What Converts Better: Free Trial or Money Back Guarantee?

money back guarantee

For the last two years I’ve been selling digital products on Quick Sprout. Because I already have 400,000 monthly visitors, I don’t really focus on increasing my traffic. Instead, I focus on increasing my conversion rate.

In efforts to increase my conversions, I tested a few things over the last few years:

  • To sell the Traffic System for $197 with no free trial and no money back guarantee.
  • To sell the Traffic System for $197 with a 30-day money back guarantee.
  • To sell the Traffic System for $197 with a 7-day free trial and requirement of a credit card upfront.
  • To sell the Traffic System for $197 with a 7-day free trial, requirement of a credit card upfront and offer of a 30-day money back guarantee.

Here’s what I learned:

Guarantees help build trust

When I first released the Traffic System, I didn’t offer a free trial or a money back guarantee. I just charged $197, and if you liked it, great; if not, you lost $197.

Sure, if someone complained, I would just refund their money, but people didn’t know that before buying.

By adding a 30-day money back guarantee, I was able to increase my sales by 21%. Out of all of the people that purchased the program, 12% asked for their money back.

Hypothetically, if I were selling 100 Traffic Systems a month at $197, I would generate $19,700 in revenue. By offering the money back guarantee, I would be able to boost sales by 21% to $23,837, while having to refund 12% of that revenue. In total, the money back guarantee would bring $20,976 in revenue after refunds.

Overall, the money back guarantee increased revenue by 6.4%.

Free trials create the most signups

The difference between a money back guarantee and a free trial was huge. Literally, double the amount of people would signup for a 7-day free trial that required a credit card upfront versus a money back guarantee offer.

Let’s say the money back guarantee offer generated 100 monthly signups. The free trial offer would then generate 200 signups.

Although the front-end conversion numbers looked great, the back-end numbers weren’t too great with the free trial.

Remember how 12% of the money back guarantee signups would ask for a refund? So out of 100, you would be left with 88 paid members. Well, 33% of the free trial users would cancel their order. That means out of 200 members, 132 remain.

The thing I learned about the free trial offer is that you lose a lot more members than you think. Although I required a credit card upfront and validated it to make sure it was good, out of the 132 remaining members, only 78% of those people had cards that were successfully charged $197. That means 29 credit cards were declined when I tried charging them $197.

In the end, the 7-day free trial provided a 15% increase in revenue over the 30-day money back guarantee.

The main lesson I learned is that some people signup for free trials knowing that they won’t be charged because they don’t have a high enough credit card limit, especially people from international countries.

People don’t care for a guarantee when there is a free trial

The last test I did was to offer a 7-day free trial combined with a 30-day money back guarantee. If you kept the product after the 7-day trial, you could still get your money back within a 30-day period.

What I saw from this test was that the front-end conversions stayed the same, and no one asked for their money back.

Conclusion

Here is a look at the results of the tests in terms of revenue, based on a hypothetical number of 100 signups a month:

  • Original offer (no guarantee/no trial): $19,700 a month in revenue
  • Money back guarantee offer: $20,976 a month in revenue
  • Free trial with credit card upfront offer: $24,428 a month in revenue
  • Free trial with credit card upfront combined with a money back guarantee offer: $24,428 a month in revenue

Although those were the results from the Quick Sprout Traffic System tests I ran, the results can vary drastically for you. Don’t assume what works for me will work for you… you have to run A/B tests.

If I had to do it all over again, I would do a few things differently:

  1. I would test a $1 trial (versus a $0 free trial) as that could potentially decrease the failure rate of credit cards going through.
  2. I would create an email drip sequence that would go out to all of the people whose card didn’t go through on the free trial as that could potentially help increase revenue.
  3. I would survey all of the people who asked for their money back or cancelled their trial to find out why and see if I could modify the Traffic System to increase their overall satisfaction with the product.
  4. I quickly learned that a lot of my buyers are people in international countries like India, so I would test payment plans instead of just charging people $197 upfront. This should help increase the number of people signing up as well as continuing the trial.
  5. If you give your customers everything they need before the free trial is over, there is no need for them to continue the trial. In the future, I would like to test giving people half of the Traffic System during the trial and second half after the trial is over. Or I would test giving them the full system on day one but providing bonuses over the next 30 days to entice them to continue to stay on. I think this would decrease cancellations and refunds.

So what do you think about free trials and money back guarantees? Which one do you prefer?