Comments

  1. Another factor to consider is churn. Credit card at the beginning of the trial might result in more conversions, but some of those might be accidental. This will create more churn, as those accidental conversions figure things out and cancel their subscription.

    • Great point David… I figured I’d covered this somewhere, but after scouring several posts I realize I only hinted at what you said.

      Whenever I run into a company that requires a credit card to start their trial, among other things, I look at retention past the first 60 or 90 days, as well as refunds / chargebacks. Generally, the latter is high and the former is low.

      That’s why I advise my clients that require a credit card up front to only consider a “conversion” an actual conversion after at least 60 days… and for some, 90 days. That’s 1 or 2 billing cycles beyond the first one when the trial ended and should indicate clear sailing from there. Consider this when figuring out compensation/payouts for sales people and affiliates, too.

      I’ll try to incorporate this into the post… thanks for the comment!

  2. Excellent insights. Very informative and provides me with some validation to continue with our strategy.

    We don’t require a credit card or even offer a free trial. Rather we’ve included a very low entry price point for a basic offering. The package does not restrict features of our SaaS, but limits data useage.

    In grand scheme, and because margins are based on how much data passes thru our systems (sms messaging), we get higher margins for this entry point.

    Also, we focus on engaging customers with product demos uaing GoToMeeting, they see what they are purchasing and understand usability immediately.

    james
    http:// movilexchange.com

  3. If you put credit card at the beginning of the trial you are opening yourself up to fraudulent use of your credit card processing for pre-auth. Criminals will setup a trial just to run through the credit card numbers to validate, knowing that the $1 pre-auth charge will disappear within 24 hours. Using this process they turn a low value credit card number into a much higher value validated card number.

    Ask Dave… he knows.

  4. Great Read Lincoln, we have struggled with this for many months with our team divided on the credit card issue. I have always felt it’s the follow through and experience once the potential client signs up that will keep them not the credit card info. Learned Something Here thanks

  5. Anonymous Please says:

    Ugh! Reading this (and several of your other posts) today has left me feeling deflated. I’ve been in my position for nearly 8 months fighting a battle with the senior management on free vs. free w/CC vs. $1 trials for our SaaS product with little to no traction. We have only just moved to two offers: 14 day free w/CC and 30 days for $1.

    I know it’s the small business owner mentality at work, but the message we send our prospects is so negative, lacking in confidence and trust, in both our relationship with them, and in our own product. And we have a great product!

    Even worse is our existing customer policy of “let sleeping dogs lie.” Customers who have not logged in to the software in 30 days we no longer engage. I know. It’s horrible and I’m trying to change the way we view our customers, but … ugh.

    I’m beginning to think I should be putting more effort into updating my resume instead. Thank you for your articles. I very much enjoyed them and find your message to be spot-on.

  6. Hey Lincoln. Long time. I just went through this and it brought back lots of old thoughts – I’m supporting a new business now that has a 22yr old SaaS site! SaaS before it was SaaS. In anycase, I am completely overhauling it…

    I’ve done the free trial, $1, CC first merry-go-round a few times and I don’t think there is a “one size fits all” model.

    IMO –
    Free trials are taken advantage of – Customers don’t see the need to invest time to learn and understand how to implement into their process. Customers only see the superficial process offered by a few of the screens.

    If offering a premiere product it dillutes the price you can get from the client. “i.e. Join our exclusive club – Oh you can try it first free — not going to work”.

    My best success using Free trials is effectively to create an email honey pot, where you remarket to them sharing the product’s virtues or pushing a discount.

    I am of the belief that if the product has value, the onboarding is straightforward and you have an easy to cancel moneyback gurantee, the customer feels like there is a good balance between try and manage risk.

    I consider this simply from a sales qualification mindset. Get the customer to put a modicum of skin in the game to get full access.

    There is a fine line to how often people use the service and the trial period. A service that is used quarterly (for me it would be istockphotos) is going to have a different trial profile than one that is used daily or more. Not suprisingly, those businesses recognize this and offer a token based payment too. (pay x credits for images vs. all you can eat for $49/mo.)

    In any case, I’d like to talk to you about getting a few hours of your help. Ping me – redoing mktalert.com

  7. Great post man!!

    I totally agree.

    It think what stops most of Saas owners from implementing it is the potential drop of revenue during the first weeks.

    What do you think about that?

    Thanks!

    Laura

    • Thanks for the kind words.

      Honestly, I think the main reason for requiring a CC to start a trial is SaaS owners know they didn’t design their free trials to convert prospects into customers so they take the easy/lazy way out and require a credit card to get started.

      But then they find that they still have 70%+ of the prospects opting-out before the trial expires, so clearly the CC requirement wasn’t a magic catalyst to convert all the prospects to customers, with the gravy on top being that by requiring a CC to get started, they end up getting less people into the trial in the first place.

      If there’s driver other than that, I’d say it’s that they hear horror stories about conversion rates dropping, which could happen… but that’s conversion RATE; if you get exponentially more people in the trial and convert a smaller percentage of those to paying cuostmers, you may still come out with a significantly higher number of new CUSTOMERS and REVENUE… which is the goal.

      Conversion rate can be a vanity metric if you’re not careful.

Trackbacks

  1. […] you require a credit card up front and just bill them on day 31 (which has its own potential […]

  2. […] can ask for a credit card or not, but you realize that isn’t the important part of the process; it is just one part that still […]

  3. […] require a credit card. You’ll bring fewer potential buyers into the final purchase […]

  4. […] would recommend not using a credit card as a filter to improve lead quality [see Lincoln Murphy’s take on this] and I do agree as a general rule. But in the end, various options can be tested and measured, and […]

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