Pricing Strategy: 3 Trial Structures to Increase Your Close Rate

» Posted by on Aug 3, 2012 in Business Strategy, Marketing, Pricing, Sales | 0 comments

Pricing Strategy:  3 Trial Structures to Increase Your Close Rate

Do you find that your free trials do not lead to closed sales?  Are the trial instances going unused, even though the prospect went through the registration process?  To increase your close rate, maybe you need to re-think your trial pricing strategy.  A good trial process matches the complexity of the product offering with the appropriate amount of training, support, and prospect commitment.

Here we describe three different potential trial structures.  Choosing the appropriate pricing strategy will ensure that you maximize your conversion rate of prospects to paying customers.

Three Trial Structures

  1. The traditional Free Trial.  This is the structure that most people think of when they decide to offer a trial – it’s the regular product offering, offered for free for a limited time period.  This structure requires a minimal commitment from the prospect, usually only a registration of contact information.  The company may or may not offer support, and conversion after purchase is usually a simple process.
  2. The Sandbox.  This differs from a free trial, in that it does not offer full product functionality.  It gives the prospect an example of the product seeded with sample data, to allow prospects the opportunity to “test drive” the product without having to enter their own data in order to test functionality.  Again, the company may or may not offer support.  Conversion after purchase involves a full, clean installation of new product.
  3. The Delayed Billing Trial.  This is not a true trial, but a strategy of shared risk: the company must deliver on promises or the customer can change their mind.  The prospect goes through the full customer conversion and licensing process if there is one prior to the start of the trial.  Full product is delivered, with support and training; however, the client has a set period of time to change their mind and return the product before they are required to pay.

Choosing the Appropriate Structure for your Product

Each of these trial structures has advantages and disadvantages; the trick is to choose the appropriate structure for your product.  Read on for a description of the pros and cons to each.

1.  Free Trial

Pros: The free trial is very easy for the company to implement, as it does not require manufacture or programming of a parallel product, nor does it require special staffing.  The registration and delivery processes of the trial can be fully automated, as can the conversion to customer process at the end of the trial.  It’s inexpensive and quick to market.

Cons: Software providers or companies providing a more complex product often find that the free trial does not offer the conversion rate that they’re hoping for; if a trial does not require any customer commitment up front, prospects often do not put in the effort to learn or use the product.

The Right Choice: The free trial is perfect for a simple consumer or single license product which does not require support.  Health and beauty products, knowledge or reference products, simple software or gaming products, food products, and other manufactured goods are potential fits for a free trial.  A good rule of thumb: if you’re handling your full customer load with one support person and an email address, an automated free trial process could be a good fit.

2.  Sandbox

Pros: The sandbox is easy for the customer to use, so it can offer a better introduction to a more complex product than a traditional trial.  Seeded with sample data or material, the sandbox allows a prospect to experience the product without having to run parallel systems.

Cons: A sandbox can be expensive and time consuming to implement; it requires programming or manufacture investment from the company.  Depending on the product, it may or may not be appropriate to automate the process of delivery and termination.  Commitment from the prospect has to be generated in the registration process (i.e., requiring a credit card or payment form to weed out the spectators) because using the sandbox doesn’t require significant effort.

The Right Choice: The sandbox is very well suited for a software or technology program that manages any kind of data.  It allows the prospect to experience the functionality of the product under ideal conditions, and takes the “user error” factor out of the equation, ensuring a smooth experience and limiting the amount of support required during the trial period.  It works for single or multiple users.  If your company’s usual new client process includes an initial period of training or intensive support, a sandbox trial could be the right solution.

3.  Delayed Billing

Pros: A delayed billing trial has a high conversion rate, as the selling process has occurred up front.  It is easy and inexpensive to implement, as it is an accounting and billing process rather than a change in product or product delivery.

Cons:  A word of caution about delayed billing trials: your sales process needs to support thorough qualification of prospects.  The cost of support and delivery is all on your side; if you don’t make sure your customer is committed to the product you may find it was a wasted effort.  Especially if your product will require significant customization or data conversion, think twice before investing in that process without payment.

The Right Choice: A delayed billing trial is a good choice when you are selling a large or complex product for multiple users that requires a change in business process, has a price point requiring a separate budget line, or works on a recurring revenue model.  Also a good choice when your customers require a group decision process, such as a public entity, educational facilities, or non-profits. Delayed billing is a great way to overcome the last objections when your customer blinks at signing a contract.

A good trial process can generate leads, shorten your sales process, and lower your company’s client acquisition costs.  Choose the appropriate structure for your product and you’ll increase your conversion rate and improve your bottom line.

Stay tuned for another article on offering the appropriate level of support during trials.

Miriam McNabb is a principal of Spalding Barker Strategies, sales and interactive marketing consultants.

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