Free Trial Conversion is one of the most important metrics to monitor in a successful SVoD business. In the ongoing search for new subscribers, companies employ many different tactics to attract and engage new users. From social media lookalike campaigns to promoting exclusive content or promotion of a popular movie, the reason many customers sign up for a trial can vary widely. Measuring the success of each campaign and how you quantify conversion should be consistent and straightforward in order to effectively evaluate your success.
Ultimately, Free Trial Conversion is a calculation of the total number of trials that are successfully converted to paid, divided by the number eligible to convert on any given day. That said, in a subscription video business, there are other variables that can affect your conversion rate.
Since almost all video businesses batch their monthly billing rates into a daily billing run, failed billing attempts will impact your daily conversion numbers. Most companies employ different retry mechanisms and intervals for processing failed billing attempts (also called a dunning process). It is important to apply a consistent calculation when comparing conversion rates.
Our Trial Conversion Methodology
At Wicket Labs, we use the same methodology for calculating conversion rates across all of our customers, regardless of their dunning methodologies. This is important as it allows us to compare conversion rates of different customer cohorts within a single customer account and provide industry benchmarks to help you understand how your key metrics compare to similar services.
So how do we calculate conversion rates? Well, not too differently from standard calculations, with one small difference. The method for calculating conversion is simple:
It’s not so simple
For example, if there are 100 trials that are eligible to convert on a given day and 70 of them pass billing, a standard calculation would be 70% conversion. That said, it is not that simple, due to the billing and retry processes mentioned above. To help standardize conversion we take the failed billing transactions into account.
Going back to those original 100 free trials in a given billing run a number of those customers may request a cancellation before their trial period ends and the rest would be eligible for conversion. Let’s say 20 (voluntary cancellation) of that original 100 request a cancellation and the other 80 go through billing. Of those 80, that same 70 successfully pass billing and convert to a paid user, and 10 fail billing and enter the dunning process.
When a trial conversion billing attempt fails that sub would then become eligible for a billing retry according to your dunning process billing rules. For example:
- Day 1: 100 People sign up for a 7-day trial
- During the course of that trial 20 voluntarily cancel (their trial will end on that bill date)
- On the 8th day, 80 are processed for billing and 10 of them fail
- The conversion rate for those Day 1 customers is 77.8%
- 100 sign up, 20 canceled and 10 held over for retry.
The remaining 10 will then become eligible to convert at a later date.
Now let’s assume 100 more sign up for a trial on day 2 and during the trial process 10 decide to cancel. Billing runs and 10 more fail billing. If the standard retry logic is to retry cards one day later the 10 failed billing transactions would be eligible for retry. Of those, five pass and convert and 5 fail and stay in the dunning process.
So on day nine, there would be 95 eligible conversions. The 80 that signed up on day two and passed billing, the 10 that voluntarily churned and the 5 that passed dunning. The conversion rate would be 89.5% (85/95).
Bringing it All Together
To calculate a monthly conversion rate we take the daily conversion rate and average that over 30 total days. By breaking it down to this level, we can ensure that we are smoothing out any outliers and getting to a consistent number.
Breaking your base into different campaigns and customer cohorts gives you an accurate read on how well you are acquiring customers. Further, you can consistently analyze which campaigns successfully bring you paying customers that stay in the service for the longer term.
Connect with us to learn how the Wicket Scorecard can aid you in your trial conversion process. Or sign up for our newsletter below to never miss out on the content we produce to make your video service as successful as possible.
Tags: conversions • D2C • SVoD • trials