Patrick Campbell, Why a SaaS Pricing Consultancy Gives Away Free Software, BoS USA 2016

Why a pricing company gives away free softwareBoS 2016

@PriceIntel

http://www.priceintelligently.com/bos

[email protected]

@PriceIntel

Building product is getting harder, not easier…and it’s going to increase in

difficulty.

@PriceIntel

The age of throwing shit against the wall and seeing what sticks is over.

@PriceIntel

Who in the world are you?

@PriceIntel

Happy customers big and small

ProfitWellSaaS pricing

software and tech enabled services

Free financial metrics for

subscription businesses

@PriceIntel

We’ve seen inside more software companies than anyone else on the

planet.

@PriceIntel

The market is becoming saturated.

@PriceIntel

Our world is more competitive, making switching costs easier.

@PriceIntel

Competition is growing

N = 289 SaaS companies, +/- 3.44% MoE at 95% level

5 Years Ago 3 Years Ago 1 Year Ago Today0

2

4

6

8

10

12How many competitors did you have during the following periods?

# of

Com

petit

ors

@PriceIntel

Competition is here

0 to 2 3 to 5 6 to 10 11+0%

10%

20%

30%

40%

50%

How many competitors do you current have? (Companies around for less than 1 year)

% o

f Res

pond

ents

N = 547 software companies

@PriceIntel

The relative value of features is declining, making a race to the bottom

for feature based pricing.

@PriceIntel

“Differentiation” isn’t what is used to be…

N = Varies by line, but minimum of 10,000 customer respondents per line

4 Years Ago 3 Years Ago 2 Years Ago 1 Year Ago Today0%

25%

50%

75%

100%

125%

Willingness to pay over time relative to WTP 4 years ago

Core Features Single Sign On Integrations Analytics

WTP

as

% o

f WTP

4 Y

ears

Ago

@PriceIntel

CAC is increasing over time.

@PriceIntel

Acquiring a customer is getting pricier

N = Varies by line, but minimum of 453 companies per data point

4 Years Ago 3 Years Ago 2 Years Ago 1 Year Ago Today

-25%

0%

25%

50%

75%

Blended CAC relative to four years ago

B2B B2C

CAC

as %

of C

AC 4

Yea

rs A

go

@PriceIntel

“Good”, “Customer driven” product is becoming exceptionally more

important

@PriceIntel

We’re really ill equipped for the transition.

@PriceIntel

We don’t really know our buyers

@PriceIntel

Buyer Personas

Table Stakes Tony• Valued features:

• SFDC Integration• Chrome extension

• Least valued features• Analytics• API access

• WTP = ~$10/month• CAC = ~$22• LTV: $160

Advanced Arnie• Valued features:

• Analytics• API Access

• Least valued features• Chrome extension• Premium support

• WTP = ~$25/month• CAC = ~$56• LTV: $325

@PriceIntel

We don’t know our buyers that well

Thought about them Central document Quantified buyer personas0%

25%

50%

75%

100%Which single category best describes your buyer personas?

% o

f Res

pond

ents

N = 1,647 software companies

@PriceIntel

We don’t do a lot of cust dev conversations

Less than 10 11 to 25 26 to 50 51+0%

25%

50%

75%

100%How many cust dev conversations are you having per month?

# of cust dev conversations

% o

f Res

pond

ents


@PriceIntel

We don’t send any cust dev surveys

0 1 2 3+0%

25%

50%

75%

100%How many cust dev surveys are you sending each month?

# of cust dev surveys

% o

f Res

pond

ents


@PriceIntel

We aren’t truly testing that much

0 1 to 3 4 to 10 11+0%

25%

50%

75%

100%How many tests or experiments are you running each month?

# of tests/experiments

% o

f Res

pond

ents


@PriceIntel

We’re obsessed with acquisition.

@PriceIntel

Looked at 25,679 blog posts.

@PriceIntel

We love talking about acquisition

Acquisition Monetization Retention0%

25%

50%

75%

100%Category of growth articles written from 2014 to 2106

% o

f tot

al a

rticle

s

N = 25,679 blog posts written between 2014 to 2016

@PriceIntel

Looked at 6,324 B2B companies

@PriceIntel

We love building for acquisition


25%

50%

75%

100%Category of B2B SaaS companies

% o

f tot

al c

ompa

nies

N = 6,324 companies currently active

@PriceIntel

These are just the acquisition companies

@PriceIntel

Asked Founders/Executives

@PriceIntel

What’s most important?

