There’s an art to getting people to sign up and pay for anything these days. More often than not, they’ll turn tail at the first sign of a registration page. If that doesn’t scare them away, the “Enter Credit Card” field surely will.
Maybe that’s thanks to widespread abuse of recurring payments: Once a customer forgets to cancel the next payment, he’s locked into that subscription, and that feels like a dirty trick from the consumer side.
Or maybe it’s just thanks to an evolutionary sense of skepticism toward anyone or anything that aims to part people with what they’ve collected or earned. How does the consumer know that what he’ll receive in the future will be worth what he’s being asked to invest now? Until he’s familiar with the brand behind the offering, any amount spent is a gamble.
Thus products, services, media and pretty much any type of subscription have come to be viewed through that skeptical lens, and the good ones struggle just as much as the bad ones. The consumer is starting the conversation with his heels dug in, and that’s a poor recipe for conversions.
LaterPay CEO and board member Cosmin Ene compared it to going out for sushi – in fact, that’s what gave him the idea for LaterPay, which lets customers buy now and pay later, once they know (and know they like) what they’re getting.
At a sushi restaurant, said Ene, the customer approaches the buffet table or watches rolls float by on the conveyer. He chooses the ones that look appetizing, eats them and then pays for them. If an employee greeted him at the door and asked him to pay $100 before he’d even seen the menu, the restaurant would never do any business, Ene said.
To give another example, if a coffee shop wanted customers to sign up and pre-pay so they could enjoy 100 cappuccinos a month, it doesn’t matter how good of a deal the shop is offering on those fancy drinks – customers will run the other way sooner than reach for their plastic.
However, giving things away for free creates an expectation that the freebies will continue, said Ene. This is what happened to online journalism. Giving content away up-front dilutes the value and does not help drive conversions, since once the free trial is over, customers can just go try the next thing for free.
Ene said that’s why it’s so hard to make money on the internet, and it’s why a different approach is needed – something like a paywall, which allows free access up to a point before putting payment or subscription options in front of the customer.
In a recent interview with Karen Webster, Ene explained how LaterPay is translating the paywall concept for business-to-business (B2B) and software-as-a-service (SaaS) contexts to drive conversion rates as high as 75 percent.
Registration Is the Biggest Point Of Friction
Sixty to 75 percent of carts are abandoned before checkout, because that is the step that requires a purchase decision, Ene said. A registration flow that requires payment info too early (or when the customer is just signing up for the 14-day trial and has not decided whether to commit to the service) only encourages that natural human inclination to abandon the cart when it comes time to put their money where their mouths are.
So why not do away with that pesky registration process altogether – or, at the very least, kick the can down the road so that customers are committed to the product or service before anyone mentions their credit card?
When you put it like that, it seems simple and obvious. Many people in the industry are talking about removing friction leading up to registration, but so far no one else has had the chutzpah to remove the biggest friction point of all: the registration itself.
Trust Drives Value Perception
For customers to give their trust to a business, said Ene, they must first experience trust from that organization. The business must entrust customers with its services and entrust them to pay later.
It may sound like just another gamble – only this time, it’s the business that must go out on a limb and hope that Lady Luck will meet it out there.
Yet there’s more to it than luck, Ene said: When customers are given a chance to try software products up to a certain point, more than three quarters of them will go ahead and pay for it when they pass the threshold of the free trial – whether that’s paying up once they’ve read €5 worth of articles or investing hundreds to thousands of dollars on SaaS offerings.
That’s why Ene said it’s important to start by establishing value. If that is not done up front, he pointed out, then customers won’t see the value later when they are asked to submit payment and they will fail to convert.
Conversely, when customers know from square one that the product they’re using is going to cost them X dollars at some point in time, it’s no surprise when they are later asked to pay those X dollars, and LaterPay isn’t getting hit with chargebacks when it happens.
“People aren’t thinking of this as free stuff,” Ene said. “They’re thinking of it as stuff they’ll pay for later.”
In short, when the customer is in the loop and in control, his perception of the experience is completely different, said Ene … and he’s paying for a meal he’s already tasted.