Which Converts More Sales, a free trial or a paid trail - excerpt from Claude Hopkins

Aaron's picture

Which initial offer will give you a better Return on Investment (ROI) for your traffic and advertising / sales efforts?

  • Some say a free trial
  • others say a low limited trial (perhaps $1)
  • while still others say full or discounted price with a 30 - 60 - 90 day money back guarantee. 

So which works best for your product or service?

Do you know?

Have you created a real life split or multivariate test to prove your methods to your investors / partners / yourself?

According to multiple studies done by the advertising and copywriting pioneer, Claude Hopkins (My Life in Advertising & Scientific Advertising), it has almost always cost the company more in converts and total profit by creating a product trial with a monetary barrier.

"A coupon good for half the price is small inducement.  A coupon which requires ten cents for a sample appeals to a small percentage.  Remember that you are the seller.  You are trying to win customers.  Then make a trial easy to the people whom you interest.  Don't ask them to pay for your efforts to sell them."  (My Life in Advertising - Claude Hopkins)

But does that mean this will always be true for you and your products?

The only way to ever prove it (and you owe it to your business) is to. . . 

Test everything and keep what works!

Many times we have worked with a company who uses the shotgun approach to marketing and advertising.

 "Just throw everything you have at a campaign and it will bring in enough business to keep us going.
  Besides, it's always worked in the past!"

We have worked with countless people and companies who have barriers to understanding this most basic ROI practice.  Countless millions of dollars are wasted on marketing and advertising every year from companies that do not Analyze, Implement, and Makeover their marketing and sales based off of scientific.

Do you have these barriers in your company?

Some of the barriers to testing we have run across include (but are not limited to)

  • Person of influence on the team who does not understand or resists testing and change
  • Person of influence on the team who has been the guru (pride is incredibly expensive)
  • Belief that there is not enough time to test and improve
  • Belief that there are insufficient funds to test and improve
  • Lack of understanding of how inexpensive tests can be
  • Faulty belief that the effort or investment will not be warranted by the ROI
  • Company or individual opinion is treasured more than the profit margin
  • and the list goes on and on

The problem (at least when we have worked with clients) almost always stems from two forms of bias:

  • Bias of ignorance (they just don't know or understand how powerful testing can be)
  • Bias of pride (someone is not willing to admit that change could improve how they have always done things)

So how do you / we overcome these biases?

The fact is, we all have pride and ignorance to overcome, and when we forget that, we will either stop growing or our company will decline and suffer unnecessary loss (but no one will really know why- it will all be speculation because nothing was tested and approved).

Perhaps one of the best ways to overcome this is to give your trial a trial.

If your product or service is currently offered at a free trial, try a split test or multivariate test where the trial is offered with 3 different options (but only one is presented per prospect).  

Then track a few simple things
(it's easier than you might think and it will almost always improve your business and understanding of your prospects and advertising):

  • Track which trial converted the most initial trial members?
  • Track which trial returned the best on the investment?

Both are very different questions and both should be tracked - Why?

Because an increase in trial members does not necessarily mean a higher ROI.

Here's a hypothetical example (but similar to real trials we have tested) with 3 options and some simple tests that you can try following the example.

We advertised a membership to training courses that cost $47 per month.

We tested 3 options:

  • No trail (control group A)- just initial cost of $47 to get started (no contracts) with a money-back guarantee
  • Free trial (experimental group B) - pay begins after first 30 days
  • $1 trial (experimental group C) - full price starts the second month

Here were the results (numbers are estimated):

  • Group A:  1000 offers were tested - 30 members bought - 27 members remain after 1 month
  • Group B:  1000 offers were tested - 280 members initiated - 120 members remain after 1 month
  • Group C:  1000 offers were tested - 120 members initiated - 100 members remained after 1 month

Out of 3000 tested offers / exposures - 240 new members remained.

Assuming that the costs for acquiring each Group was fixed (the same amount),

  • which group gave the best ROI and
  • which group would become your new control group?
  • which group would give the best long-term ROI vs. short term ROI?

*** NOTE *** Because the product was intellectual / informational / digital, each trial investment was the same for our company.  

The ROI would be quite different if the company had to invest differently for each trial (explanation below).

Here are the results:

Group A:  Total acquisition cost (cost per sale):  1000 offers at $.50 per offer (CPA - cost per action) = $500

Membership Revenues first month: $1410   -Revenues second month $1269  

Total Simple Profit:  = $2679 - $500 = $2179

Profit return per advertising dollar (simple) =  $2179 / $500 = $4.36

Group B:  Total acquisition cost (cost per sale):  1000 offers at $.50 per offer (CPA - cost per action) = $500

Membership Revenues first month:  $0.00  -Revenues second month $5640

Total Simple Profit:  =  $5640 - $500 = $ 5140

Profit return per advertising dollar  (simple) = $5140 / $500 = $10.28

Group C:  Total acquisition cost (cost per sale):  1000 offers at $.50 per offer (CPA - cost per action) = $500

Membership Revenues first month:  $120   -Revenues second month $4700

Total Simple Profit:  =  $4820 - $500 = $4320

 

Profit return per advertising dollar  (simple) = $4320/ $500 = $8.64

 

In most cases, the numbers aren't this clean / simple, but the principles remain:

  • The free trial brought the most trial users, but experienced the largest percent loss after 1 month
  • The $1 trial brought fewer initiates, but experienced the highest percent retention
  • The full paid trial brought the fewest initiates, but retained the highest percent of members and lowest total revenues.
  • If digital products were not used in this trial, final results might choose a different winner
  • Small companies that cannot afford free trials might be forced to stick with Trial A until margins allow for tests
  • Many other conclusion could be drawn from these 3 trials and would vary greatly between companies, products, services and means of advertising and acquisition of new clients / customers.

So where does a company go from here?

First, do an analysis to determine which trials are actually possible for your company or product / service line:

Then implement some very simple tracking and testing methods:

  • Use different phone numbers for each of the 3 lines of advertising (but alter nothing else)
  • Use different landing pages online for each of the 3 lines (but alter nothing else)
  • Use different coupons with tracking numbers that must be redeemed for each of the 3 lines (but alter nothing else)
  • Use 3 different business cards or brochures, with 3 different phone lines, coupons, or landing pages to track
  • Use another channel of media (fliers, magazine ads, newspaper ads, etc.) but only test 1 variable in 3 versions as above.

What can you do now to begin improving the returns for your marketing, advertising and web efforts?

 

 

 

 

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