SaaS Pricing: Supercharge revenue with a value-based pricing strategy by Patrick Campbell (CEO, Price Intelligently)
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The webinar focuses on the importance of pricing strategies and buyer personas in adapting to the rapidly changing competitive landscape. It emphasizes that traditional acquisition-based growth strategies are no longer effective, and highlights the need for data-driven decision-making in customer development and monetization. The document also discusses the decline in consumer willingness to pay and the importance of understanding and segmenting customer preferences.
![• 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?
HUMANS THINK ABOUT VALUE AS A
SPECTRUM - WE CAN USE THIS EFFICIENTLY
— YOUREXPERIMENTALDESIGN
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SaaS Pricing: Supercharge revenue with a value-based pricing strategy by Patrick Campbell (CEO, Price Intelligently)
- 1. Brought to you by How Growth is Changing WEBINAR - JANUARY 2018
- 2. Housekeeping Items • What this webinar IS: • A look into: • Why Pricing is so Important right now in your business • How to quantify your buyer personas to set you on a path of value based pricing • A detailed playbook for increasing your revenue substantially • What this webinar IS NOT: • A magic formulas that requires zero effort on your part that whimsically makes you a m/billionaire • A pitch zone • Some answers to frequently asked questions: • The webinar is being recorded and the recording will be distributed • All slides and reference materials will be distributed • We will have time for questions #PricingParty Brought to you by your friends at@PriceIntel
- 3. Brought to you by Who in the world are you?
- 4. Churn Insights Attribution Data Financial Data Unit Economics Demographics Price Sensitivity Survey Data Willingness to Pay In-App Usage Data Drastically reduce churnRETAINTM Actionable, accurate insights to make you smarter about your business SAAS METRICS Proprietary pricing software for monetization MONETIZE
- 5. We’ve seen inside more software companies than anyone else on the planet.
- 6. Brought to you by What we think works doesn’t actually work. This has dire consequences for your business. HOW GROWTH IS CHANGING
- 7. Brought to you by We’re living on another planet.
- 8. Competition is now rampant.
- 9. CONSUMERS ARE GETTING HAMMERED Number of Competitors in First Year in Business Companies started more than a year ago had far fewer competitors in their space than companies started today. AVERAGE#OFCOMPETITORSINTHEIR1STYEAR AGE OF COMPANY 2016 SOFTWARE MARKET SURVEY 0 5 10 5 YEARS OLD 3 YEARS OLD 1 YEAR OLD 9.7 4.8 2.6 N = 1432 software founders and executives Brought to you by your friends at
- 11. Sales & Marketing channels were plentiful.
- 12. MARKETING CHANNELS ARE PLENTIFUL Number of Sales & Marketing Channels Utilized Sales & Marketing channel utilization has expanded rapidly, giving the rise of more opportunities to acquire customers from numerous different places. AVERAGE#OFCHANNELSUTILIZED YEARS AGO SOURCE: 2017 MARKETING STUDY 0 5 10 15 15 YEARS OLD 10 YEARS OLD 5 YEARS OLD 3 YEARS OLD 1 YEAR OLD TODAY 13.89 13.22 12.43 8.31 4.72 2.31 N = 1168 software founders and executives N 1168 Brought to you by your friends at
- 13. Businesses have lost their power.
- 14. CAC is Steadily Increasing Over Time
- 15. UNIT ECONOMICS AREN’T WHAT THEY USED TO BE Customer acquisition cost has increased significantly Customer acquisition cost has increased significantly over the years due to market saturation of marketing vying for consumer attention. BLENDEDCACRELATIVETOFOURYEARSAGO SOURCE: 2017 CAC STUDY -18% 0% 18% 35% 53% 70% 5 YEARS AGO 4 YEARS AGO 3 YEARS AGO 2 YEARS AGO 1 YEARS AGO Today B2B B2C WHEN MEASUREMENT WAS TAKEN N 743 N = 743 companies Brought to you by your friends at
- 16. The relative value of features is declining.
- 17. THE MARKET IS DROPPING OUT BENEATH US Consumer Willingness to Pay has Declined Over Time Software willingness to pay has declined significantly over the past few years due to increased options and higher demands. WTPAS%OFWTP4YEARSAGO SOURCE: 2017 CONSUMER WILLINGNESS TO PAY STUDY 0% 30% 60% 90% 120% 5 YEARS AGO 4 YEARS AGO 3 YEARS AGO 2 YEARS AGO 1 YEAR AGO TODAY Core Features Single Sign On Integrations Analytics WHEN MEASUREMENT WAS TAKEN N = Varies by line, but minimum of 10,000 customer respondents per line N 921k Brought to you by your friends at
- 18. Consumers are so ungrateful.
