Understanding the Basic Metrics of Subscription Monetization (3)

Time to Get Them to Open Their Wallets: T2P (Trial to Paid)

Previous post 1: Understanding the Basic Metrics of Subscription Monetization (1) What is Revenue in Subscriptions?
Previous post 2: Understanding the Basic Metrics of Subscription Monetization (2) The Free Sample Section, Free Trial

Now, there's only one hurdle left to acquiring a new subscription. It's the gateway called "payment," which occurs right at the end of the user's free trial period. The conversion rate at this stage is called Paid Conversion, and it's managed as the Trial to Paid (T2P) CVR, representing the conversion from a free trial to a paid subscription.

In the previous post, we discussed the importance of Free Trials and what messages to nudge users with, and when, to induce them into trying it. T2P is harder because you actually have to get users to open their wallets. Additionally, since the core of the product (how attractively it solves the user's needs) has a much more direct impact from this point on, many services just throw their hands up and watch. However, apart from improving the product's core and developing attractive new features, there are basic methodologies to keep T2P high. No matter how much you increase free trials, if they don't lead to payments, the revenue is zero. Since those hard-won free trial pearls are only valuable when strung together into payments, Product Managers need to adopt available methodologies to suit their product's characteristics, run experiments, and manage the metrics.

1. Let them experience the "Aha Moment" during the free trial

First of all, because paid features are often numerous and scattered across multiple screens, it's quite common for users to fail to use them properly within the trial period. Even if they somehow find them, they often don't know the right way to use them, and the anxiety of needing to try as many features as possible within the time limit makes it hard for them to focus deeply on the features they actually need. To deliver a sharp "Aha moment" to users, it's essential to figure out what features they need and provide a usage guide focused on those features, or even offer a short tutorial (or a free trial onboarding). One thing that has been clearly confirmed through various experiments is that interest in paid features peaks right after starting the free trial. It's the perfect time to ask a few light questions to identify the user's needs and run a simple onboarding, which will feel more like a "welcome" than an "annoyance" to the user.

As time goes by, users' interest in paid features drops sharply. It's great if they strengthen their resolve for the free trial through guides, use the app correctly, and feel satisfied, but rapidly declining interest often leads to low motivation, making it easy to miss the Aha moment altogether. That's why many services send push messages to users via CRM tools during the free trial period. Besides these external stimuli, incorporating gamification elements into the product is another way to trigger internal motivation. Often used for new user onboarding and maintaining high retention afterward, this approach involves presenting a target within the period and showing how much they've achieved—such as collecting badges or leveling up. Especially since free trials are short, these methodologies can actually be a simple and effective way to sustain short-term motivation.

2. Find leading metrics and improve them

What is the common attribute among users who end up paying? It would be great to find a clear causal relationship, but that's not easy. Let's say users who used a premium feature at least once right after starting the free trial have a 50% higher T2P than those who didn't. This could just be because these users had a high intent to pay in the first place, which led them to try the premium feature. There might be a strong correlation, but there's a high chance it's not a clear causality. Keeping this in mind, if you slice and dice user cohorts in various ways to find leading metrics that positively impact T2P CVR, you not only get the seed to boost T2P but also can manage the lagging metric, T2P, much more efficiently. (You'll be able to quickly predict and respond to a payment rate that you'd otherwise have to wait at least a week to know.) Connecting this with point number 1, you can string together correlations in the data to find meaningful seeds—for instance, "Users who earn up to 3 badges almost always end up paying," or "Users who complete the guide are highly likely to collect up to 3 badges."

3. Find that slight chance of conversion for churning users

The churn I'm talking about here isn't a "refund," but a "cancellation of billing." Since this is a cancellation made during the free trial period when no actual payment has occurred yet, it refers to the act of canceling a future payment.

