Testing a Free Trial Membership Acquisition Program

There is a long history of using free trial offers in membership marketing. In essence a free trial offer substitutes providing member services for marketing efforts. It is an attempt to have the product sell itself.

I thought that I would highlight four basic methods that I have used or observed others use to bump up membership returns using trials. By doing some quick calculations, you can determine if one of these methods might be good to try.

1. Opt-in Trial: This method is perhaps the most common in membership marketing. The option features and initial promotion to prospects and asks them to accept a membership trial. Upon acceptance, the respondent receives membership for a specified period of time and additional promotions requesting that he or she join. Depending on the quality of the list, the initial response can be between three and five percent. The final conversion can be about 30 percent. The advantage is that you are only providing free services to a low number of prospective members who request the trial and converting a larger portion of them.

2. Force Free Trial: This method provides a free-trial to a qualified audience that did not specifically ask for the trial. It may be a list that you have compiled or that is supplied to you by some other source like current members. Services are provided to these prospective members for a period of time and then these prospects are asked to convert to a paid status. The final conversion rate from a well qualified list can be about 10 percent. One challenge to this method is that you are providing services to a much larger group with a proportionately lower level of payment because they never directly requested the membership trial.

3. No-Obligation Trial: Like the opt-in trial, this method gives a prospective member the choice to ask for benefits. But there is one key difference. When a prospect agrees to this trial, he or she also agrees to allow the organization to invoice them for the membership. The respondent has the choice to pay an invoice or write “cancel” on the invoice and owe nothing. Getting permission to invoice can dramatically increase the final paid rate especially if the prospective member can submit the invoice for company payment. The initial response to this type of offer can be one to three percent. However, the final payment rate can be as high as 50 percent.

4. Negative Option Free Trial: This is a method that I have not used, but it is becoming increasingly common. Under this method, when a free trial is accepted, the respondent provides their credit card information and has a limited period of time to evaluate the membership. If the trial is cancelled by the respondent, there is not charge. However, if no notice is given then the respondents credit card is charged for the membership.

In the March 2010 edition of ASAE’s Membership Developments newsletter, Karen Krzmarzick, CAE, the Executive Director, of the American Society of Ophthalmic Administrators (ASOA) reported on her success with one free trial method. By my definition, ASOA tried both a force free trial and opt-in trial approach.

For the force free trial, ASOA “sent individual emails out to each physician member of ASCRS [a partnering organization] asking for the name of physician's practice administrator. These individuals where then automatically signed up for the free trial program. “

Also, as an opt-in approach, ASOA said that they “placed ads on our website and promoted the program through business-reply cards in industry magazines.”1

ASOA was encouraged by the outcome. Overall membership is growing. They reported 700 current free trial participants and a conversion rate of 11 percent to membership.

However, what works for one organization may not work for another. If an organization has a large potential market and a low dues rate, for example, the force free trial may be far too expensive to deploy. On the other hand, in a small niche market, getting only 3 percent of the market to try a free trial may not produce the volume of new members needed to grow. 

Here is the bottom line, always run the numbers for your particular situation before launching a new membership marketing initiative.

1. ASAE Membership Developments, March 5, 2010, http://www.asaecenter.org/files/images/sectionnewsletters/md0310.pdf

2 comments:

Scott Oser said...

Hey Tony,

I truly think it is great that Karen's association is willing to be creative and take some risk while trying to grow their membership. The response rates concern me some. I worry that they are spending more money to recruit and provide benefits to the trial members than they are getting back when only 11% of the trial members are converting to full membership. An 11% response rate means that they are absorbing the cost of serving 9 out of 10 people who they will potentially never get another dollar from. To me that is a scary proposition.

Scott

Tony Rossell said...

Scott – Thanks for the comments. I do not know the specifics of the ASOA situation other than what was shared in the Membership Developments newsletter. But let’s take a look at a possible scenario related to this organization. I see from the ASOA web site that membership dues are $275. Let’s say the free trial lasts for 3 months and the incremental servicing costs are 20% of total dues (($275 x .20) /4 = $13.75), so the cost to service is $13.75 per trial member served (700 x $13.75 + $9,625). I use incremental servicing costs since the periodical would be published whether or not there were free trial members. Clearly there also would be staff time and other costs associated in providing the trial.

Now if 11% of the 700 members joined as reported, then the program is producing a first year income stream of $21,175. If this association maintains a typical renewal rate of 80%, then the life time dues value of these members is $105,875. I would expect that over their lifetime these members would also have non-dues purchases that would contribute to this revenue stream, but I do not have any data on what those might be in this situation.

Based on this scenario, I think you can make a case for the free trial approach with this organization. However, as you point out, if the servicing cost is higher, the conversion rate lower, the dues amount is lower, or the renewal rate is lower then these economics can fall apart pretty quickly. Tony