
Why I'm going back to capturing credit cards up front - SMrF
http://planscope.io/blog/why-im-going-back-to-capturing-credit-cards-upfront/
======
dmix
I also tried every sort of SaaS signup process (CC-first, every type of free-
trial, etc) with my app ([https://carelogger.com](https://carelogger.com)).

I actually agree CC upfront is better overall than not. Depending on the
audience of course (some business users don't have access to CC's without
approval from finance dept).

That being said. I found a higher conversion rate via what I call "resource-
based" trials. One's not based on time ('14-days') but resources/services your
app provides.

For example, in our app users can create 10 free entries with no time
restriction. This sounds like a good deal to the user. But what makes it
effective is the type of user who ends up paying for our app, was always
creating 10 entries the first day already. So it was essentially getting them
to commit and signup for free, then give us their CC the same day.

I've been meaning to blog about this for about 2 years now :P

~~~
DenisM
I think it's called "freemium"?

~~~
dmix
Freemium = offering a free service (sometimes with ads) with premium upgrade
options.

That's different from a "free trial", because there really is no way to use
our app for free on an ongoing-basis without paying for it.

~~~
sutterbomb
Your explanation made it sound like freemium because many freemium apps use
that kind of resource-limited trials - e.g. 3 seats are free, but you pay for
more seats. Your "10 free entries" sounded like the same model, but a quick
look at your product shows there is no ongoing value to 10 free entries.

------
jrochkind1
Another possibility that's not discussed:

Get the CC number up front, _but_ still require an 'opt in' after trial
expiration to begin charging. You won't start automatically charging, you'll
require the user to do something -- but the 'something' is just clicking a
single 'yes, start charging me' button, with no need to enter the CC at that
point, cause they entered it up front.

I have no idea if that will work to get the conversions he's getting with,
well, automatic conversion. But I can't help but think products where a free
trial automatically starts charging your CC on a certain calendar date if you
don't opt out -- are getting conversions via trickery, and is not going to
build a sustainable customer relationship.

~~~
racbart
This actually looks shady. If you're not going to charge me, then why the hell
do you want my CC number?

~~~
nhance
Think about it this way.

If you're not ready to pay, then why the hell are you trying my service?

It's not a charity, it's a small amount of money each month.

~~~
to3m
Ha! There's a very simple answer to that: _because your service might be
shit_. And I'm not handing over anything until I've proven to my satisfaction
that it is not.

Of course, your business is not there to make me happy, so it's up to you what
you do. Just surprised that this question even gets posed when it has such an
obvious answer ;)

------
lsc
hmm. I've spent more time thinking about the ethics of recurring billing than
the effectiveness of recurring billing; The big problem I have with recurring
billing is that recurring billing tends to capture money from the 'I forgot
about it' customers... users have to take an action to cancel the account.
Especially for small-dollar items, a recurring charge can go for months
unnoticed.

I don't feel good about 'capturing value' from users who forgot to cancel...
but the alternative (what I'm doing) is to make them take a positive action
every renewal. (In my case, the account auto-renews, but it sends the user a
bill that they have to actively pay; if they don't pay, the account goes
away.)

Now, some people do prefer the 'bill me every month without asking' model...
but I think the right thing to do is to make this an option; one option where
the account will expire if the user doesn't take positive action to renew the
account, and another option to automatically continue billing until the user
asks to stop.

I don't know if many others feel this way, but as a user of subscription
services, this is something I think about. I know that I'm probably going to
forget to cancel, and that canceling is often difficult, so generally I
consider services that don't autorenew to be much 'cheaper' even if they are
the same price in terms of dollars.

~~~
sp332
Yeah, this sentence jumped out at me: _(Conveniently, lots of people seem to
miss /ignore the “Your trial is expiring and credit card will be billed”
emails, but no one ever misses the “Billing receipt” emails that come a few
days later!)_

But of course, people are missing the billing receipt emails!

~~~
bdunn
Some services don't send invoices (which really, _really_ bothers me. I don't
want to remember that I'm paying for a service after looking through my AMEX
statements.)

Others, like KissMetrics, sends you an email a few days before billing you...
but their price points start in the 3-figures.

I think a policy of "We will bill you monthly and send you an invoice every
time we bill you, and we'll always refund your last month's payment if you'd
like" is best.

~~~
larrys
"Some services don't send invoices (which really, really bothers me."

Would like to point out that separate from the fact that it bothers you and/or
might not be right or ethical or whatever there is no doubt that _in general_
in business you don't want to make it to easy for someone to think and cancel.

I don't think everyone feels that they are "ripped off" just because they
didn't get notified that they were still paying for something that they agreed
to.

An example is, say, with cable and a premium channel.

We decided to get showtime so we could watch Dexter. We forgot to cancel. The
cable company didn't ask us each month "by the way we are still charging you
for Showtime, ok?". By some of the comments in this thread it's as if people
would expect that would be the "right" thing to do.

Forgetting personal responsibility for a moment if, as a business, you
constantly give people a chance to bail many of them will bail (even for the
wrong reason) and you will make less money.

The credit card companies by the way will approve charges even on expired
credit cards. (Under a certain dollar amount you just have to put in the
current month to get an authorization). Apparently they haven't found that
practice to be a problem with consumers (although I'm sure they do get
complaints.)

