Episode 179 | When to Ask Your Customers for Credit Cards
- Sarah Hatter’s book The Customer Support Handbook
- How to Connect with Industry Leaders to Grow Leads – RivalFox’s follow up to last episode http://t.co/aRpcCtilv1
- Totango 2012 SaaS Conversions Benchmark
[00:00] Rob: In this episode for Startups for the Rest of Us Mike and I discussed when you should ask your customers for credit cards. This is Startups for the Rest of Us: Episode 179.
[00:16] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:25] Mike: And I’m Mike.
[00:26] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week sir?
[00:29] Mike: As you know, MicroConf is just a couple of weeks away. I do want to send out a congratulations to Brian Marble and Eric Nagem. Each of them won free tickets to MicroConf compliments of Constant Contact and Balsamic respectively. They got an email from or mailing list at startupsfortherestofus.com and entered into those contests and were selected as the winner. So they get a free ticket to MicroConf and if you’re interested in hearing other things about some of the stuff that Rob and I are working on or other things in the startup community then head on over to startupsfortherestofus.com and you can sign up for the newsletter there.
[00:59] Rob: I had a coupe notes about last week’s episode and some other thoughts. One is that Rival Fox which they wrote the blog post that we based the episode on, they published a follow-up to that. We’ll have a link to that in the show notes but you can also go to Rival Fox’s blog and hear about that. The other part is we had a question about how to manage bug tracking and how to modify existing features even if you’re a developer and you don’t want to modify those features. And when I brought that up to Derek my lead developer he said write tests like spend the extra 20% of your time and write test or the more test coverage you have, the more confidence you can have to modify existing features.
[01:38] And if you’re a founder and you’re not the actual developer, then give your developers that extra time to be able to write test and that’s something I’ve realized with Drip we have a luxury that we don’t have with HitTail because Drip has extensive test coverage and HitTail does not. And so there’s a little more trepidation to go in and modify the guts of the code because you always run the risk of breaking something.
[01:59] Mike: That’s something that has completely slipped my mind as well. I remember a while back I was writing some stuff inside of the core of Audit Shark. I was changing how the engine itself was working to make it more efficient and then I made a bunch of changes to it and then I ran through my suite of the unit test which runs a couple hundred tests on the core of it, core auditing engine and there were a bunch of them that passed but then there was this whole slew of them that failed that it was something really small, some edge case that I hadn’t thought of while I was implementing the fix or the update and it just all these things failed that I probably would not have noticed or recognized until it got out on the field and it was too late. So yeah, definitely those unit tests can certainly save you when you’ve got things that are very intricate or complicated that are interacting between each other.
[02:43] Rob: Absolutely. And the other benefit is that when you do find a bug in production, then you go into your code, you fix it and then you write a test that ensures that bug will never get into production again. So over time you can always discover new bugs as you’re introducing new code but all that existing code it’s just locked down and you become so much more confident. You can make grand sweeping changes and actually feel okay about them because like you said, you don’t have to test every nook and cranny because your test handled the bulk of that for you. They obviously don’t handle 100% of it but they handle quite a bit of it.
[03:17] Mike: Hey, I asked someone to point out – if anyone follows Sarah Hatter and her team over at Cosupport, they just launched a new book called The Customer Support Handbook. They started selling it I think back in December and they were basically selling pre-released copies of it that came bundled with a basket and all these atomic fireballs and various other things. But you can go out to Amazon right now and get it and we’ll link that up in the show notes. I kind of glanced through it yesterday when I got my copy of it. It looks pretty detailed so far. I think that Sarah’s got a really good handle on customer support and if you don’t know who she is, she handled the customer support for 37 Signals for a long time before she kind of struck on her own and created the company Cosupport.
[03:56] Rob: Yeah. I hadn’t noticed the launch. I’m glad you pointed it out. I’m going to be buying the Kindle version. It looks like it’s only $8 on Amazon, it’s kind of a no brainer. One other update for me on Drip specifically, we are maybe hopefully only two weeks out from having this email automation. It’s like marketing automation but it’s specifically with email and place and Drip. And from what I can tell and from what both existing customers and some prospect, I think it’s going to open as something to do with pretty broad market and it’s a hungry market, a marketing atomization’s kind of a new thing. I mean it’s not super new. Infusion Soft’s been around for several years but it’s really starting to hit its stride and I feel like people are getting into it more even folks like who own Saas apps or the info marketers used to just have a single list are now moving people between multiple list based on that user’s behavior.
