Personally, I think that any business model that relies on your customers forgetting to cancel your service is fundamentally flawed and consumer-unfriendly. And let's face it, that's what you're doing when you use Negative Option billing, even if you provide all the disclosure in the world up front. If I love a service, I'll sign up for it after the free trial.
I'm pretty much OK with saying "Give us your credit card number; we'll charge you after your free trial" and then saying "Your free trial expires three days from now." People are easy to nudge into desired behaviors: they find it easier to go through with a decision they have already made than to make what seems like a separate decision at the 30 day point. I know of no moral stricture which says I should choose the sucky-to-the-business model just because it is sucky-to-the-business.
any business model that relies on your customers forgetting to cancel your service is fundamentally flawed and consumer-unfriendly
Absolutely true, and I agree 100%
that's what you're doing when you use Negative Option billing, even if you provide all the disclosure in the world up front
Here's where you go off the rails a bit. It's entirely possible that companies have tested and they know that requiring users to take two explicit actions (free-trial signup & entering payment details) instead of just getting it all done at once will result in a lower conversion rate. That's just human nature, and I'm not sure that acknowledging it is "consumer unfriendly".
The main problem I have with your logic is that it makes the very concept of subscription services "consumer unfriendly". Why rebill customers every month for anything? They should really have to come back to your site and take an explicit option that they want to keep paying for and using the service in question.
37signals offers a 30-day free trial for paid plans, but clearly states: "If you cancel a paying plan within 30 days of signing up you won't be charged a thing. We'll send you an email 5 days before your first charge to remind you."
In addition they also offer FREE plans for their services - which require no CC at sign-up and allow you to upgrade at any time.
Edit: Any comments on the downvotes would be helpful as I was just trying to supply more detailed information on the actual process being discussed.
That they do this is consumer unfriendly. As far as the evil of the overall organization, I'm not really qualified to say. I've never done business with them.
This article reminded me of RescueTime. I think RescueTime might be OK, but not for me. I tried clicking the unsubscribe link in the emails, which did indeed unsubscribe me instantly. However I did not get to opt out of paying them another $75 at some point in the future that I can't identify.
Ah, it took some digging, but I found the account link. This could seem unfair, since the link was actually right in the middle of the page. But it was small, hard to see, and it didn't uninstall the RescueTime bot from my computer.
Now I have an OS X process running for a service that charged me one year in advance. And I have to go find this stupid thing. Just fuck off and die.
The problem is that "1 month free trial" != "30 day money back guarantee" and many companies conflate the two.
If there is a 1 month free trial, then you shouldn't be billing a credit card upon sign up (whether you take it up front or not is a separate issue). Billing the customer and then offering to refund within the month if they don't like the service is not a free trial.
Offering a 30 day money back guarantee seems the most sensible for most SaaS plays IMHO. If someone likes your service, they should be happy to pay even for the first month. If they didn't like it, then they get their money back. Seems reasonable enough.
I think one reason companies charge you the money immediately (for the "1 month trial") is to test out the credit card. I know some companies that charge a cent (or something) then refunds that to verify that the credit card is valid.
Well, that is a crap way of doing things because in credit-card world you can 'hold a charge' for $x rather than actually execute the charge transaction. Holding a charge checks the credit card can pay the dollar amount and I believe also reduces that against your spending limit - but it doesn't actually put the charge on your bill. It only lasts a short period of time and so if you don't complete the transaction the charge is dropped altogether.
It comes down to whether your credit card processor exposes to you such functionality and whether you are smart enough to know to use it.
Does anybody have good data on conversion rates for credit card info at the beginning of the free trial or end of the free trial? That is, let's say you e-mail the user 5 days before the 30 day trial is over in both scenarios, but if they entered the credit card info beforehand, then to sign up the user has to do nothing, but if you require it at the end of the trial, they now have to enter credit card information to continue. So basically you have to add the credit card burden at some point; do you get a higher conversion if you increase the barrier for the trial (by asking for cc info up front) or the barrier for continuing (by asking for it at the end)? I'd guess that asking up front has the higher conversion, but I'd want to see the data.
I hate when services I really want (many hacker news types of businesses for instance) do not let me give a Credit Card up front. I mean sure: Credit me a free month of service. But damn, don't make me give you one 30 days later if I want to provide one now.
Sounds like they're mixing up Free Trial with Sign Up Now. Free Trial: I want to try this and I'll pay if I like it. Sign Up Now: I already like it and want to start immediately.
due to this discussion, i spent a few hours this evening changing the signup process and backend billing scripts for corduroy (http://corduroysite.com/) to no longer require a credit card to start a free trial (but still allow one to be entered if desired, since someone here mentioned they prefer to do that).
hopefully it won't result in an influx of new accounts that use it once and never return.
I would love an update on this in a month or three to see what the results are of this change.
* Do signups increase for the free trial.
* How well do the free trials convert to paid.
* How many people put in their CC details up front.
