

Ask HN: When to get customers' billing info? - charliepark

I'm working on the billing system of a new startup, and I'm trying to think through the plusses and minuses of <i>when</i> to get the credit card info from the customers.<p>I know that some shops (37signals) get the credit card up front, but say "we'll give you 30 days to cancel, and we won't charge you until the end of that time." This method actually bothers me, as it seems to spin "counting on you not remembering to cancel" as "doing you a favor, so you don't have to get out your credit card to actually sign up down the road." But maybe I'm being overly sensitive on that?<p>Have you tried multiple approaches? Has anyone done A/B testing on signup flows? I'd love anything you have ... anecdotes, data, whatever.<p>If it matters, the startup I'm working on at the moment has a freemium model, with a free (but feature-limited) version, and a paid (or multiple tiers of paid) version. The market is freelancers, self-employed people, and, to some extent, small businesses.
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kneath
I'm the designer for tenderapp.com, and we decided to try putting in credit
card information when we need it (after the 30-day trial) instead of up front,
like we previously did for Lighthouse. Well, decided may be the wrong word...
let's call it a happy accident that it happened that way.

Now that we've had this flow live for a few months, I can't think of a reason
a small startup would possibly ask for credit card information up front.

Pros:

\- We have one of the lowest barriers to entry to our app. Literally 10
seconds and you have a fully functional install.

\- We have lowered the amount of people complaining about us accidentally
charging them (i.e. they forget about the 30-day trial and ask for a refund at
day 31) to zero.

\- We've opened up a lot more channels for follow up. We can contact people
weeks/months after their trial expires and see if they'd like an extension or
to try again. (In other words, we've removed the negative parts of trying the
product -- cancelling)

Cons:

\- It's lowered our conversion rate (remember what rate means) and made it
extremely unpredictable.

\- We don't get to steal as much money from people who forget to cancel their
subscriptions.

At the end of the day, I believe in our product and I want as many people to
try it as possible. A credit card form isn't going to stop someone from
purchasing a product (unless it's _really_ bad), but it sure does stop a lot
of people from trying out a product. So I work as hard as I can to remove any
roadblocks to people getting their feet wet. From the responses I've had, our
customers love it too.

~~~
donw
Does your lower conversion rate take into account people who cancel after one
month, or ask for a refund because they tripped over the thirty days?

~~~
kneath
Yes, it does. We don't generate reports often enough to take into account day-
long variations, so it ends up being people that stick around a month or two
(at minimum)

------
warwick
I'm curious how it would work if you gave a free month, then billed at the end
of every month.

Let's say they sign up on January 1. On February 1st, they receive an email or
notice mentioning that their free trial is over, and they'll be billed at the
end of the month. If they're not completely satisfied, they can close their
account and have February's bill completely refunded. At the end of February,
they get prompted for payment information.

Some people will use your service free for two months and then close their
account, effectively getting a two month trial period. It's unlikely these
people were going to purchase your service anyhow.

The people who were going to pay will pay like normal.

The folks who are on the fence about paying might decide to signup because
they've now had a month of knowing that they're 'paying' for this service.
Once you're already expecting the bill it doesn't seem like a big deal to pay
it.

If you implemented a payment scheme like that, you might make it a policy to
never charge people for the month they cancel either. I know it loses a month
worth of income, but it feels like you'd be giving departing customers a more
positive experience.

------
tptacek
Today I finally gave up Trac for Lighthouse (I need to let customers file
bugs). Lighthouse _won't_ take my credit card information up front; I had to
get a free account and then upgrade it. I actually found it annoying.

On the other hand I'm sure patio11 will tell you that nothing bounces
prospects faster than a credit card signup.

~~~
donw
It bounces me. I don't want to have to hand in payment information to even
take a look at a product before I can use it.

------
sachinag
For a simple premium model with a 30-day free trial, you've got two reasons
not to ask for the CC info until you're going to cut off someone's access to
the premium product (you want to maximize the number of prospects, especially
as a new entrant). I'd just make sure that you just "locked" someone's premium
features/data if their credit card lapsed (if you're doing subscriptions) or
if they decline to re-up (if you're allowing month-by-month PAYGO payments) -
i.e. don't delete it accidentally when you downgrade an account.

And even if you decide to follow 37signals w/r/t the premium version (ask at
the time someone upgrades/purchases, but only but actually charge the card at
the end of the first period), there's no reason to ask for a CC for the free
version; you're making your sales funnel unnecessarily narrow. You can
nudge/bother them to upgrade _only when they're already customers_.

[I guarantee that no one has a more convoluted billing system than does
Dawdle, so I've spent a lot of time dealing with this living hell. While we
don't require up-front payment, we use credit cards for authentication as a
fraud prevention measure for both creating (free) listings and for our "name
your own price" StandingOffers. (I mean, if you're going to name your own
price, and we want to charge you automatically when your StandingOffer matches
a listing, we kinda sorta need your info up front.) Of course, the
authentication charges are 1) expensive and 2) piss off customers, but what
are you gonna do?]

------
credo
I agree with your comments on asking for credit card info upfront. As a user,
if I were to try out a 30-day trial offer, I'd prefer to provide my credit
card info after the trial ...and only if I decided to purchase the product.

I recently purchased HttpScoop which uses this model (great product for the
Mac and they let me try the product for 15 days before asking for my credit-
card info) \--- As a developer, this is the model that I'd use for any of my
products that have a trial offer.

------
fjabre
<http://news.ycombinator.com/item?id=827379>

Thought you might find the above post useful. Anyway, thanks for this
question. I think 37Signals is certainly the gold standard but I don't think
I'm going to follow it for my yet-to-be-released project.

They have about 5 or 6 tiers for each app and to be honest I really hate that
for the following reasons:

1\. because it just seems overly complicated for the user and

2\. it seems like a pain in the arse to manage on the backend

It seems to work for them though and people are used to this method of tiered
monthly payment plans.

I kind of prefer the Google apps model myself but then again Google is
ginormous and doesn't need to price google apps to make profit so I'm
suspicious of that. Google apps has 2 versions, free and pro. The pro is
$50/user/year and they have no tiers. Nice and simple.

------
joez
Just a quick thought: If the product can be given as a gift, maybe you should
leave a "give as gift" option. When you ask for credit card later, you
eliminate the chance for your best customer. If a parent, spouse or friend
gives a subscription as a gift, I feel like they are putting it on set it and
forget it mode (especially if what you are asking for is a small amount every
month).

For sure this only applies to certain products, maybe educational or
entertainment ones.

------
zck
I think it depends how you're placing your lower-tier version. If it's
permanently free, I don't think you need credit card information. If it's a
30-day trial of your paid version, you might want to grab the card just to
make sure that no one's signing up, waiting a month, canceling, and creating a
new account. I'd recommend not doing the "we'll charge you unless you tell us
not to" version. Just make it really easy for them to buy it when the month is
over.

------
gte910h
Oh god please take my credit card info up front....then remind the hell out of
me that the account will auto renew at 7, 3 and 1 day left.

I've dealt with a couple services that won't take the account info up front,
and I canceled because paying was such a hassle on the day that they actually
wanted to be paid.

------
ApolloRising
They can do this because they have achieved enough user mass and are now a
relatively known site.

They did not have this when they launched.

I suggest you let your users try everything and then downgrade when their time
is up. They don't know what they are missing unless you show them.

------
FahnRobier
Give them the option of filling in the CC info and provide a "Do it later"
button?

It would be interesting to see how the conversation rate differed between the
group that filled in the information immediately and those that opted for
later.

------
gte910h
Additionally, you can make taking it up front optional as well...

