

Ask HN: Free trial vs money back guarantee - abinoda

I am working on a software-as-a-service product and am trying to decide on how best to implement sign up. My product offers 4 paid plans; there is no free plan.<p>For those of you who don't know, Braintree's (payment gateway) sponsoring bank no longer allows new companies to offer a traditional "30-day free trial", take credit card information during sign up, and then charge customers at the end of the free trial (like 37signals).<p>So, I am trying to decide between the following two options:<p>1) No credit card required at sign up. 14 day free trial on all new accounts. At the end of the 14 day trial, if the customer has not "activated" their account (that is, provided credit card information and been charged), the account is locked/closed until they.<p>What I like about this method is that it should convert the most users who land on the site to sign up to use the application. My concern is that the additional step (having to provide credit card info after sign up) could lead to fewer paid users... Keep in mind, though, that I am not offering a free plan, only a free trial period.<p>2) 30-day money back guarantee. Credit card is required at sign up and the customer is charged immediately. But, for 30-days, the user can cancel the account and receive a full refund.<p>I like this method because it means 100% users are paying customers and actually get billed. My concern is that a "30-day money back guarantee" + credit card required at sign up + immediate charge will lead to a much lower sign up conversion rate on the website, ultimately leading to less customers then method #1.<p>- Abi
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retro212
I would always go with 14 day trial. Sometimes I just want to check the app
without providing Credit card number, and I almost never try apps that require
Credit card upfront.

Also there are situations when you are only a employee of a company, and you
want to try some app before you recommend it to management. In that case your
app won't even have a chance to be recommended because I can't try app without
credit card.

IMHO trial is the best option.

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hristov
Definitely option 1. You want to make it as easy as possible for someone to
start using your service.

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jacquesm
I would try option (2) first, but I would not default to a 'money back
guarantee', I would just say they get a 10 day trial at a slightly higher rate
than the normal subscription.

That way you get a much lower initial price point (the main hurdle), and you
rule out a bunch of jackasses that sign up, use the trial, cancel then sign up
again.

Refunds should be reserved for customers with complaints otherwise what are
you going to give them ?

Also, customer complaints are a great way to help you develop your product so
you want to have that personal contact.

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sp4rki
I'd recommend having trial periods of at least a month and if the user doesn't
add a credit card on the trial's end, the account gets demoted to a free
severely limited account. I hate getting locked out of a system and can
seriously impact my wanting to stay with the company. Demoting the account
gives me an incentive without telling me "hey cheap bastard give me your money
or leave!"

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lsc
I think it largely depends on how much it costs you to provide a customer
account. If this cost is low, I agree with others that #1 is the best option.

See, I tried option #1, and my product, well, it costs me quite a lot. I found
that very few of my first month free trials converted to paying customers,
they all used bandwidth like crazy, and looking, I believe that the majority
of signups used fake names. At the end of this trial period I was left with a
rather hefty bandwidth bill and a whole lot of now empty servers. it was
pretty miserable. I don't think my actual paying customer signup rate was any
different than it was the month before.

so for my business, #2 is the only way to go.

On the other hand, if the cost to you of hosting these free customers is
almost nothing, and you are okay with the fact that your conversion rate will
probably not be as great as you think it will be and that many of your
customers will likely sign up with fake names just to try it out, option #1
might be just fine for you.

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dclaysmith
If your service is compelling and your cost per customer is low enough, then
I'd go with #1. If you can't convert the users to paying customers then you
probably need to revisit your business model.

Assuming your service is useful--and the visitor decides they need/want it--
you need to factor in their switching cost. If they have some time invested in
configuring and using their account, they will be less likely to move to a
competitor. If your service is prone to throwaway accounts, this clearly isn't
a factor.

Recently signed up for a 30 day trial with Pingdom and converted to a paying
account ($49/month or so). Not sure what their incremental cost per customer
would be (middle of the road I'd say) but they provide a useful service and
once I got all my servers set up and had a significant history established, I
didn't want to bother evaluating/switching to a competitor.

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rbritton
If you do option 2, you will have to eat the transaction costs with most
credit card processors.

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anamax
You can combine them - 14 day free trial and after they pay, they still have
another 16 days to get a refund.

You market it as "we want to make it easy and to make sure that you're happy".

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ahi
I think this is a bad idea. It's hard to fit into marketing and makes them
think too much

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vaksel
I think it's good to do a free trial if you have a polished product, and do
the money back guarantee if you are still in the minimum viable product phase.

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dangrossman
I do #2 mostly since customers signing up for my paid SaaS product often need
some handholding during the first few days to get started. If I offered free
trials, the users wouldn't have that investment they just made mentally
pushing them to take the bit of time it takes to ramp up and start seeing the
benefits of the product.

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monicaobrien
Hi Abi, this is Monica from Braintree.

The cautiousness around trial periods, discounted offers, and continuity
programs by credit card processing providers is due to recent crack down from
Visa and MasterCard. The guidelines and rules passed down by them are a little
vague so the card association banks have mostly erred on the conservative
side.

The premise behind the concern is that these types of offers and billing
methods increase chargeback risk and financial loss. This is especially true
for new merchants or higher risk products or services.

We've been hearing from some of the banks we work with that they're
considering loosening up their rules or applying them differently to certain
types of merchants.

Regarding your dilemma, option #1 should have fewer chargebacks, which can be
costly to your business.

Hope that helps!

Monica

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jaredsohn
Another option to consider is what the music site rdio.com does. They offer a
three-day free trial and then ask for a credit card (which they won't charge)
to extend the trial for a longer period. This way you get more people to start
using your site and have a way to quickly get a credit card number.

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mike_h
Out of curiosity, why 14 days for option (2) and not 30? I often don't get
enough time to fully kick the tires on a product in 14 days, let alone build
emotional attachment or get hooked on the utility.

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stonemetal
Is there anything wrong with doing both?

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abinoda
Interesting :) Offering a money back guarantee regardless of whether or not
the customer is charged initially seems smart.

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petervandijck
1) This setup works for a free plan, not for a free trial.

2) It's legally ok to call this a "risk free trial", which many users read as
a "free trial". I prefer a free trial myself.

3) Just get another payment system and offer a 30 day free trial.

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effektz
Free trial.

If I'm interested and there's a free trial, I'll always sign up.

If I'm interested and I have to give a credit card to try it, even if there's
a money back guarantee, I usually look at other options.

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AndrewDucker
Purely anecdotal, but I won't hand over my credit card to anyone unless I'm
actually sure I want their product.

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mattmanser
They use 'trial periods' as selling point number two on their list of
features:

[http://www.braintreepaymentsolutions.com/services/recurring-...](http://www.braintreepaymentsolutions.com/services/recurring-
billing)

Does what they claim to offer and what they actually offer differ massively
then?

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blackysky
the best solution is to split test both options

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abinoda
I'm asking HN because I'm hoping someone HAS split-tested or can share from
experience.

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jaf656s
We tried both ways, and the free trial was a clear winner. I think this could
depend on your service, however.

Something else to consider: even though we had more people sign up and pay, we
also had far more people sign up and try without paying. Several of those
users also gave us free, insightful feedback. Especially if you are starting a
new service, this is worth more than the paying customers who give no
feedback.

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bruceconcepts
Option 1

