Understanding Basic Metrics for Subscription Monetization (2)

The tasting counter of subscriptions, Free Trial

To generate a single subscription, various user onboarding flows, nudge messages, and promotions are secretly working everywhere. From the main onboarding upon the first app launch to entry points placed at just the right spots and attractively decorated purchase screens, each functions as a major funnel. Among them, the tactic of offering a 'free trial' and 'automatic payment after n days' has already established itself as a massive funnel in its own right, and the Free Trial CVR (Free Trial Conversion Rate) and Trial to Paid CVR (Purchase Conversion Rate) are the metrics that indicate the health of these funnels. Let's cover these and other details more deeply in parts (2) and (3).

Previous post : Understanding Basic Metrics for Subscription Monetization (1) What is revenue in subscriptions? MRR, Net MRR Movement, ARPPU

Opening a consumer's wallet is never an easy task. Furthermore, a 'subscription' is not a one-time purchase, but a product that incurs recurring payments over a specific period, making it even harder. From the consumer's perspective, they need stronger confidence in the product's utility.

Therefore, it's easier to understand the user funnel prior to the actual 'Pay' event as a series of processes that instill this confidence. Although it varies slightly depending on the app service, the main user funnels ahead of payment generally look like this.

Here, the 'free trial' is much like the tasting counter in the food section of a large supermarket like E-mart. The value of food (taste, nutritional content, etc.) is hard to convey fully through text and images. To draw out the 'confidence' needed for a purchase, there is nothing like the act of tasting it firsthand. If the number of consumers who only taste and don't buy increases, it certainly costs money, but because the revenue impact from consumers who do end up buying is much larger, big supermarkets always run these tasting counters.

Furthermore, since a subscription product is not a tangible good but an intangible service, offering a 'free trial' incurs no extra marginal cost. (Maybe a little bit of server cost..?) Even if they try the free trial and don't end up purchasing, there's nothing really lost. Rather, due to the nature of subscription products which require instilling stronger confidence to lead to a purchase, you must provide a free trial period and captivate the consumer within that timeframe.

Therefore, at the very frontlines of the subscription funnel, widening this pool of free trial users as much as possible is truly important, and the related key metric is called the Free Trial Conversion Rate (hereafter Trial CVR).

To manage metrics conservatively at Alarmy, we calculate the Trial CVR using the number of Free Trial Events generated against Any Active Event, but this standard might differ for each app service. You could measure it by the number of Free Trial Events generated against the number of times a free trial was offered, or you could measure it based on the number of new users acquired.

Whatever the standard may be, you just need to increase the percentage of users acquired by your app who take a free trial. If you do that, you're already halfway to success.

Just because it's 'free' doesn't mean a high percentage of users will convert. From the users' perspective, they must be somewhat convinced about the payment that will follow the trial before they even begin it. Even though it's 'free', they aren't just trying it because it costs nothing; they are trying it to build a basis for deciding whether or not to pay. The emphasis in a free trial is actually on the 'trial' part, so let's look into the basic considerations for increasing the determination to try it out—that is, for increasing the Trial CVR.

0. The essence of the product

I won't bother explaining in this post that the baseline quality of the subscription service itself is important. Maintaining and improving the essence of the product is a core variable of subscription services that must be continually pursued over the mid-to-long term. If you subscribe to YouTube but videos don't play well, or if you subscribe to Netflix but there's a lack of watchable content, there's absolutely no chance it will convert to a subscription even if you start a free trial. Regarding maintaining, repairing, improving the product's essence, or developing new features, I will just wrap it up by saying, 'you need to pay attention to the voice of the user.' You can find highly impactful seeds regarding what inconveniences exist in which features, or what additional features are needed, from the voice of the users (store reviews, in-app feedback channels, etc.).

1. What message will you deliver to the user?

Under the premise that there is a minimum product quality worth subscribing to, the first variable is how you compose the "message" urging them to subscribe. In a way, it could be seen as an in-app promotional message, and as with all advertisements, it's important to craft the message as naturally and non-ad-like as possible. The basic approaches and common methodologies are as follows.

