Utilizing your Pricing for Optimal Growth

2. Utilizing your pricing for growth
Pipeline Summit 2016
@PriceIntel

3. http://www.priceintelligently.com/pipeline
Patrick@priceintelligently.com
@PriceIntel

4. We live in a world where acquisition
as we know it is dead
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5. Who are you?
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6. Happy customers big and small
ProfitWell
SaaS pricing
software and tech
enabled services
Free financial metrics
for subscription
businesses
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7. We’ve seen inside more software companies
than anyone else on the planet.
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8. The market is becoming saturated and unit
economics just aren’t what they used to be…
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9. The relative value of features is declining.
All software is going to $0.
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10. “Differentiation” isn’t what is used to be…
N = Varies by line, but minimum of 10,000 customer respondents per line
0%
25%
50%
75%
100%
125%
4 Years Ago 3 Years Ago 2 Years Ago 1 Year Ago Today
WTPas%ofWTP4YearsAgo
Willingness to pay over time relative to WTP 4 years ago
Core Features Single Sign On Integrations Analytics
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11. CAC is increasing over time.
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12. Acquiring a customer is getting pricier
N = Varies by line, but minimum of 453 companies per data point
-­‐25%
0%
25%
50%
75%
4 Years Ago 3 Years Ago 2 Years Ago 1 Year Ago Today
CACas%ofCAC4YearsAgo
Blended CAC relative to four years ago
B2B B2C
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13. We make matters worse by focusing on the
wrong fundamentals
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14. Asked Founders/Executives
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15. What’s most important?
N = 1,218 SaaS companies, +/- 2.61% MoE at 95% level
0%
25%
50%
75%
100%
Acquisition Monetization Retention
%oftotalcompanies
C-Level/Founder Spend Their Time
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16. There are clear winners and losers in this
environment.
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17. Death correlates to acquisition focused teams
0%
25%
50%
75%
100%
Less than $2.5M ARR $2.51M to $5M ARR $5.01M+ ARR
%ofRespondents
Of those companies who died, what was the makeup of their growth
Primarily
Acquisi5on
Growth
Balanced
Growth
N = Minimum of 30 companies per category who died over the past 4 years
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18. Balanced growth velocity is much larger
0%
25%
50%
2012 2013 2014 2015
%ofRespondents
How do growth rates compare to our two growth groups?
Primarily Acquisition Growth Balanced Growth
N = Minimum of 512 companies per segment pulled from the middle 2/3 of companies in terms of growth rate. This, along with a dampening
model was used to control for outlier spikes in growth rate.
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19. The root cause here stems from a lack of
buyer centricity.
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20. We don’t really know our buyers
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21. 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
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22. We don’t know our buyers that well
0%
25%
50%
75%
100%
Thought about them Central document Quantified buyer personas
%ofRespondents
Which single category best describes your buyer personas?
N = 1,647 SaaS companies
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23. We don’t do a lot of cust dev conversations
0%
25%
50%
75%
100%
Less than 10 11 to 25 26 to 50 51+
%ofRespondents
#
of
cust
dev
conversa5ons
How many cust dev conversations are you having per month?
N = 1,647 SaaS companies
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24. We aren’t truly testing that much
0%
25%
50%
75%
100%
0 1 to 3 4 to 10 11+
%ofRespondents
#
of
tests/experiments
How many tests or experiments are you running each month?
N = 1,647 SaaS companies
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25. We don’t realize the power of balanced growth.
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26. If we improve each lever by the same amount,
which lever causes the most growth?
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27. Impact of improving each
growth lever
3.32%
0%
5%
10%
15%
Acquisition Monetization Retention
%impactonthebottomline
Impact of improving each lever by 1%
N = 578 SaaS companies, +/- 2.89% MoE at 95% level
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28. Impact of improving each
growth lever
3.32%
6.71%
0%
5%
10%
15%
Acquisition Monetization Retention
%impactonthebottomline
Impact of improving each lever by 1%
N = 578 SaaS companies, +/- 2.89% MoE at 95% level
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29. Impact of improving each
growth lever
3.32%
12.70%
6.71%
0%
5%
10%
15%
Acquisition Monetization Retention
%impactonthebottomline
Impact of improving each lever by 1%
N = 578 SaaS companies, +/- 2.89% MoE at 95% level
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30. Improving retention and monetization has 2-4x
the impact of focusing on acquisition.
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31. What we find important
0%
25%
50%
75%
100%
More logos Making more money per
customer
Keeping customers around
longer
%oftotalcompanies
C-Level/Founder Growth Preferences
N = 1,432 SaaS companies
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32. What works for growth
3.32%
12.70%
6.71%
0%
5%
10%
15%
Acquisition Monetization Retention
%impactonthebottomline
Impact of improving each lever by 1%
N = Data from 512 companies
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33. This should be scary.
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34. 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 #3
Justify price #1
Justify price #2
Justify price #3
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35. How do we fix this?
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36. Quantify your buyer personas
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37. If you don’t know who you’re driving to your
product, how do you know what build?
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38. Let’s walk through an example…
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39. ProfitWell
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40. “Oh you’re like….”
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41. “Oh you’re like….”
37 Other
Competitors
(we know about)
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42. 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: $
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43. Go to the customer!
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44. For the love of God. Talk to your customer.
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45. Great. How do we do that?
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46. 1
2
3
Your Process at a High Level
Buyer Personas
and Design
1
Data Collection
And Segmentation
2
1
2
3
4
Data Consolidation
And Analysis
3
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47. 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: $
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48. Experimental Design
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49. 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?...
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50. Relative Preference Analysis
Statistical methodology to measure
preferences for features, intention,
and value propositions
Your Customer Development Toolkit
Price Sensitivity Analysis
Proven model for gauging customer’s
willingness to pay and price sensitivity
Experimental Design
Properly segmenting and breaking down the data.
How do we ask the questions?
@PriceIntel