[04:37] Frankly there are some tools out there that do it but everyone who uses them tells me that they suck it’s kind of like when everybody uses QuickBooks but everybody hates it, that’s what I’m hearing about, tools like Infusion Soft and I guess Marketo is good but it’s like a couple grand a month or something. I mean it is a space that I think could be right for some disruption so I’m excited to get that out and to basically do a pretty big marketing push into that market because it really does change the value proposition of Drip.
[05:06] Mike: Let me get this straight because I haven’t asked you about this before but by email atomization you essentially mean that there are triggers that the user can kind of trip over and trigger inside of Drip. Let’s say I run Audit Shark and somebody goes into Audit Shark and does something whatever that something is. Maybe they’re not just signing up for a trial but it could be something that they setup their first system for example to be audited and then that fires like a callback into Drip and Drip will send them an email that you guys monitor all of the interactions between the user and that email and send it out and figure out whether they actually read it or not and can do follow-ups and things like that.
[05:41] Rob: That’s exactly right. And so it can be triggered based on obviously signing up for a trial would be a good one. You could put your whole trial sequence inside Drip and we use liquid templating so you can have if then so if they’ve done this and haven’t done that you can – modify the text in the email ad you can just have a fairly standard template if they convert to paid then you can automatically move them into paid customer list or the current customer list. And like you said, as they use a new feature or if they don’t log in for X amount of days or month or whatever, there’s just all these behavioral things that can be done in an app.
[06:15] Now there’s also stuff on the marketing side where if they click this particular link in an email you can tag them. They click an SEO link, it brings them into a blog post. Talks about SEO, you can tag that person they’re interested in SEO. And so you can then say when they get done with their current sequence, move them to my other sequence my SEO sequence and then when they get done with that, funnel them back into the main sequence. So there’s both a marketing angle to it and there’s also like an in-app more of a Saas app type model behind it.
[06:42] So I’m interested to find out which one of those is bigger because I know people doing both of those sides of it but without actually getting into it and starting to market all I won’t know which of those markets is bigger and hungrier for this type of automation.
[06:54] Mike: That’s cool. Sounds really neat.
[06:58] Well as you said in the intro, today we’re going to be talking about when to ask your customers for credit cards. This question gets asked to us quite a bit so I thought we would do a whole episode on the topic and talk about some of the pros and cons of some of the different approaches and I think one of the big things that we get is why do we recommend asking for credit cards upfront when some of the data that’s floating around out there if you look at the date itself it kind of clearly shows that the opposite is actually more profitable.
[07:23] Rob: I think what we’re going to see today is the short answer to this question is you should ask for credit cards upfront. But it’s not like a 90-10 situation where 90% of the time you should ask for credit cards upfront ad 10% you shouldn’t. I’d say it’s more like a 60-40 or a 65-45 where when you hit these certain milestones this critical mass when you have enough time to do certain things, then switching to no credit card totally makes sense. But without having an entire episode to expound upon that, that’s always been the answer that I’ve given folks when in doubt, ask for credit card upfront. So I’m excited to dive into this topic honestly because we’re going to be able to give it a lot more talking through.
[08:01] Mike: So I think we’ll start into some of the pros to asking for a credit card as part of the signup process and then we’ll talk about some of the cons of that and then we’ll talk about asking people for credit cards after they’ve started their trial. To begin with, some of the pros of asking them for a credit card as part of the signup process is that theoretically it filters out some of the people who are not serious and the idea here is if you ask somebody for a credit card than they must be serious about it because they’re clearly willing to pay for it.