For one reason or another, the user doesn't want to pay and churns. It varies from service to service, but the chance of a churned user returning as a subscriber is extremely slim. However, even if they leave, you need to know why they are leaving so you can use that as a seed to design a nudge flow specific to your service that prevents subscription cancellations. Only then can you prevent future churning users and defend your T2P baseline.

The reasons for churning vary. The free trial period might have been too short to fully test it out, they might have been dissatisfied because they couldn't figure out how to use it properly, or they just might not have liked the product overall. Depending on each reason, you could run an experiment offering an extended free trial period, add a flow that teaches them how to use it properly even at that late stage, or prioritize improving existing features or developing new ones. Also, many leave because they find the price higher than expected. Assuming your current price is fundamentally the ideal one (meaning you've baselined the winner of a price-variable experiment), you could try experimenting with offering these users a discount coupon or cross-selling a more affordable subscription product.

4. Find the optimal price

Because "price" is the unit cost of a subscription product, it's known as a variable for the ARPPU (Average Revenue Per Paid User) metric, but strictly speaking, that's incorrect. Price itself is the ARPPU, and the core metrics used to judge which price point is optimal are Trial CVR and T2P CVR.

You multiply the Trial CVR and T2P CVR of experiment groups with different prices to calculate the final number of purchases, multiply that by the applied price to get the revenue, and choose the winner based on that. In some cases, a lower price might win (if it yielded overwhelmingly high Trial CVR and T2P CVR), and in other cases, a higher price might win (if the drop in Trial CVR and T2P CVR was minimal, or if they actually went up). Ultimately, what determines the winner is the combination of Trial CVR and T2P CVR, and the price decided this way becomes the ARPPU.

In particular, since price is a variable directly linked to actual payment, it has a much bigger impact on T2P CVR than on Trial CVR. If T2P CVR simply won't budge despite trying various methodologies, I'd highly recommend running a price test. The T2P could be low simply because the set price is excessively high.

For reference, if you want specific examples of price tests, check out these posts written by our growth engineer.
- Subscription, Price Testing (1) / Subscription, Price Testing (2)

5. Auto-renew or manual payment after the free trial?

Finally, the mechanism of "auto-renewal after free trial" is a variable that deeply affects T2P CVR, but I won't dive into this specifically, assuming that subscription products are generally managed through the Google Play Store and Apple App Store. The subscription products on these stores are built so that payment happens automatically after a set free trial period. Because of this, running a "manual payment" experiment requires a massive amount of development cost. You have to unlock paid features for a specific period and, at the moment of expiration, prompt a payment screen for a "subscription product with no free trial period." For stability, you'd even need to build a separate server for subscription product management and prepare an internal local mechanism that communicates with it to determine the free trial status.

Of course, the basic reason for planning such an experiment stems from the clear pros and cons of "auto-renewal after free trial." The pro is that users often don't block the automatic payment, naturally leading to purchases and guaranteeing a significantly high T2P CVR. The con is that users hesitate to start the free trial in the first place, heavily lowering the Trial CVR. In the case of auto-renewal, you have to pop up a payment screen to schedule the payment the moment the free trial begins, and the drop-off rate of users at this payment screen is incredibly high. If it were manual payment, 100% of the users would start the free trial without dropping off, and the payment screen would only pop up when the free trial expires. If you have a product that is highly confident in its paid features, and thus highly confident in a manual payment experiment, it might be an experiment worth trying at least once, even if it means bearing a high development cost.

I deliberately tried to cut down the word count when writing about Trial CVR because there was so much to cover, but the content still turned out to be quite vast. I was confident I could write about T2P CVR briefly, but looking at it now, there's more content than I expected. I suppose that just shows how many holes there are to patch up...

And just like that, following the free trial, we've managed to get users to open their wallets.

In the next post, let's look into Churn, which is when that opened wallet gets snapped shut again.
The final part of the subscription metric series!

The "Basic Subscription Metrics" series, spanning a total of four parts, is structured as follows.

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

mail : stephan@delightroom.com
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