Ask HN: When to get customers' billing info?
12 comments
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.
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.
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?
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)
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.
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.
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.
On the other hand I'm sure patio11 will tell you that nothing bounces prospects faster than a credit card signup.
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.
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?]
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?]
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.
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.
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.
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.
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.
For sure this only applies to certain products, maybe educational or entertainment ones.
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.
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.
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.
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.
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.
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.
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.
Additionally, you can make taking it up front optional as well...
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?
Have you tried multiple approaches? Has anyone done A/B testing on signup flows? I'd love anything you have ... anecdotes, data, whatever.
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.