Do you know if your product’s Free Trial is hitting industry benchmarks? If not, you could be leaving a lot of money on the table. This article will help you determine just how much is being potentially lost and make sure you’re picking the right type of trial for your customer acquisition model.
In Starship Troopers, author Robert A. Heinlein said, “There's no such thing as a free lunch.” In other words, there’s always a price to pay, even if it seems free. This is equally true when getting something for free as it is when giving something for free. As SaaS business decision-makers, figuring out how to use “free” in your conversion funnel is not easy. And mistakes can be costly.
If you’re leveraging a trial as your primary customer acquisition strategy, then your definition of a “free trial” can be the crux of your product’s success. In this article, we’ll explore the two main trial types, how to leverage them, and how to know if your trial conversions are hitting benchmark numbers.
A Tale of Two Trials: Opt-in Trials vs. Opt-out Trials
When it comes to trials there are two primary approaches in the SaaS market, opt-in vs opt-out. Let’s take a look at the components of each.
Opt-in Trials (Standard Free Trials)
This is the traditional free trial you most likely default to. Signing up does not cost a dime and allows users to quickly immerse themselves in your product before committing to a purchase.
There is only one type of opt-in free trial:
Standard Free Trials (Opt-in): This is defined by the need to manually opt-in at the end of your trial to become a paying subscriber. In other words, you don’t get automatically upgraded when the trial ends.
The Challenge: When it comes to standard free trials, the biggest hurdle is getting the user to the aha moment (delivering on the promise of your business) during their trial that ultimately compels them to upgrade.
Here prospective customers are asked to enter their credit card details and either pay a small fee upfront or, more commonly, gain access without a charge but require your credit card details. But in both cases, if they don’t opt-out before the trial period ends, then they will be charged and automatically become a paying customer.
Let's look at the two types of opt-out trials:
Opt-out Free Trials: This is when credit card details are required in order to access the trial and you have to opt-out in order to not become a paying subscriber. If you do not actively opt-out at the end of the trial you will be automatically upgraded to a paying subscriber.
Opt-out Paid Trials: This is when a small fee is charged upfront in order to access the trial (or when the first month is charged but can be refunded within the designated trial period). Again, if you do not actively opt-out at the end of the trial you will be automatically upgraded and become a paying subscriber.
The Challenge: Opt-out trials’ biggest challenge is getting visitors to sign up for a trial in the first place since it requires an immediate commitment.
Why Should You Care? Well, They Convert Differently.
Let’s talk about how each trial type converts and give a few examples to understand the potential outcomes if each trial type were to meet our trial conversion benchmarks.
First, let’s define what we are calling benchmarks.
We are considering benchmarks to be the ideal numbers that we know are achievable from our experience. Here are a few definitions to clear things up a bit:
Industry Benchmarks - the ideal number that if matched or surpassed we consider your trial to be optimized.
Industry Benchmarks Range - the range that shows the low end and high end of an optimized trial.
Industry Averages - the average conversion rate within the industry. Note: This does not determine that if you business meets an industry average that it is ideal.
For this article, we will be concentrating on #1, Industry Benchmarks. This will be a single conversion rate number that falls in the middle of the benchmark range that we consider ideal.
We have gathered our benchmark data from working with hundreds of SaaS businesses along with agreeing with a few trusted articles.
Quora - This post concentrates on the Visitor to Trial conversion rates. We believe 2% is an accurate number from our experience on a Standard Free Trial. However, they will decrease with an Opt-out trial type.
Sixteen Ventures - This article mainly focuses on Trial to Paying Customer conversion rates.
Totango - This resource is a bit dated and we don’t agree with all of the data but we do agree with the number of customers retained after 90 Days.
So let’s get down to it and look at how each trial type converts. To show an example we need to start with the number of unique visits to your site. For this example we will start with 10,000 visitors:
Key Resource: Use this SaaS Free Trial Benchmarks Calculator to plug in your own numbers and find out if your product’s trial conversion rates meet industry standards based on your current acquisition model.
Interpreting the Data: Which Should You Choose?
So what are the pros and cons of each trial type?