A. Emphasizing features

This is a method of highlighting the usable features one gets by subscribing. You can simply compete by highlighting the 'quantity of features', or you might emphasize detailed explanations of the main core features. Since it highlights immediately usable features, this approach is intuitive and concrete from the user's perspective. It's because what I will get right after the free trial is perfectly clear.

Additionally, providing usage guides for those features in the form of images or animations allows the user to concretely picture themselves utilizing them in their mind.

In Alarmy's case, we go a step further and even offer a 'preview'. Just as it's easier to decide by actually trying on clothes at a clothing store rather than just holding them up to your body, we let them try it out once. Seeing the massive difference in free trial conversion rates between users who have 'previewed' and those who haven't, you can tell that while it may not be a causal relationship, there is undeniably a strong correlation.

Content-based subscription products sometimes release a few pieces of content for free. Especially for content services, where the quality of the content is vital, providing a preview like this plays an even more crucial role in determining whether or not they'll take the free 'trial'.

B. Emphasizing value

This is a method of emphasizing the ultimate 'value' the user can enjoy through the 'features' they get by subscribing. This is essentially telling the user the planning intent (Why) behind those product specs. Unlike 'features', 'value' is a hard thing for users to grasp immediately, and since it is a subjective area, having the creator appeal to it directly isn't very helpful. Thus, to represent that value, it's common to borrow the power of numbers, the voice of users who have tried it, or the voice of highly persuasive figures (=Social Proof).

Since numbers are a tool that quantifies and displays the value of a subscription product, they are great to utilize in various ways. The number of users utilizing the subscription product, daily content views, or streaming counts—and in Alarmy's case, the number of dismissed alarms—are figures representing usability that boost the subscription product's credibility. Also, you can try highlighting the 'efficacy and effects' gained from using the service by quantifying them. It's good to appeal with them standalone, and comparing or contrasting them with competitors' services or with cases where the service isn't used can also be effective.

Social Proof is literally proving it socially, which means showing people's 'testimonials'. Their voices might contain how satisfied they were, or how their lives have changed. Very simply, it can convey the fact that they recommend this subscription product. If the attributes of the service's target user base are diverse, it can be effective to gather various users' voices tailored to those different attributes. Of course, depending on the service, having the testimonials of a few highly influential figures might make a bigger impact than plastering it with multiple everyday user voices.

2. When and to which users will you deliver the above message?

Once the "message" is set, the second variable is at what timing (Trigger) and to which user group (Segment) you will expose it. As they say, you should look before you leap; if you just thrust it out anywhere, you'll only end up with user churn. Basically, if you think about 'the situation where trial intent will be highest', the answer regarding the timing and target group will present itself.

1) Onboarding (= The user guidance stage conducted upon the first launch after installing the app)

What are users like at the time of onboarding for the overall app, which happens on the first launch right after installation? They are, at the very least, harboring curiosity about our app. Putting subscriptions aside, this is also the time when they form a judgment on whether or not they will keep using this app (if it's an app that can be used with just free features). Therefore, the onboarding stage is not the situation where free trial intent is at its absolute highest, but it is an extremely good stage to build up free trial intent. In fact, at Alarmy, we increased the free trial conversion rate by 40% through an experiment varying the onboarding structure.
(Related post : Changing Users' Stereotypes at First Impression)

The target user group at the time of onboarding is all new users, and since there is zero data built up from them, you might think sharp messaging based on user attributes is difficult, but you can appeal with customized messages through a few simple questions. Even excluding the messaging variables within onboarding (how you show features and value), the free trial conversion rate can vary wildly depending on how you arrange the overall onboarding structure and the UI of each screen.

If the total number of screens gets too high, the message you deliver becomes richer, but the user churn rate will increase in return. If you make it too easy to skip through screens, the churn rate will decrease, but the immersion in the onboarding content will drop. Also, which point in the app you land the user on after finishing onboarding can be a major variable, and whether to send them directly to the purchase screen proposing a free trial at that landing point is also a worthwhile variable experiment to run.

