, suggesting most users bounce after 3 months. ChatGPT has a ratio of 12, Canva sits at 10. The math works because companies learn to lock in users just before they'd naturally churn.