Credit card for subscription free trials?
Many components create the ideal customer acquisition promotional toolkit. Free trials are one of them. However, one of the questions many product marketers face is whether or not to require credit cards for free trials.
To decide if requesting credit card information aligns with your strategy, ask yourself the following:
How does requiring a credit card align with your business model?
What is the user experience like during the free trial?
What is the pricing strategy after the free trial ends?
How will you monitor and analyze user behavior during free trials?
What are the potential advantages and disadvantages of requiring a credit card?
Let’s focus on this last question for the rest of the article. We’ll review the pros and cons of asking for a credit card during a free trial so you can seize what makes more sense for you.
Should free trials be cardless for subscriptions?
The short answer is that it depends on your business goals. Allowing potential customers to test your product before buying is crucial to a winning acquisition strategy. In fact, 34.5% of subscription businesses offer free trials.
Let’s review both scenarios–free trials requiring a credit card and cardless free trials.
Pros of requesting credit cards for free trials
Requesting a credit card for free trials can offer several advantages to subscription businesses–by obtaining this information upfront, you can streamline the conversion process and improve retention:
Higher conversion rates: Asking for billing and payment information during a free trial increases the likelihood of converting trial users into paying customers. Only prospects with serious intent would type in their card number.
Streamlined billing and reduced friction: When the free trial ends, users don't need to provide payment details again, reducing the friction in the conversion process.
Predictable revenue: Understanding how much trial users turn into paying subscribers can help you better predict revenue streams.
Cons of requesting credit cards for free trials
While requiring a credit card makes the transition from trial to recurring customers easier, trials without credit cards pave the way for more subscriber acquisition.
This option is perfect for companies wanting to increase sign-ups or launch a product's beta version. Here’s what to consider:
Privacy concerns and customer trust: Users may be hesitant to share their credit card–if they feel like their information is being misused or that they were charged unexpectedly, it can damage trust in your business.
Chargebacks and disputes: Providing credit card information increases the likelihood of chargebacks and disputes, which can be time-consuming and costly.
Legal and regulatory compliance: Subscription businesses must follow the legal and regulatory requirements for handling and storing users' credit card information, which can be complex and costly.
When deciding if you go cardless or not on trials, consider your ultimate marketing and sales goals. Mandatory credit cards equal fewer sign-ups with a higher average revenue per user (ARPU). Cardless free trials equal a boost and sign-ups with a potential lower ARPU.
Best practices to manage free trials
Here are some strategies to effectively manage free trials in your subscription business:
Transparent communication: Clearly communicate your free trial terms, including start and end dates and how users can cancel without charges. Send them reminders before the trial period ends, encouraging them to make an informed decision about whether to continue or cancel.
Clear cancellation process: Make it easy for users to cancel their subscriptions. Complex cancellation processes can lead to dissatisfaction and chargebacks.
Customer support: Make sure that your team provides excellent customer support to address user inquiries, cancellations, and concerns promptly.
Now that you’ve decided whether or not you’ll be requesting a credit card for free trials. It’s time to review how you will measure its effectiveness.
Measuring free trial effectiveness
The only way to know if your free trials are effective is with A/B tests. Do prospects convert more with or without them? Which type of trial is driving more conversions? What is the ideal free trial length?
To answer these questions, divide your subscribers into smaller groups. Cohort analysis–usually segmented by user acquisition or start date–will help you gather insights on monthly recurring revenue (MRR), subscriber lifetime value (LTV), churn, and retention rates.
Test engagement and personalization strategies, trial lengths, and card-required vs. cardless trials for each plan. Then, use the trial conversion rate formula to seize the effectiveness of your trial strategy.
Track conversion rates over time to get an insight into when your prospects become subscribers. Recurly’s Trial Performance report, for example, shows you the conversion rate for trial to paid subscriptions.
Additionally, you can dig into the trials’ status and understand why customers aren’t converting. Maybe they canceled the subscription before the trial ended, or their payment failed.
Understand subscriber preferences & boost your sign-ups
Acquisition is one of the most challenging strategies in subscriptions. How can businesses reinvent their offerings to beat the competition, subscriber demand shifts, and new buying behaviors?
Pricing, packaging, and promotions form a well-rounded subscriber acquisition strategy. The efficacy of these marketing efforts comes down to understanding what competitors are doing and how consumers respond.
Check out this guide about the art and science of subscriber acquisition and get more insights on the core pillars of customer acquisition: free trials, coupons and promotions, upsells and cross-sells, and gift subscriptions.