To ask for credit card upfront or not: why not both?
I'm currently testing out a hybrid approach for Zlappo by giving my users 2 choices when they sign up:
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Get a 7-day free trial, no credit card required -- this is the lowest-friction path; or
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Get a 30-day free trial, if you provide your credit card -- this is the incentivized path.
The CC-upfront trials convert at about ~50%, while the ones without credit cards convert much less, at about ~10%.
And I enable Stripe's email reminder function before charging them, with a link to cancel if they don't want to continue, thus keeping refunds low and minimizing surprises.
I find that, as consumers, we hate it when companies ask for our credit card upfront.
But that's because, deep down inside, we know we don't want to pay for it.
If we have even an iota of purchase intent, putting down your credit card to get month-long free access is a no-brainer.
What I like about CC-upfront trials is that -- apart from its much higher conversion rate -- it adds to your MRR right away, you know there's an impending invoice coming your way, assuming they don't churn.
If your value proposition is strong enough, potential customers will not be put away by the credit card requirement, and you're also more likely to attract serious buyers instead of freeloaders.
How do you run your free trials?
Credit card upfront, no credit card upfront, low-cost free trial (e.g. $1), no free trial, or a combination thereof?
I've seen plenty of data showing that requiring a credit card leads to higher conversion rates, which also intuitively makes sense, but I don't know. This doesn't quite apply to what you're doing since you are actually reminding people that they'll be charged before it happens, but I think most companies that do this do it primarily because they're just hoping people will forget to cancel, which obviously doesn't pass the ethical sniff test.
Maybe my opinion this will be changed eventually, but I feel like making it as easy as possible for people to try out your product (so either having a no-commitment free trial, or even just having a limited free tier if that's at all feasible) is the best way to go just as a matter of principle, but on top of that, I think people underestimate the effectiveness of this approach because the metrics they're looking at are biased towards approaches that produce a higher relative conversion rate.
For instance, you say that your conversion rate was significantly higher when you required a credit card, but what about absolute numbers? How many people started the no-friction trial as opposed to the one that required a credit card? I obviously don't know your numbers, so I could be completely wrong on this, but my gut tells me that the lower conversion rate here should be at least partially offset by the fact that not requiring a credit card means more people will start the trial, i.e. fewer people will drop out of your funnel at that point in the process.
I think this has to be a standard practice for all credit card-upfront trials.
Doing anything else just, like you said, doesn't pass the ethical smell test.
I do it mainly to remain ethical, but also there's no point in spiking your own refund/chargeback rates when you could just be transparent about what you're doing.
You still owe fees for refunds, so what's the point if the customer intends to cancel anyway?
Just remind them beforehand and let them cancel it.
I haven't looked into my numbers either, maybe I should, but I doubt there are 5x more people signing up for the "no credit card upfront" free trial.
Also we need to look at retention too, I believe these 2 trial users, if they do convert, convert into 2 different kinds of customers and thus 2 different LTVs.
Hey jay,
Couldn’t agree more with this post. We did A/B testing with this and found for our product we should require credit card. In the last year I think we’ve only received 1 actual complaint about the credit card being required. :-)
Glad it worked out for you!
This is an interesting idea. As other commenters have pointed out, just looking at conversion rates doesn't tell the full story, but if you were to properly A/B test this and conclude that this offer actually increases the total volume of paying customers, that'd be really great.
My instinct is that this is a misuse of an innovation token [1]. Not that it's a bad idea, but this is a strange, customers haven't seen it before, and it requires them to make a decision when signing up. Each decision they make wears on them a bit and makes them that much less likely to continue. Not to mention, are there not other decisions you could have them make that would be more valuable to you (e.g. "add more users right away for a longer free trial" or "set up a call with a sales rep to get a longer free trial")?
So yeah, cool idea, and I like the creativity, but I suspect that this isn't a particularly impactful way to innovate. Sort of like how it almost never pays off to come up with a creative pricing model that customers aren't already familiar with.