More logos Making more money per customer

Keeping customers around longer

0%

25%

50%

75%

100%C-Level/Founder Growth Preferences

% o

f tot

al c

ompa

nies

N = 1,432 SaaS companies, +/- 2.19% MoE at 95% level

@PriceIntel

What’s most important?

N = 1,218 SaaS companies, +/- 2.61% MoE at 95% level


25%

50%

75%

100%C-Level/Founder Spend Their Time

% o

f tot

al c

ompa

nies

@PriceIntel

If we improve each lever by the same amount, which lever causes the most

growth?

@PriceIntel

Impact of improving each growth lever


5%

10%

15%

3.32%

Impact of improving each lever by 1%

% im

pact

on

the

botto

m li

ne


@PriceIntel



5%

10%

15%

3.32%

6.71%


% im

pact

on

the

botto

m li

ne


@PriceIntel



5%

10%

15%

3.32%

12.70%

6.71%


% im

pact

on

the

botto

m li

ne


@PriceIntel

Improving retention and monetization has 2-4x the impact of focusing on

acquisition.

@PriceIntel

What we find important

More logos Making more money per customer

Keeping customers around longer

0%

25%

50%

75%

100%C-Level/Founder Growth Preferences

% o

f tot

al c

ompa

nies

N = 1,432 SaaS companies

@PriceIntel

What works for growth


5%

10%

15%

3.32%

12.70%

6.71%


% im

pact

on

the

botto

m li

ne

N = Data from 512 companies

@PriceIntel

This should be scary.

@PriceIntel

Everything aligns to the customer

Point of Conversion

Drive Customer #1

Offer Product #1

Offer Product #2

Drive Customer #2 Drive Customer

#3

Offer Product #3Justify price #1

Justify price #2Justify price #3

@PriceIntel

How do we fix our monetization?

@PriceIntel

Two ways to better monetization

• Quantify your buyer personas

• Implement a customer development process

@PriceIntel

Persona-Product Fit

Table Stakes Tony• Valued features:

• SFDC Integration• Chrome extension

• Least valued features• Analytics• API access

• WTP = ~$10/month• CAC = ~$22• LTV: $160

Advanced Arnie• Valued features:

• Analytics• API Access

• Least valued features• Chrome extension• Premium support

• WTP = ~$25/month• CAC = ~$56• LTV: $325

@PriceIntel

If you don’t know who you’re driving to your product, how do you know what

build?

@PriceIntel

Let’s walk through an example…

@PriceIntel

ProfitWell

@PriceIntel

The Cancel-Shah Product Model

@PriceIntel

“Oh you’re like….”

@PriceIntel

“Oh you’re like….”

37 Other Competitors

(we know about)

@PriceIntel

Persona-Product Fit

Startup Steve• Valued features:

• •

• Least valued features• •

• WTP = ~$/month• CAC = ~$• LTV: $

Miderprise Marty• Valued features:

• •



@PriceIntel

Go to the customer!

@PriceIntel

For the love of God. Talk to your customer.

@PriceIntel

Great. How do we do that?

@PriceIntel

1

2

3

Your Process at a High Level

Buyer Personasand Design

1

Data CollectionAnd Segmentation

2

Data ConsolidationAnd Analysis

3

@PriceIntel

Persona-Product Fit


• •




• •



@PriceIntel

Experimental Design

@PriceIntel

What type of info do we want?

• Demographic Information– How often do you look at your metrics? Team size? Revenue?...

• Feature/Packaging Information– Which metrics? What features? Value props?...

• Pricing Information– How much are they willing to pay? What frequency do they

want to pay?...

@PriceIntel

Relative Preference AnalysisStatistical methodology to measure preferences for features, intention, and value propositions

Your Customer Development Toolkit

Price Sensitivity AnalysisProven model for gauging customer’s willingness to pay and price sensitivity

Experimental DesignProperly segmenting and breaking down the data.

How do we ask the questions?

@PriceIntel

What do people value?

@PriceIntel

“Please rank the following features on a scale of 1 to

10…”

Accuracy of your metrics

Actionability from your metrics

Beautiful Design

Depth of your metrics

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

@PriceIntel

@PriceIntel

What do your customers value the most?