[08:26] I think that’s a good qualifier but I also think that not necessarily true. It’s not an absolute role that says hey, if somebody gives me their credit card then they’re absolutely willing to pay for it and that’s totally not true because in most people’s marketing materials, it typically says something along the lines of 30 day money back guarantee or whatever the number of days is. You’re saying that you’ll give them a refund. The problem with that is they see those things and to them there’s really virtually no risk for them to put their credit card and the fact of the matter is if they do put their credit card in, they can always come back later and if you do charge them, they can do a charge back just thinking that filters out all the non-serious people is just not necessarily correct.
[09:03] Rob: Yeah. I think I see it the other way. In Drip I have a two step signup process. The first step doesn’t mention credit card your email and password and then the second step ask for credit card. So I have information on people who aren’t entering their card. I can see who gets through and I can see who doesn’t enter their card and far and away the people who don’t enter credit cards are way, way less qualified and I can tell because I have there the URL that they enter and I have their email address. Right? So I can tell if it’s a business address and then I can tell what the URL is.
[09:36] And by and large the people who are skipping out and not entering their credit card in the second step, not starting a trial either have a fake URL, they have URL that’s like a default WordPress install, they have some type of a micro niche site that is never going to work for Drip anyway. It’s not going to be worth the money to pay for it. The just have 404’s or they just have URL that doesn’t even have a site up. It’s not 100% but I would say it may be 80% plus of those people. So for me through that experience, and my intuition says that you will get more qualified people and then for that experience, that’s kind of the data point I’ve used.
[10:13] Mike: I pointed out that it’s not necessarily true because I think there’s the inclination for people to believe that if I ask for a credit card then I’m only going to get people who are well qualified and I just want to point out that there are going to be people who come through there that are not…
[10:28] Rob: That’s definitely true. Also from experience. Yup.
[10:30] Mike: So the second part is that you don’t have to follow-up and ask them for a credit card. I mean if they’ve signed up, they put in their credit card information, you don’t have to follow-up with them later and in some ways that’s a benefit to you but it’s not necessarily benefit to the customer because they do have to enter in their credit card upfront. So if you’re basically making it so that they have to kind of stop what they’re doing if they wanted to go through the signup process and they’re not able to just do the signup process, I’ve read various blog posts from people who have said flat out I didn’t sign up for such and such service because my wallet was upstairs and I would’ve had to go upstairs go get my credit card and then I just never went back to it.
[11:08] So I think that lowering that barrier entry can certainly help you but clearly one of the benefits of asking it for as part of the signup process is you don’t have to ask for it later. You don’t have to follow-up with them.
[11:18] Rob: I’ll add two points to this. The first is if you ask for credit card upfront you should always email every customer before their trial expires and let them know their card is going to be charged in typically three days is the rule I use. This is not I take a credit card and the drop out of site and try to be forgotten. That’s not how we grow apps. That’s not how you build a successful app. You definitely need to touch base with folks before they’re charged and every month when they’re charged you send them a receipt and you offer refunds if people want to cancel at that point. So that’s first thing.
[11:49] The second part is if you do implement a two setup signup process where you get someone’s email and their chosen password the first step and then credit card the second, that gives you an opportunity that if someone doesn’t complete the process, you can feasibly ping them a day later and say hey I noticed you didn’t sign up. Was it the credit card? Did you not have your wallet or something like that because I have actually had a Drip customer tell me the exact same thing. I do this. We have a Drip sequence people are subscribed to. It’s only one email long and basically just touches base and says hey you didn’t sign up with your card. Did you need assistance or did you just forget or whatever?
[12:23] But that then coverts a few more of those people who like you said their wallet was upstairs and maybe this time their wallet isn’t upstairs so that’s a way to kind of get around that not having credit card on hand objection.
[12:33] Mike: I don’t think that’s terribly common to have that two step process. I sign up for a lot of services over the past couple years and there’s not very many that have that two setup process for where you’re creating your account you enter in your email address and password and maybe a URL or something like that and then on the next page, you ask them for credit card information. I don’t see that totally often. So I think that’s definitely a good takeaway for people who are listening to this.
[12:57] Rob: I haven’t seen very much either and it’s been quite successful with this at Drip.
[13:01] Mike: The third benefit to having a credit card as part of the signup process is you get a higher trial to paid conversion rates. And if you go back and look at the Totango Saas report which we’ll link to as part of the show notes. You look at that and it pretty clearly illustrates that the people who come in and enter in their credit card information upfront typically have a higher trial to paid conversation rate.
