Offering $1 trial offers is a great way to acquire new customers and enable people to try your product or service at a discount. It’s a lucrative business model for subscription and continuity merchants who offer products and services at a recurring fee. While it has several financial benefits, this model also has some drawbacks. Here’s everything you need to know if you’re considering running a $1 trial offer to promote your products or online services at a discount.
The Benefits of $1 Trial Offers
A survey by Vantiv and Socratic Technologies found that 92% of millennials have active subscriptions online, which means that $1 trial offers are still very feasible ways to ramp up your revenue. Plus, millennials are all about investing in experiences rather than things, and a recurring payment subscription model with discounts offers customers an affordable alternative to buying the same product online every month.
Having the $1 trial option alone is a great way to get more consumers interested on your product as it is more likely to push potential customers to click the buy button. In fact, having a $1 trial can draw in more customers than a free trial due; once a customer invests money—even as little as $1—the chances that they will stick around beyond the initial trial increase.
A $1 trial offer is also a clever way to market products. It eases people into the financial investment with a deep discount and allows them to try a new product or service they may be interested in but may not have otherwise tried. This often results in increased customer loyalty over time, boosting recurring revenue. Recurring revenue is predictable revenue—an enticing benefit for merchants.
The Downside of $1 Trial Offers
Some companies that run $1 trial offers can get into trouble when it comes to chargebacks. The process of accepting and processing recurring card transactions can lead to a higher amount of chargebacks than other models. In some cases, the terms and conditions of the trial are not clearly delineated and consumers get charged for their second month without realizing that they have opted into a recurring service.
When this occurs, friendly fraud swoops in and can take a bite out of profits. When a customer doesn’t recognize a charge on their monthly billing statement, they contact their issuing bank to report a fraudulent charge. If the issuing bank rules in the customer’s favor (they typically do), the merchant is left with a messy chargeback. Not only have they lost the customer, but they’ve lost the money they have to refund, the product or service that the customer received, and they have to pay fines and fees associated with the chargeback.
Getting hit with too many chargebacks can push a merchant to a chargeback monitoring program, which costs even more in terms of money and reputation.If this happens too frequently, a merchant can lose its merchant account. A lost merchant account can be the death of a business.
It’s also important to consider whether your product or service merits a $1 trial offer. A site membership that offers digital content or physical products at a discount with the subscription model is more profitable with the $1 trial offer than the alternatives. As long as consumers know what they’re getting into, $1 trial offers can be very enticing and they can drive up your customer conversion rates, save you unnecessary marketing costs and increase your revenue stream.
Merchants offering $1 trial offers should find a merchant services provider that has the ability to manage and minimize chargebacks, reduce card declines and have a cost-friendly model (charging you every month or quarter, rather than for every transaction). Some questions to consider when looking for a payment processing partner include:
- Will I be able to access an intuitive dashboard to track subscriptions (including upsells, downgrades, and cancellations)?
- Does the gateway integrate with my current sales system?
- Does this provider have experience with true and friendly fraud chargebacks and can they help manage and advise on strategy for both?
- Can they help me minimize card declines and help reduce churn?
- Do they offer excellent customer support and will they respond promptly to any issues arising out of “$1 trials” including card declines and chargebacks?
Our team at PayArc says “yes” to these and more. We offer payment processing solutions for businesses of all sizes along with top-tier customer support. Contact us today if you’re in need of a top-tier payment processing services provider.
