Why Free Trials Don’t Always Lead to Long-Term Loyalty

Why Free Trials Don’t Always Lead to Long-Term Loyalty

Despite the current state of the economy, one thing is nearly certain — consumers crave content more than ever, and streaming content is in abundance.

A recent Nielsen study showed that “streaming services such as Netflix or Hulu account for 19% of television viewing in the United States now for people who have that capacity, and that is virtually double what it was less than two years ago.” And while Netflix and Hulu remain market leaders, other contenders such as Amazon, HBO, Showtime, and CBS have continued to pump out content, giving consumers more and more choice with each passing day.

And with content choice, comes myriad ways for these entities to attract, grow, and retain their subscriber base. 

When is a free trial the best Strategy?

Netflix practically invented the 30-day free trial, which has clearly been a successful strategy for the leading streaming service, but such promotions can backfire for other types of media subscriptions. There’s a lesson to be had in the dangers of simply imitating leading firms’ promotional tactics: what works for Netflix may not work for you.

New research from Antenna, a market research firm specializing in OTT, analyzes first-year retention rates of some of the biggest OTT offerings around — including Netflix, Hulu, HBO NOW, CBS All Access, Showtime, and Starz — all of which offer monthly subscriptions with free trials. Looking at 2019 numbers, Antenna’s research shows that an average of 49% of monthly streaming subscribers remain subscribers at the year mark. While that may seem low, compared to the retention rates of the average free trial subscriber across Piano’s platform, that is on the higher side, though not unheard of. 

percent-of-new-subscribers-retrained-one-year_2

Even the OTT services that experience some of the worst retention rates, such as HBO NOW, are in the upper quartile of free trials generally. Data from Piano shows that free trials actually have higher cancellation rates than paid trial or non-trial subscriptions, so the higher-than-average retention rates demonstrates the ability of multi-billion dollar content budgets to convince subscribers to stick around. 

For other types of subscription products, such as those from the news media, paid trials often strike a better balance between acquisition and retention. But there is a significant range in retention for subscriptions of all sorts:

percent-of-new-subscribers-retrained-one-year_1

While, on average, only 1 out of 4 free trial subscribers stick around to the year mark, there are subscription businesses where it’s better than 1 in 2 subscribers. And, it’s important to note that even the best-retaining monthly subscriptions retain worse than the average annual subscription. 

Trial offers often make sense for high volume acquisition strategies, as long as one is able to  increase conversion rates to such a degree that they outweigh retention hits. Some Piano clients have seen conversion rates more than double for trial offers compared with non-trial offers. Trials are particularly important in moments of high demand, as proven by trial subscriptions fuelling the nearly doubling of subscriptions on Piano’s platform during March and April of 2020, the peak of the pandemic newscycle. These trials made good sense in such a period, when marginal customers were placing higher value on news and were more willing to pay — especially when they could get an attractive introductory price. 

But outside of a pandemic, trial subscriptions — particularly free trials — can create such a hit to retention that they often don’t make business sense. Whether or not one should consider this approach depends on the tradeoff between higher acquisition, in the form of an elevated conversion rate, and lower retention rates. All of which underscores the importance of fine tuning promotional strategies based upon your product, its perceived value, and how quick your customers are to cancel. 

At the end of the day, it’s important in any business to look before leaping, as well as be willing to test and learn from a few different offers and customer experiences. Lasting customer loyalty takes hard work: a thoughtful strategy behind keeping them engaged with relevant meaningful content that escalates your perceived value well beyond a free offer.

Piano Partners with the Local Media Consortium

Orchestrate and automate your entire user journey with Piano.

Subscribe our newsletter

Subscribe to our mailing list to get updates to your email inbox.

Sending...

Thank you.

Your email is now subscribed to our newsletter. Stay tuned for updates, release notes, insights, and trends from Piano.