Should you combine trial users with regular customers in your standard SaaS metrics, like MRR or churn? A SaaS business owner recently asked that question.
A bit of research shows the best practice is NOT to include these users in the standard metrics. Track trial users separately, or at the very least, identify and segment them. Here are three reasons why.
Reason #1—Trial Users are Not Recurring
Seeing a growing user base for your product is great, but some perspective is needed. There is a difference between trial users and customers. Customers committed to you. They’re paying you. Trial users are trying you out, and most are paying either nothing or a discounted trial rate.
In other words, even if trial users are paying you, it’s not recurring yet unless they convert to a customer after the trial period.
Reason #2—Churn Causes are Different for Trial Users and Customers
Everyone wants to limit churn. But if a trial user doesn’t become a customer, is that churn? It’s more accurate to call that a conversion failure than churn. Consider the following questions:
- Is my product sticky? (Relates to trial conversions)
- Does my product meet a customer need? (Relates to customer churn)
It’s possible to have a Total Churn metric, but it’s a good idea to segment customers and trial users.
Reason #3—More Accurate Financial Metrics
Imagine your next meeting with stakeholders. They’ll probably want to know specifics around new bookings, MRR, churn, trial users, etc. Segmentation gives increased insight into the current performance of the business.
Trend and variance analysis is more useful if trial users and customers are not combined. Also, segmentation allows more thorough answers to questions.
For instance, think about how it might look if you are asked if trial users are included in the metrics… and you don’t know!