Offering a free trial is often expected for SaaS products in 2021. Even companies with high brand recognition, like Adobe and Hubspot, provide free trials of their products.
That’s why most SaaS companies today don’t face a dilemma whether they should be offering a free trial or not. Rather, they need to choose how they will be providing a free trial.
We covered in a previous article – How long should your free trial be? Today, we will help you weigh the benefits of keeping and not keeping a credit card option in your free trials.
Table Of Contents
- Credit Card vs. No Credit Card – When Does Requesting Card Information Make Sense For SaaS Trial?
- When To Request A Credit Card For A Free Trial
- When Not To Request A Credit Card For A Free Trial
- Benefits Of Credit Card vs. No Credit Card For SaaS Trial
- Benefits Of No Credit Card vs. Credit Card For SaaS Trial
- Verdict: Credit Card vs. No Credit Card?
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- The decision to request credit card information depends on your product type, business goals, and target market.
- Ask for credit cards if you are a startup that doesn’t want to deal with tire-kickers.
- Ask for credit cards if your product is expensive and you only want to target high-quality leads who can afford to pay for your subscriptions.
- Ask for credit cards if you want to maximize Revenue Per User (RPU).
- Don’t ask for a credit card if you are beta testing your product.
- Don’t ask for a credit card if your goal is to increase your user base, regardless of the lower conversion rates.
- Don’t ask for a credit card if total revenue is more important to you than RPU.
- Don’t ask for a credit card if you are looking to gather more data rather than paying customers.
- Requesting credit cards for free trials will help you get more qualified leads, better conversion rates, and shorten your sales process.
- Not requesting credit cards for free trials will lower user barriers, generate more leads, avoid refunding, and build trust with your users.
Credit Card vs. No Credit Card – When Does Requesting Card Information Make Sense For SaaS Trial?
We asked Paweł Paluch, Strategic Partnership & Business Development Manager at Udemy, about when to request credit cards for free trials.
According to Paweł, “There is no best option, there is only the right option to implement Credit Cards for [free] Trial and many variables you need to take into consideration, and they all come down to fewer accounts/fewer leads.”
Whether or not you should request credit card information from your buyers depends on more factors than just user preference. Your product type, business goals, and target market – all play a role in it.
When To Request A Credit Card For A Free Trial
You Run A Startup
Free trials are a gold mine for tire-kickers. These are the users who just want to “look around” but never actually make the purchase.
Dealing with tire-kickers can be too big of a hassle for start-ups or small-scale companies.
The solution? Ask for credit card information while signing up for a free trial. You can filter out unwanted users and target only those interested enough to commit to a purchase in the future.
Paweł Paluch suggests asking for a credit card if you don’t have a well-defined lead nurturing process in place.
Your Product Is Expensive
High-end SaaS products don’t require a large number of users to generate substantial revenue. Instead, these businesses often look to generate fewer but higher-quality leads.
You can target these high-quality leads by asking for their credit card information. This will ensure that only the users who can afford the subscription costs sign up for the trial.
You Focus On Maximizing Revenue Per User
High-quality leads are also important for your business if your goal is to maximize revenue per user (RPU) while acquiring new paid customers. According to Paluch, you will usually find more activity for users who used a credit card to sign up for a free trial when compared to those who didn’t.
However, asking for credit card information will significantly reduce your sign-up numbers.
On the other hand – it will increase the quality of your leads. This is especially useful for freemium products. Users signing up for a premium version trial must be high-quality leads since they have already used your product’s basic version for free.
For example, Dropbox offers a Basic plan with limited features for free. However, all of its three premium plans come with a 30-day free trial that requires you to insert your credit card details.
So, if your goal is to maximize RPU, ask for credit card details while starting a free trial.
When Not To Request A Credit Card For A Free Trial
Your Product Is In The Testing Phase
Companies testing their product need to release it to a specific number of users regardless of the user’s purchasing capacity. Their main goal is to understand if it’s the right fit for the market by receiving user feedback.
You might also want to gather input from a large number of people in different target groups. So, you’ll need to reduce the barriers for users who wish to sign up for your trial.
In short, don’t ask for credit card information if your product is in beta.
Paluch asks you to consider one more thing before you make a decision – Total Available Market (TAM), “Check TAM and assess if you can afford free trials at scale. If yes, lose the credit card.”
Your Goal Is: Quantity Over Quality
You might face situations where you just need to widen your user base. For instance, you might be looking for funding, and having a large user base will help your case. As such, your goal is to get as many people as possible to try out your product.
Therefore, you need to make the sign-up process of your free trial easy and smooth. And how do you do that?
Don’t ask for credit cards.