- 19. THE MARKET IS DROPPING OUT BENEATH US Despite Amazing Advances, NPS is Actually Down Overall Average NPS scores are actually falling pretty dramatically over the past five years, indicating either we’re just getting worse at our jobs or consumers re expecting more AVERAGENPSSCORE YEARS AGO SOURCE: 2017 SAAS STUDY 0 7 13 20 27 33 40 5 YEARS AGO 3 YEARS AGO 1 YEAR AGO 10.2 19.5 33.8 N = 1,784 software companies N 1,784 Brought to you by your friends at
- 20. Brought to you by What once worked is no longer working.
- 21. Our playbook was acquire, acquire, acquire.
- 22. WE MAKE MATTER SO MUCH WORSE Which Pillar is the Most Important in Your Business Founders and software executives overwhelmingly put their support behind acquisition based growth instead of caring about monetization or retention. %OFTOTALRESPONDENTS PILLAR OF THE BUSINESS 2017 SOFTWARE MARKET SURVEY 0% 50% 100% MORE LOGOS MORE $ PER CUSTOMER KEEP CUSTOMER LONGER 21.1% 7.58% 71.32% N = 1578 software founders and executives N 1578 Brought to you by your friends at
- 23. Acquisition is now table stakes.
- 24. WE FOCUS ON THE WRONG FUNDAMENTALS Impact of Improving Each Pillar of Your Business Monetization and retention based growth far outpaces acquisition based growth. This impact is getting greater over time. %IMPACTONREVENUE SOURCE: 2016 STUDY ON COMPANY UNIT ECONOMICS 0% 5% 10% 15% 20% ACQUISITION MONETIZATION RETENTION 3.32% 2008 - 2012 2013 - 2016 N 734 N = Data from 734 software companies PILLAR OF THE BUSINESS Brought to you by your friends at
- 25. WE FOCUS ON THE WRONG FUNDAMENTALS Impact of Improving Each Pillar of Your Business Monetization and retention based growth far outpaces acquisition based growth. This impact is getting greater over time. %IMPACTONREVENUE SOURCE: 2016 STUDY ON COMPANY UNIT ECONOMICS 0% 5% 10% 15% 20% ACQUISITION MONETIZATION RETENTION 2.35% 3.32% 2008 - 2012 2013 - 2016 N 734 N = Data from 734 software companies PILLAR OF THE BUSINESS Brought to you by your friends at
- 26. WE FOCUS ON THE WRONG FUNDAMENTALS Impact of Improving Each Pillar of Your Business Monetization and retention based growth far outpaces acquisition based growth. This impact is getting greater over time. %IMPACTONREVENUE SOURCE: 2016 STUDY ON COMPANY UNIT ECONOMICS 0% 5% 10% 15% 20% ACQUISITION MONETIZATION RETENTION 2.35% 6.71% 12.7% 3.32% 2008 - 2012 2013 - 2016 N 734 N = Data from 734 software companies PILLAR OF THE BUSINESS Brought to you by your friends at
- 27. WE FOCUS ON THE WRONG FUNDAMENTALS Impact of Improving Each Pillar of Your Business Monetization and retention based growth far outpaces acquisition based growth. This impact is getting greater over time. %IMPACTONREVENUE SOURCE: 2016 STUDY ON COMPANY UNIT ECONOMICS 0% 5% 10% 15% 20% ACQUISITION MONETIZATION RETENTION 9.32% 15.89% 2.35% 6.71% 12.7% 3.32% 2008 - 2012 2013 - 2016 N 734 N = Data from 734 software companies PILLAR OF THE BUSINESS Brought to you by your friends at
- 28. It was ok to be lazy with customer development.
- 29. WE FOCUS ON THE WRONG FUNDAMENTALS Customer Development Conversations Per Month SaaS founders and executives indicated that their companies are primarily only talking to less than 10 customers in a cust dev capacity per month. %OFTOTALRESPONDENTS # OF CUSTOMER DEVELOPMENT CONVERSATION PER MONTH 2016 SOFTWARE MARKET SURVEY 0% 50% 100% 10 or less 11 to 25 26 to 50 51+ 3.9% 10.1% 17.7% 68.3% N = 1647 software founders and executives N 1647 Brought to you by your friends at
- 30. WE FOCUS ON THE WRONG FUNDAMENTALS Experiments and Tests Per Month SaaS founders and executives indicated that their companies are overwhelmingly running less than 10 experiments per month. %OFTOTALRESPONDENTS # OF EXPERIMENTS OR TESTS PER MONTH 2016 SOFTWARE MARKET SURVEY 0% 50% 100% 0 1 to 3 4 to 10 11+ 2.71% 12.1% 37.81% 47.8% N = 1647 software founders and executives N 1647 Brought to you by your friends at
- 31. Yet, we’re building the wrong product.
