Originally Posted by
TSavery
The "Free" vs. "Not Free" Debate
Okay, it seems that there are two differing opinions on the free trial debate.
What we need to do is step back and see the dynamics at play.
Sirius XM is launching an iPhone application. Applications are judged by popularity as much as they are about what that application delivers. Getting on iPhones popular list is paramount to the success of an application. Sirius XM needs to get on that list when they launch their application. How do they ensure that this happens?
1. Make the application download free.
2. Make the value of that application enough that people will want to download it.
In order to get the downloads, the consumer needs to perceive a benefit. 1 or two weeks free will not likely be enough to get the consumer to try. 1 month is okay, but is it enough? The company can not afford to launch with too short a free trial only to then switch it. It would not bode well.
The three month free trial is an established trial period in the OEM channel. With OEM's, Sirius XM is paying for chipset subsidies, installation subsidies, royalties, as well as revenue share. This is an expensive model, but it does deliver subscribers to Sirius XM. The problem is that they have to remain subscribers for a long time before they "pay for themselves".
With the iPhone application, the company saves on chipset subsidies, saves on installation subsidies, has no revenue share, but does pay royalties. This makes the model for an iPhone subscriber more profitable much faster. Think of Apple as an OEM, and you can see why the free trial makes sense.
If we look at the retail channel, there are many issues right now. It is for this reason that the iPhone application should not follow a typical retail model.
With the 3 month trial, the company ensures that they are on top of the iPhone application list. It is also a timeframe that the company and customer service reps are familiar with as they try to convert the free trials to self paying subscribers. How does customer service respond to someone who is just coming off of a two week trial? They will turn around and let the person continue with a free trial to give them yet another chance to hear all of the content. Customer service expenses are expensive to the bottom line, and if the lines are clogged with "two-weekers", existing customers get poorer service.
Three months is enough to make one final effort with a consumer, and if it does not work they can cut the strings, knowing that the person is simply not a good candidate for an ongoing subscription.
The key is exposure, and conversion. What delivers the most exposure, and what timeframe of a trial produces the best conversion.