In a previous post, we analyzed conversion data from 9 SaaS companies and concluded that optimizing conversions based on behavior is more effective than using an X-day trial for every customer.
We call this approach “behavior-based conversions”. In this 3-part series I’ll explain the strategy and show you how to implement it.
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The pros & cons of your free 30-day trial
Easy to setup and manage
X-day free trials are effective because they reduce the cost of sales and create an artificial purchasing incentive. Customers try your products risk-free using their own data and you have the opportunity to delight them.
The trial deadline creates an artificial “buy now” incentive that drives conversions.
X-day trials are easy to create and manage with payment APIs like Stripe and Recurly. Just start the trial when customers sign up and try to get them to pay before it ends.
But not optimal if you treat every customer the same
X-day trials are not optimal because customers will convert at different rates. An expiring trial isn’t the best purchasing incentive for all of them. Some would pay right away, some need a few days, and some take 6 months.
Looking for the “optimal” trial length is a fool’s errand – there isn’t anything magical about a 14-day, 30-day, π-day, or 65.5890987899875476-day trial.
Your customers are all different.
Behavior-based conversions accelerate sales by treating customers differently
A customer may need 2 months of nurturing before buying a product – if so, giving him only 14 days risks losing a sale. Contrarily, if a customer is ready to buy at signup we lose 30 days of revenue by asking him to pay at the end of a trial.
Behavior-based conversions get
… the right purchasing incentives to
…… the right customers at
……… the right time.
Creating your behavior-based conversion strategy
Don’t begin timed trials until a customer is able to make a buying decision
Timed trials are great for creating artificial purchasing urgency – otherwise customers don’t have an incentive to “buy now”. But they only work if customers understand the value they get from your product.
Every customer needs to take a few early, critical actions before she can even begin using the product – signing up, connecting her Gmail account, etc. Before taking these actions she isn’t in a position to buy because she doesn’t understand the value your product would create for her.
These are Activation events – the critical steps that must happen before your customer begins to see the value of your product. Customers who don’t complete Activation events rarely buy – more importantly the deadline of your timed-trial won’t motivate them to complete Activation events. (this is easily provable as you’ll soon see).
Nurture your customers through marketing automation and sales until they complete Activation events – THEN start your timed trials.
Activation events are “NECESSARY but NOT SUFFICIENT” – customers who don’t complete them don’t buy but completing them alone doesn’t creating enough value for customers.
During the trial focus on creating initial value
Your product performs a few key value-added activities for customers. These are usually the core features of your product, those most of your paying customers use. You can identify key events in the customer lifecycle that indicate a customer is getting basic value from your product – these are Engagement events, or what Lincoln Murphy calls First Value Delivered (FVD).
Engagement events are NOT “delight” events – those associated with the few customers who are getting the most possible value from your product.
Try to get customers to complete Engagement events during your timed trial and use the trial deadline to create an artificial purchasing incentive.
Continue trying to get customers to complete Engagement events past the trial deadline. Offer trial extensions, workshops, sales calls, etc. for up to a year. Don’t simply toss these customers back into the same “nurture” bucket as those who haven’t completed Activation events.
Engagement events are “NECESSARY and SUFFICIENT” – customers who don’t complete them won’t buy but those who do are getting value from your product.
Accelerate conversions for delighted customers
Some customers instantly understand your product and quickly get tremendous value from it. These customers are ready to buy now and you can accelerate your SaaS sales by trying to get them to convert before a trial ends or upsell them.
You can identify these customers by those who complete Acceleration events – activities associated with your most delighted customers.
Offer additional purchasing incentives to customers who complete Acceleration events to get them to convert early.
Examples of purchasing incentives are coupons, annual contracts, or special offers. Or simply tell them to enter a credit card now so they don’t lose service.
Acceleration events are “SUFFICIENT but NOT NECESSARY” – customers who complete them are getting tremendous value but those who don’t might buy anyway.
So … are any real SaaS companies doing this?
Absolutely. In fact, you’re probably already doing some behavior-based conversions by extending trials or using your inside sales teams to close customers faster.
You will find every one of these tactics used by SaaS companies – we just put them together into a unified strategy we call behavior-based conversions.
Summary: Activation, Engagement, and Acceleration events
Here is a summary of the 3 events and how to use them.
How to find your events
You’re now wondering, “how do I identify Activation, Engagement, and Acceleration events?”
Your sales funnel diagram won’t help – it only shows what you think your customers should do, not what they actually are doing.
In Part 2 of this post I’ll show you how to identify Activation, Engagement, and Acceleration events by looking at your data.
You don’t need to be a data scientist. You won’t have to learn what “entropy” is and how it differs from a canopy.
You just need Google Sheets, 3rd grade math, and an open mind.
Part 2 of this post
Now the real fun begins – read part 2 of this series.
Photo credit: Mark Freeth