Getting a customer to pilot your product is an exciting moment, but it’s only one step toward a more important milestone: getting a customer to pay. Here are the most effective ways to get a pilot customer to pay:
Paid Pilots
A common way to convert a customer from pilot to paying is to simply charge them upfront. This is always worth a shot to test demand, even if it does not work every time.
Tactics:
- Money Back Guarantee. The customer pays the normal price upfront but if they decide to cancel within a certain time period, they receive a full refund. E.g. Usual monthly price is $5k, customer pays $60k for the year upfront with a full refund if they cancel within 60 days.
- Discounting. The customer pays a lower price for their initial usage of your product during the pilot, which will revert to the full price once the pilot is over. E.g. Usual monthly price is $5k/month, but customer pays $2k/month during the 60 day pilot.
- Custom Project. The customer pays for a small project first to confirm your product can deliver on its promises; then the customer will sign a contract. E.g. Usual monthly price is $5k, you do a small project for $3k; if successful, the customer signs a 1 year contract for $60k.
Pilot Limitations
Offer the initial pilot for free with clear limits to ensure the customer converts to paying. This is useful if your customer will not agree to pay upfront.
Tactics:
- Time Limit. Allow the customer to pilot the product for free, then charge the normal price after a short time. E.g. your product is free for the first 30 days, then $5k/month thereafter.
- Usage Limit. Let the customer pilot the product for free until they have used their “free credit”. E.g. Amazon Web Services may offer a startup up to $100k in free credit, knowing the startup is unlikely to move to another provider after the credit is gone.
- Milestones. Allow the customer to use the product for free until a specific goal is met. E.g. your product must generate a specific revenue amount for the customer before they will pay. Once a customer has proof of your ability to deliver, they’re more likely to convert to a paying customer.
Contract Conversions
When and how you ask a customer to pay can influence their decision to convert. Details such as pricing, contract length and start date should be discussed at the best time for you and your product.
Tactics:
- Automatic Conversion. Before the pilot begins, agree to both a price and a payment start date. Then charge the customer on that date, unless they cancel. E.g. Netflix requires a credit card for its 30 day trial and automatically charges you when the trial ends.
- Customer Reliance. Before the pilot begins, do not have pricing discussions. Then during the pilot you must ensure the customer becomes reliant on the product which gives you more leverage to start pricing discussions. E.g. Customer begins the pilot and after 30 days they’re using it every day. At this optimal time, inform the customer the price is $5k/month and the first payment is due in a month.
If you do not convert your pilots into paying customers, your startup will struggle. Test the various approaches to push customers to pay and see what works for best for your team.
This article is part of a series on Startup Sales1. How to get your First Potential Customers2. How to Convert your First Leads to Customers_3. How to Get Pilot Customers to Pay_
If you’re a B2B company at the seed stage looking for help, you can reach me at [email protected].
Thanks to Kaego Rust and David Smooke for their help on this article.
Photo by Sharon McCutcheon