One way or another, since onboarding is the very first starting point of app usage, keep in mind that variables here affect all variables in subsequent funnels, ultimately having a massive impact on the Trial CVR.

2) Entry Points

Actually, the term entry point means the 'point of entry to the purchase screen'. This could mean some fixed position within the app like 'Use Subscription' or 'Learn About Subscription', or it could mean a banner proposing, "Try a free trial."

Entry points come in all shapes and sizes depending on what features the subscription product covers, and even within the same subscription product, entry points can differ based on the situations users are in. What's important here is that you must find the situation where trial intent is highest to form an entry point, and appeal with the message decided above within the entry point to further elevate that trial intent at that spot.

It's common to weave the above message into the points where the user experiences inconvenience due to 'not having a subscription'. At this time, the appealed message can differ depending on what kind of inconvenience they're experiencing. If it's a point where they're inconvenienced by too many ads, you could emphasize a 'seamless ad-free experience', and if it's a point inconvenienced by restricted info/features, you could highlight the types of available info/features, or emphasize their value. In addition, if you happen to have data that can identify user segments, you should utilize the fact that the popularity(?) of entry points differs by segment. Considering the segment, you could try adding new entry points or varying the message appeal points within existing entry points.

3) Purchase Screen

It is the final gateway to starting a free trial. Just as the store listing screen is important when inducing new user app installs, the purchase screen is important when inducing subscriptions. Because no matter which entry point they pass through, the purchase screen is the screen they absolutely must go through before starting a free trial. Depending on what the journey up to this point has been like, the appeal at the final gateway could be kept concise, or it might need to pack in as much content as possible. Also, the purchase screen might be structured differently depending on which entry point they entered from. Try packing in the message content decided above to the fullest to instill that final bit of confidence in hesitating users.

1) What message will you deliver to the user?
- Emphasizing features or emphasizing value

2) When and to which users will you deliver the above message?
- Onboarding, entry points, purchase screen

On top of this, there are a few 'dark nudges' that exist as frequently used tactics to increase Trial CVR. A 'dark nudge' refers to a technique that uses expressions open to multiple interpretations or subtly confuses the information value, causing users to inadvertently or prematurely start a free trial while still lacking confidence. Representative examples include 'giving the impression that they can't move to the next screen unless they take the free trial', or 'showing the annual subscription price converted to a monthly basis, giving the illusion that it's paid in monthly installments'.

In this post, we looked into the contents corresponding to the frontmost funnel among the basic metrics for subscription monetization. We also comprehensively explored the importance of increasing free trial users and the variables that affect the related metric, Trial CVR, along with a few examples. I plan to unpack the more interesting ones among the Trial CVR-related experiments actually conducted on the Alarmy product in a separate post later.

Lastly, I'd like to emphasize that in cases where it's not a subscription-only service (like Netflix), you must always look at the changes in user Retention alongside any series of product spec work aimed at increasing Trial. To increase Trial, extreme measures like plastering free trial proposal messages in every nook and cranny and constantly popping them up to users (a sort of 'more is better' strategy) might drop in efficiency but could be effective at raising the total number of free trial conversions. Or, slapping on the 'dark nudges' briefly mentioned above to draw out free trials without the user even realizing it could have a big impact. However, prior to acquiring subscribers, acquiring active users who continuously use our app is the proper sequence. Losing active users means you are losing potential subscribers. That is exactly why you must always look at Retention changes when running experiments on various variables. There are actually a few experiments we rolled back because Retention dropped even though the Trial CVR rose significantly, and I'll unpack those experiments separately later as well.

The 'Basic Subscription Metrics' series, which will be serialized over a total of four parts, is structured as follows.

1) Explains MRR, Net MRR Movement, and ARPPU, which are the core metrics for app subscription monetization. (Previous post)
2) Explains Free Trial as a metric affecting the core metrics above. (This post)
3) Explains Trial to Paid as a metric affecting the core metrics above. (Next post)
4) Explains Churn as a metric affecting the core metrics above.

mail : stephan@delightroom.com
instagram : @seosinghan