Do free trials work – and do their lengths have an impact on conversion rates? This and several other questions have been answered by Recurly, which has released some valuable benchmarks from an analysis of 1,200 subscription commerce sites over a 15-month period.
The following breaks out some of the highlights of the analysis.
Overall, the study reveals that an impressive 6 in 10 free trials convert to paid subscriptions. B2B businesses have more success with free trials than their B2C counterparts: Recurly found that the median rate for conversions for B2B businesses was 66%, indicating that on average, 2 in 3 free trials convert for B2B businesses. These are a powerful tool for B2B businesses, as separate research indicates that buyers themselves consider free trials to be among their most helpful and trustworthy information sources.
While B2C conversion rates were a little further behind, the median rate still crossed the majority, at 57%.
On an industry basis, Recurly points to Consumer Services (66.8%) and SaaS (62.4%) businesses as having above-average conversion rates.
Trial Lengths And Their Impact
For monthly plans, B2B (14 days) and B2C (15 days) tend to offer similar median trial lengths, per the report. B2C businesses on average offer much longer trial periods (85 days) than B2B businesses (14 days) for annual plans, though.
There’s also quite some variety in trial length among industries. For monthly plans, Media & Entertainment, Consumer Goods and Consumer Services businesses offer the longest trials (median of 30 days), while Education businesses offer the shortest (10 days). The median SaaS company offers a 2-week (14-day) trial period.
Interestingly, it’s not the length of the trial period that impacts conversion rates. Rather, it’s the plan itself that appears to influence the prospect’s choice to commit.
For example, B2B businesses’ trial conversion rates averaged 68.8% for monthly plans, almost 15% higher than the 59.9% conversion rate for annual plans.
Likewise, B2C businesses’ trial conversion rates were about 10% higher for monthly plans (59.8%) than for annual ones (54.4%). This makes some amount of logical sense: prospects are more likely to sign up for a shorter than a longer commitment.
While that might suggest that customers who initially signed up for a free trial aren’t as valuable customers in the long run, the analysis indicates that some industries are more successful in keeping their customers for the long haul.
Recurly measured the subscription lifetime of customers who started with a trial versus those who did not to arrive at a “Trial Lifetime Ratio”. While it did not reveal the actual ratio (did trial subscribers have a longer lifetime value?), it did mention that companies in the Consumer Services, Business Services and Media & Entertainment vertical had a higher Trial Lifetime Ratio than the median average. B2C businesses in general also were more successful in this ratio than B2B businesses.
Length of Subscription Period
In an interesting revelation, Recurly’s research indicates that customers who signed up with a coupon discount applied to their first billing cycle averaged a higher subscription lifetime than those who did not.
Overall, customers who began their subscription with a coupon had a subscription duration that was 13% higher than those who did not. The difference was driven by B2B businesses: customers starting things off with a coupon averaged a 22% longer duration than those who didn’t.
There was virtually no difference for B2C businesses, where those who began with a coupon averaged a 1% longer duration than those who didn’t.
Coupons Particularly Effective for SaaS Businesses
Recurly called this analysis the “Coupon Lifetime Ratio” – measuring the subscription duration of those who signed up with a coupon applied against those who didn’t.
The ratio was highest for SaaS businesses (1.29) – where coupon-enabled customers ended up staying for 29% longer than those who didn’t use a coupon when they signed up.
The Coupon Lifetime Ratio was also particularly high for Consumer Services (1.21) and Business Services (1.17) customers. However, Consumer Goods (0.89) and Box of the Month (0.88) businesses had less success holding onto customers who signed up with a coupon.
Discount Rates Make A Difference
One reason why Consumer Goods and Box of the Month businesses were less successful? They employed a lower coupon rate – each of 25%.
In fact, Recurly found a correlation between the size of the discount and the customer’s subscription duration. The requisite “correlation does not equal causation” disclaimer needs to be here, of course!
Nonetheless, B2B businesses (with their Coupon Lifetime Ratio of 1.22) offered a 42% average discount rate, compared to a 30% average for B2C businesses (with their ratio of 1.01).
Recurly recommends that businesses “measure the potential payback on the coupon to estimate ROI,” measuring the costs associated with the coupon against the value of the acquisitions.
The full analysis can be found here.
About the Data: Recurly describes its methodology in part as follows:
“We examined a sample of over 1,200 subscription sites which used the Recurly platform. The study encompassed a period of 15 months, from January 2016 to March 2017. All data was aggregated and anonymized. Our study uses median, 25th, and 75th percentile values which eliminate outliers and provide a more accurate representation of the data.”