51. What do people value?
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52. “Please rank the following
features on a scale of 1 to 10…”
0
0.2
0.4
0.6
0.8
1
Accuracy
of
your
metrics
Ac5onability
from
your
metrics
Beau5ful
Design
Depth
of
your
metrics
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53. @PriceIntel

54. What do your customers
value the most?
More on: Relative Preference Analysis
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55. What do your customers
value the most?
More on: Relative Preference Analysis
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56. What do your customers
value the most?
More on: Relative Preference Analysis
@PriceIntel

57. 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

58. Relative Preference Analysis
Statistical methodology to measure
preferences for features, intention,
and value propositions
Your Customer Development Toolkit
Price Sensitivity Analysis
Proven model for gauging customer’s
willingness to pay and price sensitivity
Experimental Design
Properly segmenting and breaking down the data.
How do we ask the questions?
@PriceIntel

59. How much are they willing to pay?
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60. 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

61. • 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?
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62. How much are your
customers willing to pay?
More on: Relative Price Sensitivity Meter
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63. WTP for SaaS Metrics
$0
$50
$100
$150
$200
$250
$300
$0 - $50k $51k - $100k $101k - $250k $251k - $500k $501k+
WTP
Size of Company (MRR)
WTP for a SaaS Metrics Solution
N = 234 companies
@PriceIntel

64. 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

65. 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
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66. WTP for Churn Recovery
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$0 - $50k $51k - $100k $101k - $250k $251k - $500k $501k+
WTP
Size of Company (MRR)
WTP for a Recovering Churn
N = 234 companies
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67. WTP for Rev Rec
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$0 - $50k $51k - $100k $101k - $250k $251k - $500k $501k+
WTP
Size of Company (MRR)
WTP for a Revenue Recognition
N = 234 companies
@PriceIntel

68. A good entry point
Low CAC with
constant value
Creates the
Requirement
Path to Share
of Wallet
ProfitWell
Financial 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
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69. Our current monetization path
ProfitWell
Financial metrics for the subscription economy
Retain Rec Revenue
Delinquent credit
card recovery
through email, in-
app snippet, and
optimization
Algorithmically
solved 2-3 days of
work amongst
accounting and
finance team
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70. 12 hours total.
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71. 12 hours total. $2089.
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72. We’re in a customer value centric world.
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73. You will be left behind if you think you can
brute force your growth.
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74. http://www.priceintelligently.com/pipeline
Patrick@priceintelligently.com
@PriceIntel