Chapter 23. SaaS: Lines in the Sand

Churn, engagement, and upselling metrics are similar across many SaaS companies. But there’s one factor that produces a huge difference across many metrics: asking for payment up front during a trial.

Totango, a provider of SaaS customer intelligence and engagement software, has data across more than 100 SaaS companies, measuring trial, conversion, and churn rates. It has found that asking for a credit card during signup means 0.5% to 2% of visitors sign up for a trial, while not asking for a credit card means 5% to 10% of visitors will enroll.

Enrollment isn’t the only goal, of course. You want users who enroll in a trial to become paying customers. Roughly 15% of trial users who did not provide a credit card will sign up for a paid subscription. On the other hand, 40–50% of trial users who did provide one will convert to a paid subscription.

Asking for a credit card up front can also mean more churn after the first payment period if users’ expectations aren’t clearly set. Up to 40% of paid users may cancel their subscriptions—they forgot that they agreed to billing after the trial expired, and when they see a charge on their credit card, they cancel. Once this initial hurdle is over, however, most users stick around each month. A 2009 Pacific Crest study found that best-in-class SaaS companies manage to get their annual churn rates below 15%.[102]

Table 23-1 shows a quick summary of the differences in metrics with and without an upfront ...

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