Customer-centric Growth by Lincoln Murphy

SaaS Free Trial: Require a Credit Card to begin?

So, should you require a Credit Card to get started in your SaaS Free Trial?

TL:DR – By asking for a Credit Card up front, you will get fewer prospects into your Free Trial with no guarantee of converting more paying customers.

Now, if you’d like to know why that is, read on…

Should We Ask for a Credit Card To Begin a SaaS Free Trial?

Okay, so I get questions like this a lot:

Hi Lincoln what are your thoughts on requiring a Credit Card from new Trial users?

Right now, we do not require a credit card from folks who are signing up for our 14-Day Trial but I am beginning to rethink that strategy.

What are your thoughts? Should we or should we not?

Without even asking them, I know that this SaaS provider is frustrated by the lack of conversions from Free Trial sign-ups to paying customers and they think requiring a Credit Card up front is the magic bullet that’ll fix everything instantly.

It won’t, and apparently I haven’t been clear enough in the past, so let me clarify my stance on this.

Asking for a credit card up front (an “opt-out SaaS Free Trial”) does little to help conversions and this is backed up by the fact that I routinely see SaaS vendors with < 20% conversion rates that ask for a credit card up front.

Even a 50% conversion rate isn’t great if – as you’ll read below – the overall numbers are terrible.

Clearly, asking for a credit card up-front is not a guarantee that you’ll get more customers.

It’s about Conversions… Not Conversion Rate

The only thing I can guarantee with an Opt-Out SaaS Free Trial is that you’ll get less prospective customers into your Free Trial than if you didn’t require a credit card to start.

Sure, you might raise your “conversion rate” – the percentage of those who start a trial that become customers – but you will end up with less actual new customers off the same amount of traffic to your site. At least that’s what I’ve seen in my experience.

Conversion Rate can easily become a vanity metric if you’re not careful.

But you know what? It isn’t about whether you ask for the Credit Card up front or not…

…it’s about everything that happens after they sign-up.

You’ve got to Trust the SaaS Free Trial Process

Most SaaS providers treat the Free Trial like a black box… literally, a box on a flow chart of the sales process.

They look at the Free Trial like this: “free users” enter and 5-10% magically appear 31-days later as paying customers.

That’s a stupid, silly, misguided, growth-limiting, and several-other-NSFW-words-way of thinking.

First, instead of “free users” consider those who enter your Free Trial to be… prospective customers.

That’s a difficult mindset shift, but one that’s required if you wish to dramatically improve the number of customers your Free Trial produces.

Yes, the Free Trial is part of the overall sales process, but the trial itself must be looked at as a process.

The first step is getting them to sign-up (with or without the credit card)… but that’s just one step in a process.

From there, the Free Trial process must be designed to get the prospect engaged and then to convert them to a paying customer.

Read this post about SaaS trials, especially the part about TRUST.

Then watch this quick video where I talk about how whether to ask for a Credit Card is a red herring issue that distracts us from the real issues.

And then watch this somewhat-longer presentation I put together on a Free Trial metric designed to increase conversions.

And of course…

Design Your Product As If You Actually Want Customers

You either want customers and to grow your business or you don’t; if you’re the latter, I can’t help you.

But if you’re the former, then pay attention.

If people can’t figure out how to get started once they’re in your SaaS Free Trial – easily – they won’t.

And it’s not because they’re stupid… it’s because they’re super busy and you’ve made them have to work to figure out how to use your product…. which, as I’ve already said, they won’t.

Or at least they won’t at scale.

Sure, some early adopters might take the time to figure out how your product can help them – in spite of your efforts to the contrary – but this won’t fly at scale.

You must have a process that’s repeatable and predictable if you want to scale your business… even if – no, especially if – there are Outbound Sales and Professional Services involved!

That’s why it must be SUPER EASY to get them started, to get them to take the second, and third steps, and so on…

…otherwise they’ll go back to doing things the way they always have, even if that is less than ideal.


Don’t Confuse Complex with Valuable

The status quo is hard to disrupt and your overly-complicated product isn’t helping things.

“But our product does so-many things, is so complex, requires multiple people, legacy data seeding, blah blah blah…” everything can be broken down into smaller steps and the process around that simplified (it’s a relative term, I get that).

Read about what happens when people are confused by your product and how that affects their ability to experience all those great features you want them to see.

Then take a step back from “functional on-boarding” and think “engagement”

Then take “engagement” and break it down into quick wins.

Requiring a Credit Card Can Lead to Higher Churn

David Rowley, CTO at Get Satisfaction, said in the comments on this post that in his experience, requiring a credit card at the beginning of the SaaS free trial might result in more conversions, but some of those “conversion” might be accidental; the forced continuity and negative option ideas that I talked about in this post on why $1 trials are a bad idea.

David said that in his experience, requiring a credit card to start a trial “yields higher churn from ‘accidental’ conversions that later cancel” resulting in more churn, as those accidental conversions figure things out and cancel their subscription.

When I saw David’s comment, I assumed I’d covered this somewhere, but after scouring several posts I realize I only hinted at what David said, so it’s great that he brought that up and I thought it warranted an update to this post.

This is yet another reason why I often say “the seeds of churn are planted early.”

So, whenever I work with a SaaS provider 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.

More than anything, that in itself is yet another reason to not require the credit card to start the trial!

But the…

Biggest SaaS Free Trial Fail? Not Asking for the Sale

Yeah… this is kind of important… you must ask for the sale!

Remind people that they have only x days left (but be cognizant of “trial countdown blindness”) to increase the sense of urgency.

Then make it super obvious and easy for them to become a customer in a way that’s congruent with the way they want / need to buy.

Many SaaS providers forget to ask for the sale or they don’t want to seem to “salesy” or too aggressive… and that’s why most aren’t as successful as they should be.

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