~~~
lsc
>Would like to point out that separate from the fact that it bothers you
and/or might not be right or ethical or whatever there is no doubt that in
general in business you don't want to make it to easy for someone to think and
cancel.

Eh, I think if I have a product that the consumer doesn't want, I've pretty
much already lost. 'extracting value' from people who aren't paying attention
is best left to the professionals. I mean... the line between making it hard
to cancel and outright fraud... can get fuzzy. I think it's best to make, as
it were, a "Good faith effort" to insure that you are only charging people who
want to be charged.

Now, you can argue that recurring billing with an easy way to cancel can count
as that 'good faith effort' \- It's certainly the industry standard.

If you start doing things with the goal of making it hard for users to cancel,
though, you are certainly stepping outside of that 'good faith effort' \- and
where the line is between that and outright fraud, I do not know. I do think
that my current system, with it's manual cancellation process would be
unacceptable by my standards if I pulled money from customer accounts. I don't
think it would be unacceptable by legal standards, but it would be well into
the gray area.

~~~
larrys
For any individual of course it all comes down to what allows someone to sleep
at night, right?

What I've found as a general rule is depending on where the line is people
tend to think that someone who does something that they wouldn't do (wherever
the line is for them) is either a) "really honest" or b) "a crook, cheat,
dishonest etc."

Same with paying taxes. If we can assume that most people fudge a bit then
someone who fudges 5 times as much is a cheat but someone who goes to
extraordinary means to pay every cent is "really honest". Because it's usually
in relation to how you view what you do as being "the right middle ground".

You strike me as being really honest by the way simply because (using my own
ethics) you do things that I don't do more in the direction of being
transparent and to the benefit of your customers at your own expense.

~~~
lsc
>For any individual of course it all comes down to what allows someone to
sleep at night, right?

That, and risk tolerance. You could just as easily call me a coward.
Especially when it comes to taxes; There are few mistakes I can make that I
can't get out of through bankruptcy. Screwing up my taxes is one of those
mistakes. (and I'm in a situation where my revenue, but not my profit, is
fairly significant. So obviously, if a substantial portion of my revenues are
ruled profits, I'm... in trouble.)

It's also, I'm given to understand, important to maintain a 'good faith
effort' to pay the taxes you owe... my understanding is that has a lot to do
with what happens after you are audited. If they think you intended to defraud
them, that's criminal. If you just made a mistake, well, you've still gotta
pay it back plus penalties, but you aren't getting a criminal record.

>You strike me as being really honest by the way simply because (using my own
ethics) you do things that I don't do more in the direction of being
transparent and to the benefit of your customers at your own expense.

That is the goal I aspire to... I don't always live up to those standards.
Usually my failures can be attributed to (or framed as) incompetence rather
than dishonesty, but... that can be difficult to determine externally. I
personally see dishonesty as way worse than incompetence, even when the effect
is the same, though I acknowledge and have a hard time arguing with the
argument that the effect is what matters. I actually have some conflicts here
because I /know/ I'm overconfident about how quickly I can get something
done... but by how much? it varies a lot. Does this mean I shouldn't take
jobs? I've chosen to take jobs. I pad my estimates a lot (like 2x) to cover
the uncertainty, but sometimes that's still not enough. (and sometimes, it's
way too much) I personally see that as a little bit dishonest. But, I don't
think it's entirely unreasonable to re-frame it as incompetence, which is
easier for me to swallow.

A good way, I think, for me to get around this is to take more 'pay upon
completion' type projects. If I make it? great. If I don't? I don't get paid.
I'd feel pretty good about that. Unfortunately, most of my good-paying
contacts want to go hourly; all the per-job offers I've gotten have been...
much less remunerative, for any reasonable estimate of how long the project
would take.

I'm not entirely sure that a focus on honesty and transparency is entirely 'at
my own expense,' though; It could also be seen as me trying to turn one of my
weaknesses into a strength.

I'm sure you can get ahead by pushing that line if you are good at it... but
because my line is so, for lack of a better word, conservative, once I step
over my line... I have a hard time seeing where other people would set their
line. I suspect (partially supported by some tentative exploration when I was
younger) that I'd be bad at pushing that line. Worse-off than if I was too
conservative.

I don't really see the line between the normal schmoozing and quid pro quo of
enterprise sales and the unacceptable kinds of kickbacks. Pushing that line
is... difficult; there's a sea of cultural norms that don't make any sense at
all to me, and knowing how to give the acceptable gifts and not offer the
unacceptable kicbacks is essential to enterprise sales. If you do it
improperly, well, everyone sees you as very unethical, and your behavior can
easily be seen as criminal. So again, here is both self-knowledge (that where
other people draw that line makes no sense to me, so I can't predict where
that line would be) and cowardice, in that I don't want to 'guess and check'
where the consequences to being wrong are so high.

