Killing FREE: How to make every SaaS customer pay
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Killing Free How to make every SaaS Customer Pay RYAN KOONCE
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Transcript of Killing FREE: How to make every SaaS customer pay
Killing Free How to make every SaaS Customer Pay
RYAN KOONCE
@Kissmetrics
#Kisswebinar
@thuelmadsen
Thue is the Kissmetrics Webinar Wizard and Marketing Ops Manager. Before joining forces with Kissmetrics, he was a Lyft driver in SF, which is also how he ended up as a Kissmetrics marketer. Whenever Thue is not trying to
automate everything around him, you can find him hiking in the Sierras.
THUE MADSEN Marketing Operations Manager, Kissmetrics
@ThueLMadsen
As CEO of Mammoth Growth, Ryan works with his team to help clients leverage data to drive growth. He is also
Executive Chairman of Attributionapp.com, a SaaS platform providing multi-touch attribution, and Managing Director of Roaring Bull Studios, a social game studio.
RYAN KOONCE CEO, Mammoth Growth
@ryankoonce
@mammothgrowth
#Kisswebinar
@ryankoonce
1 Section One - Introduction
Defining Free
Understanding Freemium
Taking Advantage of Your Pricing Power
Balancing Free and Trial
Time Based Vs. Metered-Based Trials
Switching From Free
2 Section Two - Killing Free
3 Questions?
TABLE OF CONTENTS
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WATCH WEBINAR RECORDING NOW
What does it mean to make a customer pay?
Free is giving something away and getting nothing in return.
- or -
FREE = Net Profit per Customer <= Zero
DEFINING FREE
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There are different types of payment
IF YOUR PRODUCT HAS VALUE, YOU SHOULD GET PAID
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Money Indirect Promotion Direct Promotion
RESPONSE WHEN ASKING REID FOR A FREE PREMIUM LINKEDIN MEMBERSHIP
Reid Hoffman Linkedin
If it’s going to be useful for you then you should just pay for it.“
*note, this was paraphrased.
Give away 100% of your core service to everyone.
Unlock features for people that upgrade.
Maybe great for social games.
Almost never optimal for SaaS.
No, Mailchimp didn’t really win with Free.
WHAT IS FREEMIUM?
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FREEMIUM IS GREAT, UNTIL IT IS NOT
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Cut loose your deadbeat customers.
When does it make sense to keep or kill free?
You must be free when you have no pricing power
• No real product differentiation (or crappy product) • Customers can live without you • Switching cost low • Competitors pricing you out of business with VC war-
chest (e.g. war of attrition) • Crappy sales team
Reality check: If this sounds like you, you have a existential issues (e.g. no business model)
WHEN YOUR PRODUCT HAS TO BE FREE
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You can charge when you have pricing power!
• Unique (great) product • Customers struggle without you • Switching costs high • If above true, hard for competitors to spend you to death • Great sales team (trumps all of the above)
If this sounds like you, it’s time to go win bigger!
WHEN YOUR PRODUCT DOES NOT HAVE TO BE FREE
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We will assume you have some pricing power.
AND THAT IT DOESN’T COME FROM YOUR SALES TEAM…
Free trials are great! But you have to balance the Trial and the Free.
FREE TRIALS ARE NOT FREEMIUM
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Two things are really important:
1) Get Customers to the Ah-Ha Moment FAST
2) Don’t lose money on Trial users.
BALANCING FREE AND TRIAL
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Your trial should show the value of your product to your customer, without providing full value.
BALANCING FREE AND TRIAL
#Kisswebinar
The ah-ha moment is different for every
business. FIGURE OUT YOURS!
Two types of SaaS Businesses
1) Easy / No Commitment (simple implementation)
2) Difficult / High Commitment (harder implementation)
BALANCING FREE AND TRIAL
#Kisswebinar
Clearbit provides data augmentation for every step of your sales and marketing funnel.
1) Simple Setup - Fast AH HA
2) First 100 api requests are free. Then metered pricing.
SIMPLE IMPLEMENTATION EXAMPLE
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Find out what web sites are built with.
1) No Signup Required to Use - Fast AH HA.
2) Report returns first 10 rows of a 10k row competitive report for free. Start sub to unlock.
SIMPLE IMPLEMENTATION EXAMPLE
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Attribution provides multi-touch attribution modeling.
1) Implementation required (varying degree of difficulty)
2) Cohort based reporting requires time to bake.
3) Scrapped 14 day trial for MTU and Campaign-based usage.
4) Upgrade request triggered at AH-HA moment
HARD IMPLEMENTATION EXAMPLE
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www.attributionapp.com
It is almost always more optimal to implement a
metered free trial than a time-based free trial.
Don’t lose money on trial users.
You must understand your Cost to Service (CTS).
Your CTS is your hard cost of serving each incremental free customer.
• AWS (storage, server etc.) • Messages Sent (email, SMS, etc) • Other SaaS MTU Costs (analytics, etc) • Onboarding cost (CS headcount)
These add up at scale
DON’T LOSE MONEY ON FREE
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CAC > LTV is not enough
(CAC + CTS) > LTV is the winning formula
DON’T LOSE MONEY ON FREE
#Kisswebinar
Identify high value customers early for optimal resource
allocation
Madkudu stuff
MADKUDU SLIDE
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Now that you’re convinced to kill free…
So how do you make the switch to revenue yield, without blowing up what you have?
MAKING THE SWITCH
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• Pricing page testing
• Rate limit testing • You probably know where value is in your
business. • Start throttling back from 100% gradually. • Upgrades should be immediately preceding
full value exchange.
#Kisswebinar
MAKING THE SWITCH
It unlikely that you are perfectly priced, which means you can get more from every customer.
Give it a try and let us know if you would like some help.
#Kisswebinar
SUMMARY
LEARN MORE NOW
Discover how Kissmetrics can help you optimize your marketing
THUE MADSEN Marketing Operations Manager, Kissmetrics
@ThueLMadsen
Questions?
RYAN KOONCE CEO, Mammoth Growth
@ryankoonce