[13:24] Rob: This is a little bit of a vanity metric. Obviously someone paying you money is not a vanity metric but if you’re not looking then down the line that I think we’re going to get into here pretty soon. I’m talking about how many people churn out over the next few months, you’re not looking at the full picture. This would be kind of a weak argument if I were to say well the only reason you should do is because they’re trial to paid because if you don’t retain people for very long and everybody cancels in the first month then obviously that’s not ultimately the best thing to do.
[13:50] Mike: So let’s talk about some of the downside of asking for the credit card upfront. Obviously the first one is to get lower signup rates. Again that’s something that kind of way with the people who are signing up. I mean do you want a lot of people who are not very well qualified or do you want a few people who are very well qualified? So that’s something that you have balance to there.
[14:08] Rob: Let’s talk a few numbers. We do have this Totango report that we’ll link up. They give some ranges and they’re pretty accurate as far as my experience has been. And they basically say if you’re asking for credit card upfront you tend to be around a 2% visitor to trial signup and I’ve seen 1-2% as a general rule for Saas. Now with no credit card required they have 10% as their kind of general ballpark so it’s about a 5X difference. It’s about 5 times more trials or as you said, I guess you said lower signup rates so it’s about 1/5 of the trials coming through your funnel if you’re asking for credit card.
[14:44] Mike: And this is on page 8 of that report. The next thing is that you’ll tend to not engage with customers as much because you already have their payment details and what happens is that you have stopped trying to earn their business. So you’ve got this pay wall up in front of your app and in order to get into your app you basically force them to give you their credit card information and then once you’ve got it, what I’ve seen is a tendency to stop doing marketing to those people, to stop trying to continue to sell them on the product because they’ve already bought it.
[15:12] So I think the mentality is really well they’ve already purchased it. What do I need to keep selling them on it? I think the reason for that is you want to make sure that they follow through and don’t do a charge back that they don’t cancel that they’re still going to be a customer after 30, 60, 90 days because you want them to get into your system and stay there. I mean the lifetime value of that customer is going to increase over time. So you want to do whatever it takes to make sure that they stay there for a long period of time.
[15:39] Rob: Yeah I think this is a common mistake. I think you’re right. It’s a crutch to fall back on the fact that you asked for credit card to assume that the people are then just going to onboard themselves. You still have to spend a lot of time getting someone, using the app, getting value out of the app so that when they get that three day prior to charge email that they do in fact want to stick around and that they don cancel right away. Now at the same time it tends to be easier to get people who have entered their credit card to get onboard because they are a little more qualified.
[16:07] They have slightly more invested because they have given you credit card details that they know if they don’t get on boarded that they need to remember to cancel on that kind of stuff. So there’s a balance here but I think it’s a no-brainer that if you are asking for credit card or not that you still have to spend the time to engage you customers during that trial or else you’re going to lose them whether you have their credit card or not.
[16:27] Mike: The next sound sides of asking for their credit card upfront are you end up with a lower paid retention rate after 90 days and a lower end to end conversion rate. And again this goes back to the Totango report and these are in relation to asking for a credit card and the numbers that they show are that after 90 days the retained paid customer after that 90 days is 60% with a credit card require but its 80% if you do not require a credit card. And on the end to end conversions it’s .6% if you require a credit card and 1.2% if you do not require a credit card.
[17:00] Rob: Right. So they’re saying you convert twice as many people with no credit card. Now you have to manage five times the number for trials but you convert twice as many with these numbers. These numbers vary in both directions, both credit card and credit card not required. So it truly does depend on your product and how well you’re able to handle onboard and just how engaged you are and how much you’ve optimized that funnel, a broad swaft across all the companies that Totango studied certainly indicates that end to end conversion rates with credit card are lower.
[17:30] Mike: So let’s talk a little bit about asking for credit cards after somebody has created their account and started their trial. One of the first things that you’ll see is that you get a significantly higher signup rates and the Totango report shows it’s about five times what it is as if you were to ask for credit cards upfront.
