There’s a lot of information out there on how to maximize your sales — but how much of it is relevant to your business? Sales research is often based on the assumption of a one-time sale and a business model based on selling products.
Sometimes that age-old wisdom holds true for subscription-based businesses…and sometimes, what works for another business can hurt a subscription-based business.
The question for you, then, is what are the key differences for customers between deciding to buy a one-time product and signing up for a subscription product or service? And how can you utilize those difference to get more sales?
Free trials can work in non-subscription businesses — samples are a popular sales tactic for a reason. With free trials, it’s a little different, because the customer has to take an action to get the free sample. If you’re a subscription business, there are two points of conversion:
When it comes to the first point, there are no hard and fast rules. Because of that, you should always test your landing pages and copy — depending on your industry and customers, you might find some surprises. For example, Wedbuddy originally had a free trial CTA that emphasized that the no-risk, no credit card nature of their free trial. Putting the “free” in “free trial” makes sense, right?
However, when they tested this landing page against a different version with a few key changes, they increased conversions by 73%. One of the biggest changes was changing the CTA to focus on what users could do with the free trial — create a website in minutes. The lesson is, as usual, to test everything.
Another factor to think about with your free trials is how long they should be. For monthly subscriptions, 14–30 days is usually the go-to. There are a few things to note here:
One last thing to note is that the effectiveness of your free trial will be heavily influenced by your onboarding process. Onboarding — and doing it correctly — is a topic too large to effectively cover in a subsection here. Just keep in mind that if all you do is send one welcome email and one “Your trial is almost up” email, you’re likely losing customers and it has nothing to do with your free trial length or CTA.
A monthly subscription is the default that most subscription businesses use — but is it the most effective?
There are pros and cons to having longer subscription periods available. The second-most common option outside of monthly is annual, but you could also look at offering quarterly plans.
The biggest argument for offering annual plans has nothing to do with the customer and everything to do with your business. Annual plans get you more upfront revenue — when a customer commits to a whole year upfront, you get that money faster than you would if they were paying month by month. Because of that, you can recoup your customer acquisition cost quicker, and reinvest that in your business. To see some graphs comparing revenue growth with annual vs. monthly plans, head to this post from ProfitWell.
However, we aren’t here to talk about whether it’s a smart business strategy or not — we’re here to figure out whether it makes customers more or less likely to buy. If you present annual prices first (and show the total annual price), it can be used as a form of price anchoring.
The idea behind “price anchoring” is that you show a more expensive price first. That makes the less expensive price feel like the more reasonable choice. The old sales saying goes:
“How do you sell a $2,000 watch? Put it next to a $10,000 watch.”
The biggest thing to remember when presenting annual prices is to be careful not to overwhelm your customer. If you have five different plans and have two different ways of viewing prices, you might give customer so many choices that they don’t make any choice at all.
Interestingly, there is some debate about whether the length of subscription affects the customers’ commitment to the product. Harvard Business Review has conducted research which suggests that monthly pricing can make customers more committed. When renewing on an annual basis, the “sting” of the price fades over time. The result: people are less likely to stay committed.
When paying monthly, however, customers are reminded of the cost and more likely to make use of what they’re paying for. And if they’re using it regularly, they’re more likely to renew their membership (and tell other customers about it).
Of course, depending on your target market, these might change. For example, in many B2B cases, the person paying for the product isn’t the person using it, so annual plans might not make any difference in customer commitment. The answer, as usual, is testing and user interviews to double-check your assumptions.
This is one area where the commonly-held wisdom about pricing can hold true — and in fact, might be more important. When you have several plans available, and then a monthly or annual option for each plan, customers can get overwhelmed quickly.
Here are a few questions to help gauge if you’re potentially losing people because of your pricing plans:
Of course — you know what’s coming up next — the best way to find out what will work is to test all of this for your business and your customers. While humans are, in general, fairly predictable creatures, there is no “one size fits all” for all businesses and industries.
This post was originally published at the Rebilly blog.