- 32. -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% -0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5 Revenue Drivers 2017 SOFTWARE MARKET SURVEY THE MARKET IS DROPPING OUT BENEATH US Measuring consumer sentiment to what we’re building DEVIATIONFROMMEDIANWTP RELATIVE PREFERENCE MAGNITUDE Brought to you by your friends at
- 33. -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% -0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5 Revenue Drivers 2017 SOFTWARE MARKET SURVEY WE’RE BUILDING THE WRONG PRODUCT Calculating the expected impact of product on growth DEVIATIONFROMMEDIANWTP RELATIVE PREFERENCE MAGNITUDE Differentiable Features High Value/High WTP Brought to you by your friends at
- 34. -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% -0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5 Revenue Drivers 2017 SOFTWARE MARKET SURVEY WE’RE BUILDING THE WRONG PRODUCT Calculating the expected impact of product on growth DEVIATIONFROMMEDIANWTP RELATIVE PREFERENCE MAGNITUDE Differentiable Features High Value/High WTP Add-Ons Low Value/High WTP Brought to you by your friends at
- 35. -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% -0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5 Revenue Drivers 2017 SOFTWARE MARKET SURVEY WE’RE BUILDING THE WRONG PRODUCT Calculating the expected impact of product on growth DEVIATIONFROMMEDIANWTP RELATIVE PREFERENCE MAGNITUDE Differentiable Features High Value/High WTP Add-Ons Low Value/High WTP Core Features High Value/Low WTP Brought to you by your friends at
- 36. -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% -0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5 Revenue Drivers 2017 SOFTWARE MARKET SURVEY WE’RE BUILDING THE WRONG PRODUCT Calculating the expected impact of product on growth DEVIATIONFROMMEDIANWTP RELATIVE PREFERENCE MAGNITUDE Differentiable Features High Value/High WTP Add-Ons Low Value/High WTP Core Features High Value/Low WTP Trash Land Low Value/Low WTP Brought to you by your friends at
- 37. -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% -0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5 Revenue Drivers 2017 SOFTWARE MARKET SURVEY - N = 5K+ INPUTS FROM 1282 DIRECTOR, VP, OR C-LEVEL PRODUCT LEADERS WE’RE BUILDING THE WRONG PRODUCT What we think we're building DEVIATIONFROMMEDIANWTP RELATIVE PREFERENCE MAGNITUDE Brought to you by your friends at
- 38. -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% -0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5 Revenue Drivers 2017 SOFTWARE MARKET SURVEY - N = COMPOSITE DATA FROM 1.2M CUSTOMER INPUTS WE’RE BUILDING THE WRONG PRODUCT What we're actually building DEVIATIONFROMMEDIANWTP RELATIVE PREFERENCE MAGNITUDE Brought to you by your friends at
- 39. Brought to you by There are clear winners and losers in this environment.
- 40. CLEAR WINNERS AND LOSERS Comparing Cust Dev Strategies of Companies Acquisition based growth companies grow at a smaller rate than those with a balanced growth approach (growth from all three pillars of growth). YOYGROWTHRATE SOURCE: 2017 STUDY ON CUST DEV 0% 25% 50% 75% 100% 2012 2017 44.821% 31.72% Minimal Customer Development Aggressive Customer Development N 687 N = Minimum of 687 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. Brought to you by your friends at
- 41. CLEAR WINNERS AND LOSERS Comparing Cust Dev Strategies of Companies Acquisition based growth companies grow at a smaller rate than those with a balanced growth approach (growth from all three pillars of growth). YOYGROWTHRATE SOURCE: 2017 STUDY ON CUST DEV 0% 25% 50% 75% 100% 2012 2017 59.08% 44.821% 17.43% 31.72% Minimal Customer Development Aggressive Customer Development N 687 N = Minimum of 687 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. Brought to you by your friends at
- 42. This should be scary.
- 43. Buyers are the central tenet of your business POINT OF CONVERSION DRIVE CUSTOMERS OFFER PRODUCT A JUSTIFY PRICE A OFFER PRODUCT B JUSTIFY PRICE B OFFER PRODUCT C JUSTIFY PRICE C $ $$ Brought to you by your friends at
- 44. Brought to you by Too many of us acquire all we can without thinking of the customer.