But yeah, a lot of it is also just what makes me, perhaps irrationally, feel
good. I can make a pretty good living as an individual contributor, and my
financial needs are small. I

A good example of how it is just irrational good feelings is that I'm mostly
okay working for body shops and having someone else do all that shady shit. As
long as I do my job, I feel pretty okay. I'd class this as the same variety of
hypocrisy as eating meat but being unwilling to kill animals yourself.

~~~
larrys
Yours is probably a textbook case of someone needing a partner who has a
better idea of where that line is seat of the pants wise. I've never needed
that it comes naturally. I simply weigh the downside to any decision vs. the
upside. It's almost automatic. After a while your brain just works that way.

I'll give you an example (which doesn't relate to business). My state requires
front license plates. But I have a nice car that I don't want to mess up. But
I also don't care if the cops stop me. So I didn't put the license plate on
the car. Worst case is I get pulled over. I get a ticket for $85 or whatever.
Maybe in some extreme case something even worse will happen but it shouldn't.
So I decide to take that chance. (Nothing has ever happened not that it
couldn't etc.).

In the case of the body shops you are probably shielded enough from the down
side both legally and also emotionally so you are ok with it. I think that's
fine from the way you are describing it.

~~~
lsc
>Yours is probably a textbook case of someone needing a partner who has a
better idea of where that line is seat of the pants wise. I've never needed
that it comes naturally.

My life partner, actually, is sort of stepping into the role you describe.
It's hard for me letting go, but I'm far more likely to be okay with my
partner taking that role than some random sleazebag. I mean, her background is
more technical than mine; which is a downside in that role (though an upside
for me actually following. Like most technical people, I have a hard time
accepting leaders who don't have a technical background.) but eh, hiring for
that role is really hard; judging from my past, when it comes to evaluating
business people? I'm worse than random.

But it's still ultimately my business, and ultimately mistakes (or unethical
decisions) made by that business are still my responsibility. Perhaps I will
feel differently if someday I'm no longer the majority shareholder? (my
partner is vesting in over time, so I am still the majority shareholder by
quite a bit..)

But it's probably good that it's her; we have a lot of shared values and
cultural background, and ultimately I see her as a good person, so while she's
probably not the best businessperson available, she might be the best at
working with me.

>I simply weigh the downside to any decision vs. the upside. It's almost
automatic. After a while your brain just works that way.

Yeah, but almost nobody weighs moral concerns as zero. I mean, for an extreme
example, you wouldn't murder someone for money even if you were certain you
wouldn't get caught, and wouldn't face any negative consequences save those
you imposed yourself.

(I'm not claiming that 'sharp' business practices are anything like murder;
I'm just pointing out that you have the same line I have, even if yours isn't
quite in the same place as mine. Almost nobody does a pure cost benefit
analysis with no ethical or moral overlay.)

------
GrinningFool
The problem for me as a potential user is that I no longer trust
some.random.dude.com with my CC info. I have no way to know if they're storing
it locally unencrypted or if they're using a trustworthy third party provider.

I'm down to maybe three places that have my CC on file. Everyone else, I enter
it - every month - at time of payment. I don't exactly like this, either -
there is still the possibility that a poorly written component is logging the
card somewhere[1], but it's better than handing over my wallet and walking
away.

[1] seen it...

~~~
kintamanimatt
I'm not sure your concern is warranted. Your bank provides a lot of protection
against such fraudulent transactions, both at the time of authorization and
after the fact if one does slip through. In any case, if you're really worried
about your card number being stolen use a secondary card that you use for
internet use only that just lives in your "backup wallet".

You're spending more of your life entering your credit card number every month
than is likely to be spent dealing with fraud.

~~~
GrinningFool
That seems far more of a series of workarounds than a solution in order to
save myself a few minutes (collectively) a month.

~~~
kintamanimatt
I do it myself and I'd struggle to call it a workaround. Your solution is
certainly a workaround though.

The time to pull a different card out of a different wallet is seconds. The
time and tedium to re-enter your credit card every place you want to make a
payment is greater. You should have backup bank accounts and credit cards
anyway. What if you lose your wallet? If I do, I have my backup one ready to
go.

You're worrying over nothing. You're so heavily protected by the bank that
you're just making work for yourself for no benefit. If your card details get
nabbed, you're not going to lose anything anyway. And hey, who knows, they
might be storing your card numbers behind the scenes anyway with your order,
and therefore you're not at any advantage! Or they might have been compromised
and your card details are floating off every time you enter them. Who knows?
In any event, I'd be more worried about my card being skimmed at an ATM.
That's definitely more likely than having it compromised online.

~~~
GrinningFool
As someone who used to work in the credit card industry, perhaps I'm more
sensitive to the costs that my bank's protection of me incurs. Because you're
right - _I_ am covered. But someone is still paying.

 _And hey, who knows, they might be storing your card numbers behind the
scenes anyway with your order, and therefore you 're not at any advantage_

Indeed. Frustrating as hell.

