Patrick Campbell, Why a SaaS Pricing Consultancy Gives Away Free Software, BoS USA 2016
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Why a pricing company gives away free softwareBoS 2016
@PriceIntel
http://www.priceintelligently.com/bos
Patrick@priceintelligently.com
@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
N = 1,647 software companies
@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
N = 1,647 software companies
@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
N = 1,647 software companies
@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
Acquisition Monetization Retention0%
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
Acquisition Monetization Retention0%
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
Acquisition Monetization Retention0%
5%
10%
15%
3.32%
Impact of improving each lever by 1%
% im
pact
on
the
botto
m li
ne
N = 578 SaaS companies, +/- 2.89% MoE at 95% level
@PriceIntel
Impact of improving each growth lever
Acquisition Monetization Retention0%
5%
10%
15%
3.32%
6.71%
Impact of improving each lever by 1%
% im
pact
on
the
botto
m li
ne
N = 578 SaaS companies, +/- 2.89% MoE at 95% level
@PriceIntel
Impact of improving each growth lever
Acquisition Monetization Retention0%
5%
10%
15%
3.32%
12.70%
6.71%
Impact of improving each lever by 1%
% im
pact
on
the
botto
m li
ne
N = 578 SaaS companies, +/- 2.89% MoE at 95% level
@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
Acquisition Monetization Retention0%
5%
10%
15%
3.32%
12.70%
6.71%
Impact of improving each lever by 1%
% 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:
• •
• Least valued features• •
• WTP = ~$/month• CAC = ~$• LTV: $
@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
Startup Steve• Valued features:
• •
• Least valued features• •
• WTP = ~$/month• CAC = ~$• LTV: $
Miderprise Marty• Valued features:
• •
• Least valued features• •
• WTP = ~$/month• CAC = ~$• LTV: $
@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
What do your customers value the most?
More on: Relative Preference Analysis
@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
Your Experimental DesignMore on: Relative Preference Analysis
Main Category
Support• Phone• Live Chat• Email• …
Data in Integrations
Metric Types
Data out Integrations
Action Tools
@PriceIntel
Your Experimental DesignMore on: Relative Preference Analysis
Main Category
Support• Phone• Live Chat• Email• …
Data in Integrations
Metric Types
Data out Integrations
Action Tools
All Demographics and Personas@PriceIntel
Persona-Product Fit
Startup Steve• Valued features:
• Price • Design
• Least valued features• Actionabiltiy • Depth
• WTP = ~$/month• CAC = ~$• LTV: $
Miderprise Marty• Valued features:
• Accuracy • Uptime
• Least valued features• Price • Design
• WTP = ~$/month• CAC = ~$• LTV: $
@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
Startup Steve• Valued features:
• Price • Design
• Least valued features• Actionabiltiy • Depth
• WTP = ~$50/month• CAC = ~$• LTV: $
Miderprise Marty• Valued features:
• Accuracy • Uptime
• Least valued features• Price • Design
• WTP = ~$150-250/month• CAC = ~$• LTV: $
@PriceIntel
Persona-Product Fit
Startup Steve• Valued features:
• Price • Design
• Least valued features• Actionabiltiy • Depth
• WTP = ~$50/month• CAC = ~$500-600• LTV: $600
Miderprise Marty• Valued features:
• Accuracy • Uptime
• Least valued features• Price • Design
• 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
Size of Company (MRR)
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
Size of Company (MRR)
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
Patrick@priceintelligently.com
@PriceIntel
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