- 45. Brought to you by That doesn’t work anymore.
- 46. Brought to you by How do we fix this?
- 47. Let’s walk through an example….
- 48. PROFITWELL Free financial metrics for subscription businesses
- 49. “Ohhh…you’re like…” #SaaSEconomy @PriceIntel Brought to you by your friends at
- 50. Stop building. Stop buying ads. Stop guessing and checking.
- 51. For the love of God. Talk to your customer.
- 52. Cool. How do we do that?
- 53. QUANTIFIED BUYER PERSONAS PRICING STRATEGY DATA COLLECTION & SEGMENTATION ANALYSIS & DECISIONSEXPERIMENTAL DESIGN Your pricing process needs to be data driven DATA DRIVEN PRICING Basic Statistical Models Brought to you by your friends at
- 54. DATA COLLECTION & SEGMENTATION ANALYSIS & RECOMMENDATIONS Data Collection & Segmentation PHASE TWO EXPERIMENTAL DESIGN Basic Statistical Models Brought to you by your friends at
- 55. “Surveys? Ugh. I hate surveys.”
- 56. Brought to you by What do people value? RELATIVE PREFERENCE
- 57. When utilizing Max Diff, you get both rank order and magnitude, which allows you to save yourself from costly false positives on preferences. WHAT TYPE OF FEEDBACK WILL YOU GET WITH MAX DIFF? — RELATIVEPREFERENCEDATA Brought to you by your friends at
- 58. When utilizing Max Diff, you get both rank order and magnitude, which allows you to save yourself from costly false positives on preferences. WHAT TYPE OF FEEDBACK WILL YOU GET WITH MAX DIFF? -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 ProfitWell is built and supported by a team with strong expertise ProfitWell has great uptime, reliability, and speed ProfitWell gives me actionable insights ProfitWell is free ProfitWell is the most accurate solution out there MORE IMPORTANTLESS IMPORTANT — RELATIVEPREFERENCEDATA Brought to you by your friends at
- 59. When utilizing Max Diff, you get both rank order and magnitude, which allows you to save yourself from costly false positives on preferences. WHAT TYPE OF FEEDBACK WILL YOU GET WITH MAX DIFF? -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 0-50K MRR 51-100 101-250 251-500 501+ ProfitWell has great uptime, reliability, and speed ProfitWell gives me actionable insights ProfitWell is free ProfitWell is the most accurate solution out there MORE IMPORTANTLESS IMPORTANT — RELATIVEPREFERENCEDATA Brought to you by your friends at
- 60. When utilizing Max Diff, you get both rank order and magnitude, which allows you to save yourself from costly false positives on preferences. WHAT TYPE OF FEEDBACK WILL YOU GET WITH MAX DIFF? -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4 STARTUP STEVE MIDERPRISE MARY MORE IMPORTANTLESS IMPORTANT ProfitWell is built and supported by a team with strong expertise ProfitWell has great uptime, reliability, and speed ProfitWell gives me actionable insights ProfitWell is free ProfitWell is the most accurate solution out there — RELATIVEPREFERENCEDATA Brought to you by your friends at
- 61. Quantified buyer personas are data driven profiles of the customers you’re targeting or choosing to ignore. FIRST DRAFT OF YOUR BUYER PERSONAS Startup Steve VALUED FEATURES ‣ Price ‣ Design LEAST VALUED ‣ Actionability ‣ Depth LIFETIME VALUE $XXX WILLINGNESS TO PAY $XX/month CUSTOMER ACQUISITION COST $XXX TARGET PERSONA Miderprise Meredith VALUED FEATURES ‣ Accuracy ‣ Depth LEAST VALUED ‣ Price ‣ Design LIFETIME VALUE $XXXX WILLINGNESS TO PAY $XXX/month CUSTOMER ACQUISITION COST $XXXX IGNORED PERSONATARGET PERSONA Brought to you by your friends at
- 62. Brought to you by How much are people willing to pay? PRICE SENSITIVITY
- 63. • 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? HUMANS THINK ABOUT VALUE AS A SPECTRUM - WE CAN USE THIS EFFICIENTLY — YOUREXPERIMENTALDESIGN Brought to you by your friends at
