Growth January 9, 2020

Reduce churn by offering a discount instead of a free trial

Growth Bites @growthbites

Reduce churn by offering 50% off the first month instead of a free trial.

Joe Howard of WP Buffs ($69,000/mo) brought his churn rate from 65% down to single digits when he switched from a 30-day free trial to 50% off the first month. His customer acquisition stayed the same but the customers he attracted were much higher quality. The psychology of sunk cost might also encourage some users to stick around for longer.

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  1. 3

    I'm curious how his customer acquisition stayed the same. Does that mean there were customers who didn't want to join when it was free for a month but did want to join when it was 50% off for a month?

    I would expect a situation where customer acquisition declined, but since he was now charging for the 1st month, revenue stayed the same.

    1. 1

      That's a really great question. It seems to me that having a discount vs a free trial actually attracted people who may have otherwise been on the fence. That said, there are always so many variables that it would be difficult for anyone to see for certain. Here's the relevant part of his original quote if it's helpful:

      "The biggest mistake I made as part of our pricing was to go too far into SAAS-land; initially, we were offering a 30-day free trial of our maintenance plans. This turned out to be a bad idea because it attracted the kinds of people who would sign up for our free trial, ask for website edits, and then leave on day 29. Not good. Our churn rate was something like 65%. So I switched things up. My wife actually first suggested the idea that we give people a 50% discount for the first month instead of a free trial. I should listen to my wife more often. We made the change, saw no drop in customer acquisition, and started attracting a much higher quality customer. Our churn rate dropped to single digits!"

      1. 1

        Totally agree about there being too many variables to really tell from only that quote.

        It seems to me that having a discount vs a free trial actually attracted people who may have otherwise been on the fence.

        This is the part I'm really curious about. I've never come across anyone with that experience before.

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