A slight tweak that might get around my concern: Email them a day or two after they start the trial saying that if they enter their credit card within 24 hours, their trial will get extended to 30 days. That way you aren't cluttering up the signup flow, plus it's an excuse to get them to re-engage after their initial signup. I guess the downside is that at that point, maybe the only people who would enter their card are people who were going to pay anyway, so you might not be changing anyone's behavior (but that might already be true with your current setup).
If A/B testing proves me wrong, I'd love to know about that. Good luck!
[1] - https://www.lessannoyingbusiness.com/post/innovation-tokens
Hi Tyler, I appreciate you dropping by and sharing your insight.
Yes, an A/B test is needed to conclusively prove one is better than the other, and your hypothesis that giving them a choice might actually decrease total number of upgrades might be worth looking into.
Like you said, decision fatigue, etc. It's certainly a valid concern.
My main concern is that I want to put my trial users in the frame of mind that they must be able to see themselves upgrading to one of the plans eventually, if the product meets their expectation, and, if they can't see themselves eventually becoming a paid user under any plan, I'm willing to lose them.
I'm targeting users who already have a use case in mind, know what they're looking for in a Twitter growth tool, and are closer to the final stages of purchase.
I've always hit them with the "plans and pricing" page every time they sign up ever since my launch, but if they're uncomfortable proceeding they still have the choice of doing a no-strings-attached free trial.
Sort of like how Amazon hits people with the "what about a longer trial?" when you try to cancel your Amazon Prime.
Your suggestion to hit them with the "enter credit card details for longer trial" after 1-2 days is a good one, but I think that doesn't strike when the iron is at its hottest.
Their buying temperature would have cooled somewhat at that point, they've gone beyond the "buying decision/product selection" frame of mind and moved to the "product usage/evaluation" frame of mind, and I wouldn't want to disrupt that.
Context-switching is expensive even for users.
Anyway all I've stated are simply unsubstantiated hypotheses, no way to really know unless we A/B test this, so I'll give fuller thought to your ideas for sure.
I read your post on innovative tokens, and I'm willing to expend one innovative token on business model.
~Everyone is doing the same thing in SaaS and expending their innovative tokens on their product or marketing, nobody is really changing anything in terms of business model.
~Everyone is doing the "3 plans to choose from, monthly/annual, starts at $9-29/mo, 14-day free trial, no credit card upfront" shtick.
I try to differentiate a bit, because I believe it materially affects my top line; for instance, I offer lifetime plans on my pricing page (with a price tag comfortably above my average user LTV), and I've gotten dozens of purchases from that.
Some people abhor recurring fees so much that they would rather pay a high upfront fee, once-off and be done and over with it forever, than to be subject to recurring payments ad nauseam, to them it's almost like death by a thousand paper cuts.
Obviously offering a lifetime plan option hampers MRR somewhat, but what really matters is the amount of money hitting your bank account at the end of every month, and it works for me.
As for "what's valuable to me," I think credit card details are pretty much up there. It signifies purchase intent, puts the users on "default convert" instead of "default churn," and filters/screens for the type of trial users that I want.
Thanks a lot for chiming in, I'm learning a lot!
Makes sense! I especially like the lifetime plan approach. When I read that I was like, "yikes, I'd hate to indefinitely support customers that aren't paying me anymore" which is why it's such a good way to differentiate yourself. Doing stuff other companies don't want to do is a cheat code (assuming it's profitable at the end of the day).
This is a fantastic idea.
As a consumer, if you ask me for my credit card upfront, before trial, I will be very wary.
If you give me the choice, you gain my trust and I might enter my credit card info. Especially with the incentive.
I haven't seen your UI, but if you haven't, you should also add a message that a reminder will be sent before billing, giving them the chance to unsubscribe (once again, increasing trust).
That's interesting idea. Can you tell what is a ration of those two types of trials? Also, what is a ration of refunds in the CC version of the trial? Thanks.