More people will sign up if they don’t have to commit to making a purchase early on. You might also have more active users with increased trial sign-ups.
Market leaders like Adobe offer free trials without requiring any payment information.
Hence, don’t ask for credit card information if your goal is to reach as many users as you can.
You Focus Less On Revenue Per User
We’ve talked about how asking for credit cards helps you maximize RPU or Revenue Per User. Businesses that have to incur incremental expenses for increasing user base need to consider RPU carefully.
But what if your incremental expenses are low enough to prioritize overall revenue instead of RPU?
If that’s the case, you can safely remove the option to ask for credit cards and get more users to sign up for your free trial. Your trial to paid conversion rates might fall, but the overall conversion number is likely to go up.
You Are Looking For Data
Data is a powerful tool in the digital world, and its importance will continue to grow with the growth of AI and Machine Learning. You might be looking to prioritize collecting data through your free trial sign-ups rather than paying customers.
In this case, you can simply ask your users to input a few pieces of relevant information instead of asking for credit cards. It will increase your sign-up rates and help you gather valuable insights.
Benefits Of Credit Card vs. No Card For SaaS Trial
Get Qualified Leads
Tire-kickers (who also happen to be your sales team’s worst nightmare) are highly unlikely to sign up for your free trials if they have to take an extra step and add their credit card information.
Users won’t give you their credit card information unless they are genuinely interested in your product. Having a credit card requirement helps you get qualified leads without your sales team having to break a sweat.
As Paweł Paluch puts it, “If you are getting poor quality leads from the signup process [request credit cards] to improve the quality over quantity. If not, skip the friction.”
Paluch also mentioned a couple of pointers if you are facing issues with lead quality:
- Check if you are positioning the product well enough.
- Check if the product still has the market fit.
Better Trial To Paid Conversion Rates
Your conversion rates are likely to go up as you get more qualified leads. Users who sign up for free trials using their credit cards will become your paid customers if they complete their trial period.
This makes it easier for users to make the transition to being paid customers.
Having a credit card requirement also prevents users from abusing the system by opening multiple accounts and continuing to use your product for free.
Shorter Sales Process
Users automatically opt for paid subscriptions if they don’t cancel their trial within the trial period. They don’t have to sign-up again or take any additional steps to access the full version of your product. This helps you shorten your sales process, as your sales team doesn’t have to engage with users again to turn them into paid customers.
On the other hand, users who didn’t have to use a credit card in the first place need to put in additional effort to become paid customers if they wish to continue using your product.
Benefits Of No Credit Card vs. Credit Card For SaaS Trial
Low Barrier For Users
Let’s face it, having to put credit card information when you want to test a product is not a welcoming experience for most of us.
When people are interested in your product and go on to sign up for a trial, they expect to get their hands on it as quickly as possible.
If you need to reduce the barriers they face in the sign-up process, and the easiest way to do so is by removing credit card requirements.
Generate More Leads
While requesting credit cards for free trials is likely to boost your initial trial conversion rates, you might actually get fewer new customers, even if your site traffic remains unchanged.
Fewer conversions stem from fewer generated leads. Having low barriers in the sign-up process will lead more users to sign up for your free trial – and therefore, you will get more product-qualified leads.
You can then rely on your lead nurturing funnel and sales team to better convert those leads into paying users.
Users may often forget to cancel their free trials before it expires. In this case, they start paying automatically if they have signed up using credit cards. This may lead them to send you emails asking for refunds or make chargebacks, as they didn’t intend to pay for the product.
Refunding can be quite a hassle. You don’t have to deal with customers asking for refunds if you don’t require them to put in their credit card details in the first place.
How many times have you appreciated the “No Credit Card Required” text beside a free trial prompt? There’s very little risk for the user.
You can easily convert this appreciation to trust if you can offer your users a great product without asking for anything in return. If they complete the trial and then choose to pay for your product, they are likely to generate a high Lifetime Value (LTV) for your business.
Therefore, if you can build trust with your users by creating a win-win situation, they won’t hesitate to pay for your products.
Verdict: Credit Card Or No Credit Card for a SaaS Trial?
As you might have guessed – the answer is: it depends.
You need to assess your product and business goals before deciding to add or remove the option to ask for credit cards during free trial sign-ups.
You can ask for credit card information from your users before they access your free trial if you are running a small-scale business with an expensive subscription fee and prioritize revenue per user. This will help you get more qualified leads, boost your conversion rates, and shorten your sales process.
On the flip side, don’t ask for credit card details if you are looking to increase your user base, ramp up your conversion numbers, or gather user data. This will reduce barriers for new users, generate more leads, help you get rid of the hassle of refunding, and also quickly build trust with your customers.