[174:8] Rob: I think it’s at least five times. I’ve seen apps where they might get a 1% before credit card and they can get well up over 10% without credit card so 5 in my experience has been the low end and I could easily see 10 or 15 X more trials which can be a good thing. If you can handle that volume it’s actually you can optimize stuff a lot quicker if you’re getting that many trials. Right? Because you just have so much more volume coming through your funnel.
[18:15] Mike: I think that’s something else to point out is that just because you have a lot more people coming through your funnel, that doesn’t necessarily meant that you have the time to follow-up on. I think one of the key things that a lot of this data doesn’t necessarily tell you is that you really need to be able to have the resources behind you to follow-up with these people if you’re not requiring a credit card. If you got and just kind of assumes that you have 10,000 visitors a month to your website and these are the approximate numbers that it’s going to shake out to but that comes out to 1,000 trials a month. And 1,000 trials a month is a lot more difficult to manage than 200 say.
[18:54] Rob: And you’re jumping ahead to one of the cons but the point is it’s the downside of the pro that we’re discussing. At a thousand trials a month, if you have any kind of manual setup or any kind of code you need to install or any step that might require assistance, you are going to need like a half time or a full time support person just to help with on boarding if you’re driving that many trials. It’s night and day. Think it 5 times the amount of support than the asking for credit card route. and so that’s where if you’re a company and you have 5 or 10 people or you can hire full time support person, then yes, moving towards not asking for credit card is something I would recommend at least testing.
[19:31] But if you’re a solopreneur and you’re working on a Saas app on the side nights and weekends you launch it and you’re just trying to scramble and get enough money to quit your job not asking for credit card can be kind of real danger zone because you just don’t have the bandwidth to be able to onboard and engage with the volume of trials that you’re going to get.
[19:50] Mike: I think one of the weird things about this report is that it shows that when you’re not asking for a credit card the number of free users to free trials to paid users is significantly lower than if you’re asking for a credit card but then the number of those people who end up paying you for more than 90 days is about 20% higher. It’s 80% versus 60% for a credit card. I don’t see anything in here that kind of explains why that is. That’s one thing that it’s a question mark.
[20:16] Rob: Yeah. I think that it’s that people are making a very deliberate choice to convert to paying customer. And it’s not that the people who enter their credit card upfront and then get the three day email and see it and they kind of say well I’m going to keep using it. I’m not on boarded yet but I’ll just stick around for a month or two. I mean I’ve done this several times. Then you get 2 or 3 months down the line, your card’s been charged and you eventually cancel. I think that’s what’s happening with those folks whereas on the other side where you’re 20 days into a trial and it’s kind of like hey, have you gotten value out of this? If so, enter your card and we’ll move you into a paid account. That’s a very deliberate decision.
[20:53] And I think those folks don’t enter a card unless they’ve on boarded and gotten value out of the app and by that time, they’re just much more likely to stick around so that’s – you’re right. It doesn’t say that – that’s kind of my theory on why the retention rates are there dramatically higher. It’s a very stark difference and that leads to the other two pros you were going to mention which is that you have a higher paid retention rate after 90 days not asking for credit card and at least according to this report and their study that you have a higher end to end conversion rate.
[21:22] Now the tough part is if you’re doing this on your own, I would always recommend to test. Right? You got to test both approaches. It’s pretty complicated to do so. It’s not like setting up a Google split test. There’s a lot of numbers and a lot of things you have to look at over an extended period of time and so this is not something that I would recommend that again if you’re doing it on the side, you’re more of an entry level entrepreneur or you’ve just launched, it’s like this is a complex beast and you can easily look at the wrong metrics or not look at it over a long enough period of time and make the mistake and judgment.
[21:52] And that’s again why the short answer I have is always get the pre-qualified people, ask for credit card upfront. But the longer answer is as you get more advanced, you can do something like this. Very similar you know how I talked about a freemium being the samurai sword that if you don’t know what you’re doing you can cut your arm off but a master can do amazing things with it.
[22:09] I kind of feel like this credit card debate is the same way when you’re getting started the easy way is to ask and then down the line you can test and or you know what you’re doing more and you know more about your value prop and you’re just able to encourage people who haven’t given your credit card to enter that credit card. You’re on boarding so much better and you just have a lot more to lend to optimizing that process.