More on: Relative Preference Analysis

@PriceIntel

Your Experimental DesignMore on: Relative Preference Analysis

Main Category

Support• Phone• Live Chat• Email• …

@PriceIntel


Main Category


Data in Integrations

Metric Types

Data out Integrations

Action Tools

@PriceIntel


Main Category


Data in Integrations

Metric Types

Data out Integrations

Action Tools

All Demographics and Personas@PriceIntel

Persona-Product Fit


• Price • Design

• Least valued features• Actionabiltiy • Depth



• Accuracy • Uptime

• Least valued features• Price • Design


@PriceIntel

Relative Preference AnalysisStatistical methodology to measure preferences for features, intention, and value propositions

Your Customer Development Toolkit

Price Sensitivity AnalysisProven model for gauging customer’s willingness to pay and price sensitivity

Experimental DesignProperly segmenting and breaking down the data.

How do we ask the questions?

@PriceIntel

How much are they willing to pay?

@PriceIntel

Basic Plus Premium

$49 $149 $299

I only have one cool feature. The same cool feature. Yup, same one.

Oh! You can only get this here. Well…and here.

Huzzah! I’m the plan with absolutely

everything.

@PriceIntel

• At what (monthly) price point does [PRODUCT] become too expensive that you’d never consider purchasing it?

• At what (monthly) price point does [PRODUCT] start to become expensive, but you’d still consider purchasing it?

• At what (monthly) price point does [PRODUCT] a really good deal?

• At what (monthly) price point does [PRODUCT] too cheap that you question the quality of it?

More on: Relative Price Sensitivity Meter

How much are your customers willing to pay?

@PriceIntel

How much are your customers willing to pay?

More on: Relative Price Sensitivity Meter

@PriceIntel

WTP for SaaS Metrics

$0 - $50k $51k - $100k $101k - $250k $251k - $500k $501k+$0

$50

$100

$150

$200

$250

$300

WTP for a SaaS Metrics Solution

Size of Company (MRR)

WTP

N = 234 companies

@PriceIntel

Persona-Product Fit




• WTP = ~$50/month• CAC = ~$• LTV: $




• WTP = ~$150-250/month• CAC = ~$• LTV: $

@PriceIntel

Persona-Product Fit




• WTP = ~$50/month• CAC = ~$500-600• LTV: $600




• WTP = ~$150-250/month• CAC = ~$3000• LTV: $1500

@PriceIntel

WTP for Churn Recovery

$0 - $50k $51k - $100k $101k - $250k $251k - $500k $501k+$0

$500$1,000$1,500$2,000$2,500$3,000$3,500$4,000$4,500

WTP for a Recovering Churn


WTP

N = 234 companies

@PriceIntel

WTP for Rev Rec

$0 - $50k $51k - $100k $101k - $250k $251k - $500k $501k+$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

WTP for a Revenue Recognition


WTP

N = 234 companies

@PriceIntel

A good entry point

Low CAC with constant

valueCreates the

RequirementPath to Share

of Wallet

ProfitWellFinancial metrics for the subscription economy

100% accurate SaaS metrics for free integrating 1-click with your

billing system

Central fulcrum to cust success, sales, finance,

marketing e-team, and rest of

stakeholders

Allows interface to clearly point

to problems and reinforce value of paid add-ons

@PriceIntel

Our current monetization path

ProfitWellFinancial metrics for the subscription economy

Retain Rec RevenueDelinquent credit

card recovery through email, in-app snippet, and

optimization

Algorithmically solved 2-3 days of work amongst accounting and finance team

@PriceIntel

12 hours total.

@PriceIntel

12 hours total. $2089.

@PriceIntel

Implement a pricing process

@PriceIntel

Need to evaluate every 3 months and make changes every 6 months.

@PriceIntel

Changing Your Pricing

Customer/Market Research

Communication Plan

Week: 1 2 3 4 5

6 7 8 9

Impact Analysis

Customer Advisory

Panel

ImplementChanges

Step:

@PriceIntel

Your Pricing Committee

Main Decision Maker(could be a member of the committee, as well)

Main Coordinator Typically in Product or Marketing

Product Leadership Corp Dev/Finance

Sales Leadership Marketing Leadership

@PriceIntel

Monetization matters.

@PriceIntel

Building a company is getting harder; make it easier on yourself.

@PriceIntel

http://www.priceintelligently.com/bos

[email protected]

@PriceIntel

Patrick Campbell, Why a SaaS Pricing Consultancy Gives Away Free Software, BoS USA 2016

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Transcript of Patrick Campbell, Why a SaaS Pricing Consultancy Gives Away Free Software, BoS USA 2016