- 64. Ranged questions allow your to get the best answers from respondents, but also ensure you’re able to properly segment and measure elasticity. WHY IS ASKING IN RANGES THE MOST EFFECTIVE WAY TO ASK PRICING QUESTIONS? Optimal Price Band $363.86 - $434.58 $406.01 Indifference Price Point POTENTIAL PRICE %OFRESPONDENTS PRICE POINT %OFSALESLOST — OURMETHODTOCUSTOMERVALUE HIGHLOW Profits lost Customers lost PRICE Optimal Price Band Brought to you by your friends at
- 65. EATING OUR OWN DOG FOOD Buyer WTP for a SaaS Metrics Products Customers weren’t willing to pay as much as we thought for a SaaS Metrics solution. This was especially bad when looking at the multiple between the lower end customers and the upper end customers. WTPFORASAASMETRICSSOLUTION SOURCE: 2017 CONSUMER WILLINGESS TO PAY $0 $75 $150 $225 $300 $0 - $50k $51k - $100k $101k - $250k $251k - $500k $501k+ Upper Lower Median COMPANY’S MRR N = ~300 companies Brought to you by your friends at
- 66. • Body Level One • Body Level Two • Body Level Three • Body Level Four • Body Level Five 0 25 50 75 100 0 200 400 600 800 1000 1200 1400 MAXIMIZE PROFITABILITY Top 25% Sensitivity Curve MAXIMIZE ACQUISITION
- 67. Quantified buyer personas are data driven profiles of the customers you’re targeting or choosing to ignore. FIRST DRAFT OF YOUR BUYER PERSONAS Startup Steve VALUED FEATURES ‣ Price ‣ Design LEAST VALUED ‣ Actionability ‣ Depth LIFETIME VALUE $XXX WILLINGNESS TO PAY $50/month CUSTOMER ACQUISITION COST $XXX TARGET PERSONA Miderprise Meredith VALUED FEATURES ‣ Accuracy ‣ Depth LEAST VALUED ‣ Price ‣ Design LIFETIME VALUE $XXXX WILLINGNESS TO PAY $150 - $200/month CUSTOMER ACQUISITION COST $XXXX IGNORED PERSONATARGET PERSONA Brought to you by your friends at
- 68. Quantified buyer personas are data driven profiles of the customers you’re targeting or choosing to ignore. FIRST DRAFT OF YOUR BUYER PERSONAS Startup Steve VALUED FEATURES ‣ Price ‣ Design LEAST VALUED ‣ Actionability ‣ Depth LIFETIME VALUE $600 WILLINGNESS TO PAY $50/month CUSTOMER ACQUISITION COST $550 TARGET PERSONA Miderprise Meredith VALUED FEATURES ‣ Accuracy ‣ Depth LEAST VALUED ‣ Price ‣ Design LIFETIME VALUE $1,500 WILLINGNESS TO PAY $150 - $200/month CUSTOMER ACQUISITION COST $3,000 POOR PERSONAPOOR PERSONA Brought to you by your friends at
- 69. EATING OUR OWN DOG FOOD Consumer WTP for a SaaS Retention Solution Customers were willing to pay much more for a SaaS Retention solution. Of particular note is the fact that low end customer who weren’t willing to pay much for metrics were willing to pay 2-4x more for a performance based solution. WTPFORASAASRETENTIONSOLUTION SOURCE: 2017 CONSUMER WILLINGESS TO PAY $0 $1,250 $2,500 $3,750 $5,000 $0 - $50k $51k - $100k $101k - $250k $251k - $500k $501k+ Upper Lower Median COMPANY’S MRR N = 612 companies Brought to you by your friends at
- 70. Brought to you by Bringing it all together DATA CONSOLIDATION & ANALYSIS
- 71. DATA COLLECTION & SEGMENTATION ANALYSIS & RECOMMENDATIONSEXPERIMENTAL DESIGN Your “Pricing Profiles” for your target market, ensure you properly identify how customers will grow with you YOUR BUYER GROWTH JOURNEY IS CRUCIAL Brought to you by your friends at
- 72. Start small. You can always test more. Brought to you by
- 73. 12 hours. Brought to you by
- 74. 12 hours. $2089. Brought to you by
- 75. Saved us 18 months. Brought to you by
- 76. • Quarterly research process run by a PM for XX% of their time • Make changes every 6-9 months • Don’t “grandfather” your pricing • Use a value metric of some kind • Freemium is not a pricing model OTHER KEY PRICING PIECES FOR SUCCESS — RETENTIONINTHENEWECONOMY Brought to you by your friends at
- 77. Brought to you by What we think works doesn’t actually work. This has dire consequences for your business. HOW GROWTH IS CHANGING
- 78. Next Steps Free Pricing Audit profitwell.com#audit Brought to you by
- 79. Q&A. Brought to you by
- 80. Brought to you by + Thanks for attending!