[22:31] Mike: I guess the way I see it is you don’t necessarily understand or fully comprehend what it is that’s resonating with your audience yet.
[22:39] Rob: So it’s not that you don’t know what you’re doing. It’s just you don’t know what your audience is thinking yet. So by asking for the credit cards upfront, you kind of filter it down to the people who really need it and make the decision upfront hey I know that I need this and this guy supplies so I’m going to pay for it and then you talk to those people and then eventually down the road when you get more resources available to you then you can kind of convert over.
[23:02] Rob: That’s right. Yeah, that phrase you don’t know what you’re doing yet, I use that for myself when I’m still learning about how to market an app. Until I find that place where I can scale it and I’m still in that learning phase. Right? So it doesn’t mean you’re a beginner versus advance. It just means you’re still trying to figure out that value proposition that resonates with folks.
[23:20] Mike: I think the biggest issue with not asking for the credit card is you need to follow-up with people a lot and you need to optimize that because you have to have a lot of information from your customers in order to be able to do it effectively because you can create email sequences and follow-ups and all these other things but if you don’t have like for example the resources to call people back and ask them questions or ask them why they haven’t done something then it doesn’t matter. That’s going to drop your ability to convert people from a free trial into a paid conversion.
[23:53] Rob: Yeah. If you look at the people who are not asking for credit card and having success with it and make sure that last part is there because a lot of people are not having success with it and don’t know any better. But if you look at a Kiss Metrics, if you see someone who’s making it work, they have invested hundreds of hours into making that work because you have to optimize this part of the follow-up sequence. You can’t just dump someone in and expect them to get started. You need to either be making phone calls, you need an expertly written email trial sequence, you need a lot of on boarding in the app. There’s a lot that goes into this that that is harder here than it is if you ask for credit card upfront.
[24:31] And so if you don’t have week’s worth of time to not only put out a V 1.0 but to watch how that works and measure it in terms of your on boarding into trial emails and that whole process then this is where it can be a danger zone. Use that phrase again, if you don’t know what you’re doing yet then this is a lot harder than it looks to actually make these numbers work the way that Totango shows.
[24:53] Mike: Yeah, one of the interesting things that I’ve heard that the business of software conference a few years ago was there was a round table discussion and there were a bunch of people from some fairly large companies there and one of the people was there from Red Gate and he flat out said that as part of their trial sequence and stuff they basically ask people for some information about themselves like their email address and phone number and things like that. And what they started doing was they started calling people 20, 30 days after they downloaded a trial. And what they found was after doing the measurements and stuff was that the purchase price, the average purchase price of somebody that they called was something like 60 or 70% higher than it was than if they did not call.
[25:39] It was enough like you at that and say what’s 60-70%? It was something the difference in actual numbers was something like $1,300 to $2,400 $2,500 or something like that. So the cost of them not making that call was something like over $1,000 and they were consciously choosing to not make that call and they’re just like we don’t know why we’re not doing this. We just don’t have the ability to call. We’re not consciously choosing to call those people. And they’re making enough money that it does necessarily mater to them but they could theoretically have been a lot more successful if they were calling those people.
[26:12] And you would think that a company their size would be able to afford to hire people to just go out and call people and it was just not something that they were doing this time.
[26:21] Rob: I think you’ve made a good point there that if a company like that can’t make this worked without credit card and that they aren’t doing the right steps to actually get this 1.2% conversion rate that Totango’s report talks about, it shows you that it’s difficult. It’s not impossible for a small shop to do it but if you’re one person, two people, three people, it is going to be a challenge and you’re really going to have to know what you’re doing and be willing to invest a lot of time in it until you see the numbers grow. It’s not something you can just set one time and forget.
[26:49] Mike: Yeah, I think the other thing that brings out is that you can’t really treat those free trials as if they were just a black box. I mean you really need to engage with your customers and that makes a huge difference in whether or not they cancel or whether they fork over their credit card and actually pay for the service. I mean the other side of that is how quickly they realize the value versus when they perceive the value of the products makes a huge difference as well. So if you put together this great marketing story for them and they look at that and they say oh yeah, I see the value in that. Here’s my credit card information.
