Should a free trial require a ccard?

January 18, 2023

Happy WEDNESDAY! This newsletter is growing ! Easy to get double digit day-on-day growth rates when you start with double digit subscriber numbers :-). Today I talk about: Should a free trial require a credit card? How to minimise failed payments. My goal? Always to help you grow your SaaS faster.   - EveD.

SEEN IN THE WILD

Should you require a credit card for a trial?

Ryan Badger (@ryanseabadger) tweeted out this image below...it's for his startup, and no it's not a glitch.

What's going on? Ryan thinks (and I agree) that it's people who signed up for a free trial with empty prepaid (or virtual) credit cards. I am guilty of doing this all the time, and as these cards become more mainstream across the globe it's going to become a default practice.

What's the solution? You're probably not going to like it, but it very well could be to not require credit cards at sign up. That requirement is becoming futile, skews your MRR and churn rate (even if you segment first month churn) and doesn't actually move you towards your goal (engaged, long term users). You can experiment with this, of course, and do what works best for you but at least open the door to the whole credit-card question.

No credit card at sign up does mean that you will have more "tyre-kickers" (people who sign up without a real need or consideration for your product), but the possibility of just using prepaid cards is making the cc requirement moot. And it's never a bad idea to collect data on people who are thinking about your product but are not yet ready to use it. A clever email engagement flow can nudge them in the right direction over time, and you'll be in their inbox when their needs change.

Side note: Ryan shouldn't have been surprised by this churn. Chances are, the users who allowed their credit card to "lapse" were visibly not getting value from his product. The users effectively "cancelled" the trial with non-usage, which can be tracked during the 14 day trial with product cohort analytics.

TOOL DIVE: PROFITWELL RETAIN

So what to do about failed payments?

Since we are on the subject of failed payments, let's talk about a tool that can help you with the problem: Profitwell Retain (this is not a sponsored post). Not all failed payments are due to empty pre-paid cards, of course. Cards can expire, there can be a glitch in the authorisation process, they might temporarily not have enough funds available, they might have been cancelled due to theft or fraud etc. Profitwell Retain says that up to 40% of churn is caused by failed payments (delinquent churn) vs "voluntary churn", and they help you with both types. Here's how:

  • Profitwell Retain is used by 20% of subscription businesses, so they collect literally billions of data points that help them figure out how to retain users better.

  • They use this data to help retain 25%+ of users who wanted to voluntarily churn, by offering them the right "salvage offer" to entice them to stay.

  • For delinquent churn, Profitwell will retry the failed credit card at the right time, based on product type, card type, location and 15 other factors. They say they recover 5-10% more payments this way.

Profitwell Retain charges on performance, so the incentives are well aligned. In fact, if they do not increase your current retention rate, you don't pay them a cent.

FROM THE BOOKSHELF

I've just read "Four Thousand Weeks", and I strongly recommend it. It will give you a new perspective on how to prioritise what you work on, how to stop berating yourself for not moving fast enough and how to not take life too seriously.

GROWTH HELP

Growth Tools Guide

In about 3 weeks, the first edition of the Growth Tools guide is going live. All NMB subscribers get it in their inbox, free. The goal is for founders and growth teams to learn about new growth tools, new growth opportunities and alternatives to their existing stack. You can't lose out by reading it (on your phone, your desktop or...print it out!). Want to include your growth tool in the guide and be seen by 20,000 founders in 2023? Get in touch [email protected]

MY BOOK

Up and to the Right !

I wrote a book about SaaS growth! You can preview it on Amazon. It's a good read for any SaaS founder or growth team member, who wants to build sustainable growth for their VC- or self funded startup.

Themes: Acquisition. Retention. Monetization. Growth teams. Channels (looking at: social media, paid ads, sponsorships, events, webinars, community, SEO, personal brands, referrals, affiliates etc). And so much more. Best 10 bucks you'll ever spend.

THAT'S IT FOR TODAY :-)

See you tomorrow...

Let me know what you want to read here. Content I'm planning to write this week:

  • I'll start including some growth tool deep-dives

  • Different pricing models for SaaS, and how to figure out which one is right for you

  • The importance of transparency in your sales motion

  • and more...

Thanks for reading. Find me on Twitter @eved if you want to chat :-)