Patrick Campbell- 2019 APPEALIE SaaS Conference Featured Speaker

1. Brought to you by How we keep screwing SaaS up. SEPTEMBER 2019

2. Brought to you by The SaaS market has changed dramatically in the past two decades, but we haven’t done much to keep up with the changes. NONE OF US ARE PERFECT, BUT WE CAN BE BETTER

3. Brought to you by “Listen large, bearded, preachy man… …who the hell are you?”

4. Brought to you by PROFITWELL Free financial metrics for subscription businesses.

5. Churn tribution Financial Unit Price Survey Willingness to In-App Usage Drastically reduce churn RETAINTM Audit proof revenue recognition RECOGNIZED Proprietary pricing software for monetization PRICE INTELLIGENTLY

6. We’ve seen inside more SaaS data than anyone else out there. Brought to you by

7. Brought to you by patrick@profitwell.com For data/slides

9. Let’s first understand our history.

10. In the beginning…

11. …and it was good.

12. Prehistoric SaaS

13. 1960s to the 1990s

14. 1960s to the 1990s

15. Speed. Stability. Evangelism.

18. PRODUCT - market fit

19. Something changed though.

20. Subscription Golden Age

21. Late 1990s to 2013

22. We got great at building.

23. We got lucky with distribution.

24. Everything was great…

25. …until it wasn’t.

26. Acquisition costs increased.

27. 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. BLENDED CAC RELATIVE TO FOUR YEARS AGO SOURCE: 2017 CAC STUDY -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 6 YEARS AGO 5 YEARS AGO 4 YEARS AGO 3 YEARS AGO 2 YEARS AGO 1 YEAR AGO Today B2B B2C WHEN MEASUREMENT WAS TAKEN N 818 N = 818 companies Brought to you by

28. Competition exploded.

29. 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 # OF COMPETITORS IN THEIR 1ST YEAR 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

30. Value tanked.

31. 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. WTP AS % OF WTP 4 YEARS AGO SOURCE: 2017 CONSUMER WILLINGNESS TO PAY STUDY 0% 30% 60% 90% 120% 6 YEARS AGO 5 YEARS AGO 4 YEARS AGO 3 YEARS AGO 2 YEARS AGO 1 YEAR AGO TODAY Core Functionality B2B B2C WHEN MEASUREMENT WAS TAKEN N = Varies by line, but minimum of 10,000 customer respondents per line N 921k Brought to you by

32. Customer satisfaction plummeted.

33. 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 AVERAGE NPS SCORE 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

34. Sad?

35. We’ve arrived.

36. What are we messing up?

37. Brought to you by Only focused on acquiring customers.

38. Brought to you by 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 $ $ $

39. Percentage of expenses that go to acquisition?

40. 57%

41. Acquisition is now table stakes.

42. 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. % IMPACT ON REVENUE 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

43. 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. % IMPACT ON REVENUE 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 1.4k N = Data from 1.4k software companies PILLAR OF THE BUSINESS Brought to you by

44. 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. % IMPACT ON REVENUE 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 1.4k N = Data from 1.4k software companies PILLAR OF THE BUSINESS Brought to you by

45. Pricing/Retention 4-8x more effective than Acquisition

46. Brought to you by Building the wrong value in product.

47. “Focus on your customer”

48. “Steve Jobs didn’t talk to customers…I don’t need to either”

49. Average number of customer research calls a company does per month?

50. Yet, we’re building the wrong product.

51. -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 THE MARKET IS DROPPING OUT BENEATH US Measuring consumer sentiment to what we’re building DEVIATION FROM MEDIAN WTP RELATIVE PREFERENCE MAGNITUDE

52. THE MARKET IS DROPPING OUT BENEATH US Measuring consumer sentiment to what we’re building Relative Value of Attributes • Taste • Country of Origin • Temperature

53. THE MARKET IS DROPPING OUT BENEATH US Measuring consumer sentiment to what we’re building Relative Value of Attributes • Taste • Country of Origin • Temperature Willingness to Pay • Price elasticity for a cup of coffee

54. -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 THE MARKET IS DROPPING OUT BENEATH US Measuring consumer sentiment to what we’re building DEVIATION FROM MEDIAN WTP RELATIVE PREFERENCE MAGNITUDE Taste

55. -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 THE MARKET IS DROPPING OUT BENEATH US Measuring consumer sentiment to what we’re building DEVIATION FROM MEDIAN WTP RELATIVE PREFERENCE MAGNITUDE Taste Temperature Country of Origin

56. -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 THE MARKET IS DROPPING OUT BENEATH US Measuring consumer sentiment to what we’re building DEVIATION FROM MEDIAN WTP RELATIVE PREFERENCE MAGNITUDE Taste Temperature Country of Origin

57. -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 DEVIATION FROM MEDIAN WTP RELATIVE PREFERENCE MAGNITUDE Differentiable Features High Value/High WTP

58. -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 DEVIATION FROM MEDIAN WTP RELATIVE PREFERENCE MAGNITUDE Differentiable Features High Value/High WTP Add-Ons Low Value/High WTP

59. -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 DEVIATION FROM MEDIAN WTP RELATIVE PREFERENCE MAGNITUDE Differentiable Features High Value/High WTP Add-Ons Low Value/High WTP Core Features High Value/Low WTP

60. -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 DEVIATION FROM MEDIAN WTP 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

61. Brought to you by “You’re so depressing, Patrick…”

62. Brought to you by Couple of tactical pieces…

63. Brought to you by Utilize a Value Metric

64. Brought to you by Price Localization

65. Localize your pricing.

66. Brought to you by Optimize for term

67. Brought to you by Rapid Fire

68. • Don’t discount over ~20% DATA WE’VE SEEN TO BE HELPFUL Brought to you by — SAAS IN THE NEW ECONOMY

69. • Don’t discount over ~20% • Support, Brand, Design all drive WTP now DATA WE’VE SEEN TO BE HELPFUL Brought to you by — SAAS IN THE NEW ECONOMY

70. • Don’t discount over ~20% • Support, Brand, Design all drive WTP now • Credit card failures make up 20-40% of your churn. Fix them. DATA WE’VE SEEN TO BE HELPFUL Brought to you by — SAAS IN THE NEW ECONOMY

71. • Don’t discount over ~20% • Support, Brand, Design all drive WTP now • Credit card failures make up 20-40% of your churn. Fix them. • You should consider freemium (15-20% higher retention, lower CAC) DATA WE’VE SEEN TO BE HELPFUL Brought to you by — SAAS IN THE NEW ECONOMY

72. Brought to you by Enough? Everyone get some value?

74. Brought to you by Free Benchmark Audits patrick@profitwell.com

75. Brought to you by patrick@ProfitWell.com

Patrick Campbell- 2019 APPEALIE SaaS Conference Featured Speaker

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