[27:22] But if they don’t actually see the value of that, then an maybe it takes 30, 40, 50 days for them to see the value, that makes a big difference as well. I think Rob you’ve kind of talked a little bit around this in the past by discussing how you’ve – I think it was the length of your free trial for I believe it was HitTail. You dropped it from like 28 days to 14 days or 21, something along those lines.
[27:43] Rob: Yeah. When I first acquired HitTail, the trial was 60 days long and I immediately moved it to 30 and then I moved it to 21 after maybe 6 months of testing and it allows you to iterate faster and it also frankly we had improved the product and so people got value out of it sooner. And the more you learn about how quickly people get value out of it the shorter you can make that trial. Having a 7 day trial is not a bad thing. If you give people value in the first few hours having a 24 hour trial or no trial, charge them upfront and then refund them, that’s how a lot of web host do it because as soon as you have a web hosting account, you have space on the server. You’re getting value out of it.
[28:20] And to be honest, I’m actually considering either going with no credit card with HitTail jus as a test or also testing asking for a charge upfront. Because as soon as you get into HitTail now, there’s no tracking code and there’s no weight anymore. Right when you get in your link it up to your Google web master tools account, boom, you get suggestions right away within minutes of being in. So the length of time until that awesome experience, that literally went from 15, 16 days that a lot of our customers was taking down to about 5 minutes. So realistically my whole on boarding flow should change. I can take better advantage of that frankly.
[28:53] So there’s a lot of options here and I think that the more data you have and the more that you’ve seen your customers get value out of it, the more behavior you’ve been able to witness it just gives you more areas in your quiver in order to test new things.
[29:06] Mike: Something else that we haven’t really talked about yet is that the Totango report really differentiates in three different categories not just two. The first one is the credit card required upfront. Second one is credit card not required upfront and then they have this third category where what they call it is best in class Saas leaders. If you look at that category, it’s essentially people who don’t really fall inside those numbers. They were doing significantly better than all of the other people in there. So maybe they’re looking at the top 5% or 10% of the Saas companies that are feeing data into their system and saying what are these guys doing? How are they doing so much better than everyone else?
[29:46] And it’s interesting because they point out that one of the things that those best in class people do is they don’t restrict that top of the funnel. They don’t ask for credit card upfront which kind of makes sense because we kind of talked about that but the other thing that they have to do is they have to monitor those trial users and in any group of trial customers there’s going to be some people who are more inclined to buy from you just because of the fact that whether it’s who you are or whether they really need the product.
[30:13] Again, it’s those people who probably would’ve given you their credit card upfront if you’d asked for it but by following up with those people and actively looking for them in their metrics and say oh, Sally joined today and she spent two hours inside of our applications so clearly she needs this. So let’s follow-up with her today versus Joe who signs up and then doesn’t log in for four days he’s probably not nearly as well qualified.
[30:39] Rob: I’d also be really interested to see the worst in class and when they’re doing differently. I think that would be really educational. But this is cool to see. They say the best in class companies have that large top of funnel they don’t ask for credit card, says they have awesome content. They do a lot of inbound marketing. They obviously have a higher touch approach to sales because they doing lead scoring and they’re nurturing those trials and they’re focusing on the people who are getting value out of it or who feasibly could. And you know, as we’ve said, that does definitely take more effort than some people have at this point in their product.
[31:11] Mike: And they’re also actively reaching out to people who are essentially at risk customers. I remember Dharmesh Shah at the Business of Software conference had said flat out that they have the CHI’s, the customer happiness index and they can essentially predict when somebody is going to cancel and they were using them to identify those people and in advance of them cancelling would call them up and say hey, we just want to know what we can do to help but he basically said that you target those people and try to make sure that they have everything that they need so that they don’t cancel.