If we pay attention to the End-to-End Conversion Rate of each trial type above we find that the Standard Free Trials (Opt-in) delivers the most customers after a 90-day period.
But why is this?
The Pros of Opt-in Free Trial
A Standard Free Trial (Opt-in Free Trial) is most effective because it aligns the closest with visitors’, users’ and customers’ goals. A visitor wants the flexibility to try the product easily and upgrade later on their own terms. This leads to customers staying around longer since every customer conversion was their own choice, ultimately creating the highest customer lifetime value (LTV). That right there is the biggest win.
However, since there is no friction in starting a trial you will also see more trials coming through and it’s your job to show them the value of your product through optimized user onboarding. This is the toughest part of getting an opt-in free trial right.
But what if you don’t want just anyone trialing your product. Let’s talk about that. If an opt-out trial might actually result in fewer upgraded customers, why would anyone do this?
The Pros of an Opt-out Trial
There are really three primary reasons why a company might choose to go this route:
Your product does not have a user onboarding process in place: Opt-out trials offer a more simple path to upgrade.The fact that these trial periods feed into upgrades seamlessly makes for a simplified upgrade strategy. This would also require less effort in optimizing user onboarding which would lead to less activity monitoring and engineering.
Your product’s trial creates added upfront costs: A business might need to highly quailify users to keep costs in check during the trial period. For example, the product could accrue bandwidth and storage costs if it allowed users to upload and watch videos within their trial. If they had a high enough amount of trial users the unit economics may not make sense if they are creating expenses that are killing acquisition costs.
Your product does not face competition: If your product is the only current solution solving a problem you could get away with setting up more barriers, achieving above-average conversions and still grow the business for a period of time. That is until there is new competition in the space that takes an approach that aligns better with what your ideal customers desire.
Note, that there is one other reason that comes up a lot, but is not a good reason.
Blinded by high customer conversion rates: You may not be seeing the full picture as shown in the examples above. When an opt-out trial automatically upgrades a user to a paying customer upon trial expiration, you may see higher customer conversion rates since many users might simply forget to cancel. However, since this can often happen without notice, it will most likely also lead to higher cancellation numbers and lower retention rates.
Before Switching from an Opt-out Trial to an Opt-in Free Trial
Let’s say your company is currently using a opt-out trial, but you’re finally ready to offer prospective customers the option of a opt-in (standard) free trial. Perhaps your user onboarding process has been retooled, or maybe your competition has forced your hand with free trial offers of their own.
Whatever the case, you’ll need to reset your expectations. Because you’re removing the credit card wall, more customers will naturally flow into the trial stage, while the percentage of users who actually convert to paid customers will likely drop dramatically.
Before you do make the switch over to (or simply introduce) a free trial, however, you should take some steps to minimize any potential negative impact that this decision may have on your bottom line. Here are a few ways in which you should prepare:
Implement customer engagement analytics: Tools like InnerTrends paired with Fullstory can pave the way for a greater understanding of what your customers’ needs are and how you can satisfy them more fully. So make improving your analytics a priority before launching your free trial.
User onboarding process: We’ve already covered the significance of your user onboarding process, but to reiterate, your conversion will surely suffer doubly if you don’t create a smooth transition for users to understand the value of your product and upgrade from trial user to paid customer.
TTFV and the aha moment: Your true goal during any trial period should be to assist customers in seeing the value in your product (i.e., their aha moment). So focus on shifting your approach to minimize that Time to First Value (TTFV). Note: It’s not always about doing this as fast as possible, but concentrate more on what makes the most sense for your customer’s journey within your product.
Collect user feedback: Knowledge truly is power when it comes to your free trial. So diligently conduct customer surveys — gauging product-market fit and pricing, among other factors — to propel your long-term customer relationships forward.
Encourage a dialogue with your product: Your customer should be able to engage in two-way communication with your product, creating an ongoing dialogue. If your customers are having a monologue and logging in and back out, maybe just to check out a dashboard, think of better ways to increase engagement within your product.
Ready to Optimize Your Trial for Better Growth?
An optimized SaaS user onboarding process makes all the difference in which type of trial would make the most impact on your business. But getting your onboarding ready is easier said than done and it starts with tracking your activation metrics that matter most.