We’re pleased to announce the Bowery Capital 2020 Startup Sales Stack Report! This report is meant to serve as a guiding framework for anyone evaluating sales solutions. Whether sales, marketing, customer success or management, if you’re thinking of using or buying software to optimize customer…
Understanding and implementing the best free trial practices for your product can be difficult for an early stage SaaS startup. Although free trials may not be necessary, approximately half of business-to-business SaaS companies offer a free online trial, undoubtedly making it a popular component for many types of enterprise software products. While every startup is different, we outline key themes from best free trial practices that many founders have struggled with while navigating through trial structures.
Duration of Trial: Like most of these recommended points, there is no hard number; the length of a trial depends heavily on product factors (low/high ASP, length of setup, etc.). However, the best free trial practices favor relatively short trials (less than a month) since usage statistics show that only a small minority will use the product for more than three days in a row for a long free trial. Keeping the trial short increases the likelihood that your customers will take the time to know the product. You will also have lower customer acquisition costs since shorter trial length will lower sales cycles. Out of a list of 550 established enterprise SaaS companies, 41% offer a 30-day free trial while 18% offer a 2-week free trial, making the “less than a month” length more popular among this category. Free trial practices show that longer trials are mainly implemented when the product platform is designed so that users will grow to depend on it. Dropbox, Evernote, and Jira are good examples because discontinuing use/switching to competitors is inherently more inconvenient if users already have files saved on their platform.
Payment Information/System: The best free trial practices show that requiring credit card information hurts conversion rates. Based on a sample size of 100+ SaaS companies, trials without required credit card information earn 120 customers after 90 days while trials with mandatory credit card input earns only 60 customers in the same period. If you do end up requiring credit card information, you should have a very clear website that demonstrates explicitly the value of your service. The best free trial practices efficiently onboards paying customers; so if you do take any payment information, set up a payment gateway that will verify all the information before the trial starts. About 11-14% of transactions don’t go through, so you want to make sure that you do not lose converted customers because of payment failures.
(Courtesy of Totango)
Free Trial Product Limits: It is common to not release the full product out to the trial user. Here are some top product feature limits found in different free trial practices.
Feature Limit: Popular in many free trial practices, this limit disables important functions of the software. For example, with design software, you can remove the “saving” option for users’ design outputs. The obvious disadvantage here is that customers may have to inconveniently re-download the full product a second time after purchase and may not evaluate the product the best if they were not exposed to full features.
Usage Limits: This limit restricts how much a certain action can be performed. For example, this can place a limit on how many times a user can start the software. The advantage here is that you can control how much is enough for the user to get a taste of the product but the downside is that every user has a different usage expectation, making it hard to optimally set a usage-limit across all your accounts.
Output Limit: Some trials add a modification to alter the output of their product. For example, a digital design software will add a watermark to an output design piece. While this can be effective by allowing users to remain exposed to the product’s quality while reinforcing the necessity for the user to purchase the complete product to reap full benefits, modifications usually involve complex safeguards to prevent any foul play. The disadvantage is that your company may spend unnecessary resources making sure that the modification cannot be worked around.
Capacity Limit: This restricts the amount of data that can be entered. For example, a customer information manager may only allow you to enter 100 contacts in the trial version. Be wary of implementing this limit when performance for your software is crucially important. The trial user in this particular example will not know if the software will run smoothly (be adequate) for a database of thousands of customer information.
Nagware: This is common with free trial software that do not have any other restrictions. Nagware reminds you periodically to pay for the software and is viewed negatively. While it is a notable limit feature, it is not usually found in best free trial practices as it significantly detracts from the user experience itself and has been proven to be ineffective.
Obviously implementing these limits depend entirely on what type of product you have; some startups combine limits and many do not include limits at all. Nevertheless, it is important to keep in mind the tradeoff when implementing such restrictions on your software.
Customer Marketing System: Remember as soon as you establish contact with a user that your job is to convert them into a paying customer. The best free trial practices attempt to turn the trial length into a powerful opportunity to deploy marketing tactics when they already have their attention on you. Set up an automated email marketing process to advertise during the trial. Use emails to remind and reinforce trial users. In addition, by the end of the trial process, having a direct way to reach users who do not convert allows you to keep them in the loop about any product changes and target them as potential future customers.
Obtaining User Metrics: It is no secret that improving conversion rates will increase your company’s bottom-line. Best free trial practices allow you to obtain an understanding of the variables (usage, demographics, churn, etc.) behind conversion rates so you can improve your offering. Remember, the trial period is a valuable time when you can gather crucial information about how your customers respond to your product. If you do not have a customer behavior analytics system in place, it is good to set one up before the trial so you can gather as much data as possible. Trial data may notify you of specific bottlenecks that affect conversion rates. For example, if you monitor usage activity across accounts and see that usage from multiple accounts stop at as specific point in the trial, it could mean that users have reached a bottleneck in the experience. Best free trial practices show that in order to increase your chances of success, you can use the marketing system mentioned earlier to time a targeted communication effort in order to either 1. Get more feedback about the bottleneck or to 2. Encourage customers to jump back onto the trial. Measure these user metrics from site visits to the trial sign-up stage to the trial usage phase and finally to paid-customer conversions.
Danger ahead! Lately we’ve observed some obvious, and also not-so-obvious challenges in pitching a product that sells into the SMB segment to VCs. While the total addressable market for SMB B2B SaaS products may be huge in terms of numbers of customers, this is almost…