[31:43] Rob: Yup and the Totango report says proactively reach out to at risk customers to offer help. And so that’s not just an automated email follow-up sequence that means either manually emailing someone or better yet getting on the phone with them and that’s what these best in class companies are doing and I think that’s the part that people skip over when they read this report or when they hear oh, I shouldn’t ask for credit card. There is some effort here. Well worth it if you’re at scale because the numbers are very different it’s a whole other side of the business that you definitely need to focus on if you want to make it work that way.
[32:16] Mike: Yeah and I think that’s probably where a lot of the confusion maybe comes from where we tend to recommend A) ask for credit card upfront unless there’s very specific reasons that you have for not doing so and it’s because all of that active follow-up, the proactively reaching out who are at risk and nurturing those leads as they come in. When you have so many people who are coming in, it’s hard to follow-up with all of them and again you don’t necessarily know your marketing message upfront. So those things make it difficult to manage that large number of people versus asking for their credit card upfront, trying to do your best to kind of pre-qualify people and using that credit card and then following up with that smaller group of people so you get to that scale.
[32:57] I heard a podcast had Ruben Gomez on there and he said he was actively testing without a credit card now in order for him to iterate faster. It was a very interesting podcast. If I find it I’ll link it up in the show notes but it’s definitely a good listen to hear what his process was for that.
[33:15] Rob: Yeah and that’s a good example right there. You could point to Ruben and say well he’s doing it, I’m going to do it too but Ruben has a lot of experience and has a lot of info about his customers and he’s done extensive interviews, a whole back story to that that you don’t know about. So if you’re at his level and not just his level as a marketer and a founder but his level in terms of knowing your customers then you should absolutely dive into that. It takes time to get there.
[33:38] You know with all this, I will point out that I’m definitely considering testing no credit card with Drip and with HitTail as I’ve already said. It’s not always this blank recommendation. Like I said it’s not a 90-10 thing. It’s really in the middle and it depends on the situation you’re in and I think that’s why we wanted to spend a full 30-40 minutes talking about it today because the short answer doesn’t really give the full picture. I think how I feel about this subject.
[34:04] Mike: One thing that you’ve mentioned to me offline was that in some cases that you felt that some people use not asking for credit card is a crutch for overcoming bad marketing. Why don’t you talk a little bit more about that because I thought that was very insightful.
[34:16] Rob: Yeah, I mean you see some folks just getting started, asking for credit card upfront and no one’s signing up and then they basically say well, it must be because I’m asking for credit card instead of saying my marketing is not very good. My messaging isn’t very good. My website’s not doing a good job of convincing people that this is actually a valuable product or it really isn’t a valuable product and I didn’t test the market in advance. And so it’s easy to fall back on not asking for credit card to try to open up the funnel and I think that’s tempting to do.
[34:43] now on the flip side if you do open it up to get more people into that funnel and then figure out why people are getting on boarded and try to figure out who is actually getting value of it and you’re really going to dive into that, then I can see that being a decent move but the real beginner folks that I have seen try to do this weren’t going to that extent. They were just opening up the credit card hoping that more people would convert and that was it.
[35:09] Opening up to more credit card is the first step of a long series of a lot more work that you need to do to then optimize your positioning and your value prop on your website, upgrade your marketing, update the copy, there’s lot that needs to be learned and done once you do that. It’s not just this secret trick that you can use to suddenly skyrocket your growth.
[35:32] Mike: Yeah and kind of hidden underneath there is if you’re going to go that route, there’s nothing to say that you can’t figure out what your marketing message is doing wrong and then go back and start asking for credit cards again upfront afterwards. Because if your goal is to open it up just to get more people in because asking for credit card upfront is not working and you’re just trying to get people in to the sales funnel to talk to them and kind of understand what it is that their needs really are and then you tweak your marketing messages and then you revert it back.
[36:02] I mean I don’t think that there’s anything wrong with that but it has to be a deliberate choice to be doing that too. I think that as you said, people used as a crutch for bad marketing and then they still don’t fix their marketing. They just say oh, well this increased my sign up rates. So I’m going to leave it as is and not do anything.
[36:17] So hopefully that this whole discussion kind of clarified what our recommendation is and why it is that way even though it does in many cases go against what this Totango report recommends. But if you have question for us, you can call it into our voice mail number at 1-888-801-9690 or email it to us at email@example.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.