Customer Acquisition: Do free trials increase subscription conversions?
Published: April 11, 2024
There’s many ways to motivate customers to subscribe – but which ones work best and how do you use them efficiently? Today, we take a look at free trials (and when they make sense).
What’s a free trial?
A free trial is usually a specific period of time that is free of cost but still offers many or all features of the full product and service, so customers can get a first impression and get to know the product/service before they make a decision to buy it.
It’s like the free spoon of ice cream you get at many ice cream shops, so you can try out new flavors and then make a decision before you regret that experimental asparagus ice cream after you bought (and tasted) it.
It should be mentioned that incentives such as “book six months, the first three months are free” usually do not technically fall under the “free trial” moniker since they could be better defined as discounts as the customer basically gets 50% off the six month period and can’t only get the free trial without the paid period.
Freemium vs free trial
A “freemium” can be defined as a free trial but does not offer the full product or service and instead provides users a more limited, basic version. For example, a video software might offer a freemium that automatically adds a watermark on every video.
When does a free trial apply best?
Spiegel, one of Germany’s most popular news magazines did tests with free and paid trials (for recuded subscription fees) and found out that their userbase was much more likely to subscribe if they had to pay a small amount of money. They were even more likely to stay on beyond the trial period (source: mediamakersmeet).
However, it’s important to note that this is for a product that does not require any kind of setup, training and configuration. A magazine subscription immediately delivers value (e.g. content). Users therefore might even be inclined to think that the product has more value if they have to pay for it (consumer psychology is very fascinating), so the lower priced trial period is attractive because you get what you pay for without any transition phase.
SaaS on the other hand, usually requires users (and companies) to get used to the platform, try it out, see what I can do and check if all requirements are met. That’s why a free trial for any SaaS makes much more sense, since it allows potential customers to get a first look and test out the solution before they can fully start.
A free trial is therefore perfect for any product/service that has a bit of an onboarding/configuration period or needs to be tested before the user makes a commitment/decision. This is especially relevant for B2B businesses that might need to do a full assessment of a software before they commit to a migration/implementation and investment.
But even for B2C services such as streaming, a free trial might be a good idea to give users the chance to, e.g., browse the media library or get “hooked” on a TV show, etc.
How to set up a free trial
A proper subscription tool (such as the Billwerk+ solutions) usually gives the option to set up trial periods for plans and define the length and what happens, once the trial is over (e.g., sending a reminder via email).
There’s different things to consider when deciding to include a free trial:
Length
How long can people use your service/product for free? Depending on the type of product/service, it can be short or long.
According to Userpilot, the most common trial length for B2B companies is between 14 and 30 days. However, a university study (PDF) showed that for an SaaS company, that tried out 7, 14, and 30 day trial periods for their users, the shortest amount maximized both “short- and long-run outcomes, customer acquisition, retention, and profitability.
Are short trials always the best option?
Not necessarily. Software that is intuitive and can be easily used – and more specifically – doesn’t require configurations and setups, lends itself to a short trial period.
However, a software that requires setups, branding options, maybe even compliance and tech-stack integrations, can support the user’s buying decision by offering a longer trial period to not only get accustomed to the software but also set everything up for full use.
For example, at Billwerk+, our Optimize and Pay product can be used for free until the go-live (to process actual subscriptions and payments), so our users have all the time they need for a proper setup and don’t have to pay while they’re still in the configuration phase.
As you can see, different business models, customer groups and use cases require different approaches. It’s therefore beneficial to be able to experiment a little and base your strategy not only on studies and other companies but on your own findings.
Credit card required or not?
Some companies require credit card infos for the free trial. Usually, the free trial period will then automatically turn into a paid service unless the user cancels the trial within a specific timeframe.
More and more companies let users register for a free trial without adding their credit card data, so the trial will simply end and the user has to actively sign up for a paid service/product.
The thinking behind this approach is, that users who are seriously interested in the service will get the paid plan anyways. Users who “forgot” to cancel and then are being forced into a paid service are more likely to cancel the next chance and additionally have a bad impression of the service and company.
Advantages without credit card requirement:
- Faster signups
- Increased trust
- Higher signup-rates
On the other hand, it is not uncommon for users to use a free trial for one-off services (e.g., watching a specific TV show or movie, doing a one-off project with a software) with no purchase intention in the first place. If you offer a product or service that lends itself to this loophole, a credit card-based approach might discourage bad-faith users.
Advantages of credit card requirement:
- More commitment
- Higher conversions
- Decreased churn-rate after free trial period is over
The Billwerk+ subscription management solutions offer many different ways to experiment with incentives such as free trials, discounts, and more. Try Billwerk+ Optimize for free or set up a demo to discuss your business case.
