Not long ago we received a tweet from someone who had been keen to try out Nusii. They were upset about needing a credit card to signup for a trial. This isn’t an isolated event.
Over the last 12 months we’ve received plenty of tweets and emails in a similar vein. Some even suggesting that we’re trying to rip people off…
So why do we do continue to ask for a credit card?
Let’s start with what others tell you
For starters most businesses won’t address this, and to be fair neither do we. On our pricing page we inform visitors that they won’t be charged during their trial period, and that we’ll email them twice before the trial ends to ensure we don’t get any false signups. We do this 3 days before the trial ends, and again 48 hours later. This ensures there’s plenty of time to cancel.
The few businesses that do try to deal with the sticky question of why a credit card is required usually default to the following:
“We ask for a credit card to ensure your service isn’t interrupted, should you decide not to cancel”.
You’ve probably seen these about.
This is absolute crap.
Asking for a credit card during signup has nothing to do with ensuring a smooth crossover or an uninterrupted service. It does however, have everything to do with increasing the chances of converting a trial into a new customer. (And no, not through deceit or dirty tactics).
I’ll get to the why of this in a minute…
If it worked for your SaaS, why not mine?
When you’re an early stage startup, (by the way, does anyone mind if I stop using the word startup? I’m doing my best to build a business) you try lots of different channels and tactics to find traction.
Every now and again I chat with a fellow entrepreneur. He runs a very successful SaaS, so I listen. One day the subject of our signup process came up.
Here’s a summary of what was said:
“Get rid of the credit card. Make it easier for people to try out Nusii. Reduce the friction”.
On the surface it’s obvious. Reduce friction, get more bums on seats and watch the MRR shoot up! We decided to try it for 4 weeks. What’s the worst that could happen?
What happened after reducing friction?
Things blew up and overnight we 5x’d the number of trials hitting Nusii.
We got excited!
Our trial period is relatively short (15 days), so it didn’t take long to see results. And boy, did we see results!
We bombed. We completely and utterly bombed!
This one little experiment directly lost us 4 week’s revenue. We virtually flat-lined.
Conversion rates will always suffer when removing a credit card from signup. But the hope is that the sheer volume of people getting through the door will compensate for this. The fact is, our conversion rate suffered to the point of not being able to suffer any more. We would’ve needed Facebooks’ traffic to see any movement at all. (I’m guessing they have a fair bit of traffic).
Support shot up, as did the amount of time I spent in Groove ( the helpdesk software we use). There seems to be a direct correlation between the number of trash email addresses (including Gmail) in our system and the amount of time I spent answering crazy support requests. It wasn’t a fun 4 weeks.
We fell from a 30% conversion rate to a measly 3% (and I think we may have puffed that up to make ourselves feel better). We essentially blew off an entire month’s revenue. This isn’t something a small bootstrapped business can afford.
It’s in your USP, so don’t forget, your SaaS is unique
Yes, removing the need for a credit card can work wonderfully in the right situation, unfortunately this wasn’t the case for us.
The thing is, freelancers (especially designers, like myself) love to browse. We’re always looking for the next greatest app. Unfortunately lowering the barrier to entry briefly put us on the “free to get in” radar.
So why was “free to get in” a bad move for Nusii? Browsing is very rarely accompanied by the intention to buy.
Shopping, however is different. When there’s money on the table, intention comes into play. You are shopping for something, in the case of our customers, a business solution to help win more client projects.
Put your money where your damn mouth is
Nothing says I’m serious like pulling out your wallet, in this case in the form of a credit card.
If you’re looking to solve a serious problem, such as losing out on new business opportunities, then you’re willing to pay to have that problem solved.
When you use a credit card to signup up for a service what you’re really saying is “I want this to work for me”…not, “Let’s see how cool this is”.
As I mentioned, we’ve had emails asking us to remove the need for a credit card. In some cases these emails come from people who are legitimately searching for a solution. However, we’ve seen that generally lowering the barrier to entry doesn’t attract a serious customer. The chances of them converting are far lower. We simply don’t have the time or resources to focus on the long-shots.
When we hear about how Freshbooks doesn’t ask for a credit card, or how Zoho offers a free plan, it doesn’t mean anything to a couple of bootstrappers. The only money we’re burning is our own. Things like free accounts, and lack of credit card on signup belongs to a world we’re not part of.
That isn’t to say…
That isn’t to say this approach won’t work for you. Each and every service, business and startup is different. After all, my friend was convinced it would work for Nusii, as it had for him. But, what works in one sector might not work in another. I know this now.
If you’re a fledgling business who’s looking to grow, then I’ve no doubt that the time will arrive when you’ll want to try this experiment for yourself.
My question to you would be, “Can you afford it?”
P.S. When our 4 week experiment ended, we immediately reverted to our previous signup process. We subsequently had our largest month’s growth, ever.
Latest posts by Nathan Powell (see all)
- Give up or buck up. The founders’ dilemma - September 25, 2015
- How we lost revenue by improving our signup process - September 19, 2015
- Building a product and saying no to features - July 1, 2015