What does your Churn look like for folks who go ahead and pay?
This does seem like a nice compromise. You cater for the ‘tyre kickers’ with the free trial but anyone with half an intention to actually test the system, will likely be happy with the month free. Nice.
are they converting simply because they forgot and ignored your follow up email, or are they long time customers? would be interesting to track if they continue to subscribe beyond 2+ months after a 30 day trial period
I can tell you that very few who got charged actually say they forgot to cancel, they wanted a refund, etc.
Those who intend to cancel would have done so already before the trial period was complete.
So they tend to stick around quite a bit.
I have many customers who have been with me from the start in 2020 to now.
It seems weird to suggest that they're converting "simply because they forgot."
Thanks for sharing.
What I’m curious to know though is your actual paid sign up numbers for each method?
Great post , I like your short and sweet 7 day trial, we implemented 7 days from the start, never looked back.
We will soon be removing our $0 Freemium plan and going solely on Weekly trials.
Currently we do not ask for credit cards up front, and see about a similar conversion rate to what you mentioned.
I too was grappling with incentivizing CC at the signup page, but felt it may come across as cheap to offer a 'free month' or 'bonus' for asking for CC when i just said "No credit card required". I also figured most users would probably hit the 'skip' button as they haven't started the trial yet, and dont know what to expect.
We will experiment perhaps with some A/B and see how it goes. I do like the idea of sending an email before charging and letting them know they can cancel anytime before the week is up.
Do you also send monthly payment invoices/ notice of upcoming charge?
Great article, thanks!
I’ve always liked the idea of a “paid trial” that allows people to use the product for a limited time (say 7-14 days) before they have to pay. That way you can get more full-functionality trials and less tire-kickers — which is what I think you’re getting at here.
Do you have information what is the percentage of those who wanted to try a free plan but stopped as soon as they saw they had to pay? It may be crucial data.
That's a good question.
I wouldn't know for sure, but in my setup it's not mandatory to provide a credit card upfront, it's just incentivized in the form of a month-long trial.
I think it's the best of both worlds, and I can't see a downside to doing this.
Thanks for sharing this. Offering two trial types looks like a great Idea which I didn’t test but might set up an experiment in the future.
I believe it all really depends on your product and when is the moment your users already got an idea of the value they can get, but didn’t yet settle on the feeling that they should have it for free.
As a consumer of B2B products I always prefer a volume based approach for trials that I can directly connect to the revenue of my business. (E.g. amount of emails I can send from a marketing platform).
For my own B2C product though I figured out that a cheap paid try-out with an option to upgrade to a longer period plan works best so far.
Oh yes, this is such an underrated treasure trove that most SaaS founders miss.
At first, it seems to not matter, but before you know it you have 1,000s and 1,000s of email addresses to whom you can send your marketing emails.
This is why I'm not fully onboard yet with the whole "credit card or bust" method just quite yet.
Super interesting. I am actually surprised that the results were so different between the two options. I would have guessed the opposite.
I do think that it can certainly depend on the product you have and the market you are in. BTC, BTB, prosumer, etc.
I'm talking about trial-to-upgrade rates, so why would requiring credit card upfront have a worse conversion rate?
Logically it should convert better, because the hard part is already done, and now the default is they're going to be charged, and the onus is on them to cancel, if they want to cancel.
For no credit card upfront trials, the default is they're not going to be charged, and the onus is on them to upgrade, if they want to upgrade.
Naturally the latter will convert worse because they were just further up the funnel when they signed up.
That's a very good approach, Agree with you 100%.
Within a certain period, the bank provides the opportunity to use the funds on the card for free. That is, it will not charge interest for this. Its duration differs from bank to bank: it can be either 50 or 70 days. To attract customers, banks provide for a fairly long period of free use of money immediately after the card is issued - up to 100 days or more. Then it can become shorter, reduced to the typical 50-60 days. Again, you need to read the terms of the contract very carefully or clarify this issue on Mortgage Advice Leeds.
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