
SaaS Conversion Rates from Free Trial - jkuria
https://capitalandgrowth.org/questions/691/what-is-the-general-conversion-rate-from-free-tria.html?src=HN
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gcatalfamo
The free to paid with CC is obviously skewed. If you have the commitment to
signup trial with CC you are, statistically, much more committed to stay. What
they don’t say is that the higher CVR of CC is balanced by less people signing
up for trial in absolute numbers.

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flexie
When you take people's credit card details, and 60-70 percent of them regret
the purchase / don't continue after the trial period ends, what do the credit
card companies say about that?

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patio11
Two separate issues here:

 _Don 't continue after the trial period ends._ This is a successful
transaction by the standards of everyone involved, right? The SaaS company
successfully induced a user to try it. The user got free use of a product and
decided against adopting it. The various parties that come under the heading
"credit card companies" were all instrumental in facilitating commerce. The
fact that no funds were actually captured is not maximally relevant to anyone
here; no harm happened. This is like a user walking into Best Buy and walking
out without buying anything; Best Buy is eagerly supportive of that, within
reason.

Buyer's remorse is a real thing, but it is _not the case_ that SaaS companies
operating aboveboard have 60~70% of users regret their (actually charged)
purchases.

Suppose that a particular customer is dissatisfied with a particular SaaS
company. The first line of defense is very clear messaging around trial
timelines, payment terms, etc; the company should avoid surprising anyone.

The second is likely the SaaS company fielding a CS inquiry from the customer.
The _overwhelming_ policy of SaaS companies in response to "I started a free
trial and gave you my credit card to do so, and whoops seemed to have gone
over by 2 weeks, but didn't actually use the software." would be some variant
of a refund and (if they're smart) an offer to extend the trial.

The reason that SaaS companies have their finger on the refund button is that,
in the event of them saying "Well, you agreed to these trial terms, and under
our terms you do owe us the $29", the customer can open a dispute with the
bank which issued their credit card. The bank has wide discretion on whether
it wants to side with the person who is their customer (and generates revenue
for them) or the SaaS company which is not their customer and doesn't generate
revenue for them.

Most people who have run SaaS companies will tell you that disputes are unfun
and that, even if one is in the right, one will not successfully win a huge
percentage of them, and so one should comport one's affairs to generate as few
of them as possible.

Note that any company which sustains a dispute rate of above 1% or so will get
a very unfun series of decisions made about their business, by either the
credit card brands or their credit card processor. You urgently do not want
this to happen to your business.

SaaS businesses are not at a very high risk of this happening, particularly
when well-operated. They generally sell a product which mostly works to
customers who are relatively savvy, and as they have ongoing relationships
with customers, their customers only need to go to the financial system for
resolution in extremis.

There exist other businesses which are at substantially higher risk of running
afoul of high dispute rates even if they do everything right.

Disclaimer: I work at Stripe and so the above is theoretically professionally
relevant to me, but I'm speaking here mostly in my personal capacity, as
someone who spent 10 years selling software over the Internet on no-card-
required and card-required free trials.

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flexie
Thanks for taking the time to answer!

If the SaaS provider takes customers' credit card information up front when
they start the trial period, and he charges the customer automatically when
the trial period ends, but a number of those customers want to cancel, and the
SaaS provider then (as a policy in order to avoid disputes) allows all of them
to cancel, would he then get into trouble with the credit card
brands/processors/banks?

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robodale
That's a great question. I'm curious for opinions on this as well.

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neutrinoq
Stripe's recent article on SaaS has some great breakdowns on numbers as well:
[https://stripe.com/atlas/guides/business-of-
saas](https://stripe.com/atlas/guides/business-of-saas)

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hackathonguy
The more interesting figure would be conversion rate from visitor to paying
user, with cc required vs without cc required for the trial period.

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Finbarr
Also whether no cc/cc required has any bearing on churn patterns.

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jlebrech
What about a 3rd technique, free to try, then offer a few more days free if
they add cc.

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Harrisonbans
The free to paid conversion rate with CC is really good and impressive.

