Most SaaS companies have similar statistics for churn, engagement, and up-selling. But not all prospects are created equal, and there’s one factor that produces a huge difference across many metrics: Asking for payment up front during a trial.
Totango, a provider of SaaS customer intelligence and engagement software, has data across over a hundred SaaS companies, measuring trial, conversion, and churn rates. They’ve found asking for a credit card during signup means 0.5% to 2% of visitors sign up for a trial, while not asking for a credit card means 5% to 10% of visitors will enroll.
But enrollment isn’t the only goal—you want those trial users to become paying customers. Roughly 15% of trial users who did not provide a credit card signed up for a paid subscription. On the other hand, 40-50% of trial users who did provide one will convert to a paid subscription.
Asking for a credit card up front can also mean more churn after the first payment period if users’ expectations aren’t clearly set. Up to 40% of paid users may cancel their subscriptions—they forgot that they agreed to billing after the trial expired, and when they see a charge on their credit card, they cancel. Once this initial hurdle is over, however, most users stick around each month. A 2009 Pacific Crest study found that best-in-class SaaS companies manage to get their annual churn rates below 15%.
Here’s a quick summary of the approaches.
Table 23-1. Impact of requiring ...