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Patrick Campbell- 2019 APPEALIE SaaS Conference Featured Speaker

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The SaaS market has changed dramatically in the past two decades, but we haven’t done much to keep up with the changes.

We’ve seen inside more SaaS data than anyone else out there. But here's how we are screwing SaaS up from the Founder and CEO of ProfitWell, Patrick Campbell.

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Patrick Campbell- 2019 APPEALIE SaaS Conference Featured Speaker

  1. 1. Brought to you by How we keep screwing SaaS up. SEPTEMBER 2019
  2. 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. 3. Brought to you by “Listen large, bearded, preachy man… …who the hell are you?”
  4. 4. Brought to you by PROFITWELL Free financial metrics for subscription businesses.
  5. 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. 6. We’ve seen inside more SaaS data than anyone else out there. Brought to you by
  7. 7. Brought to you by patrick@profitwell.com For data/slides
  8. 8. 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
  9. 9. Let’s first understand our history.
  10. 10. In the beginning…
  11. 11. …and it was good.
  12. 12. Prehistoric SaaS
  13. 13. 1960s to the 1990s
  14. 14. 1960s to the 1990s
  15. 15. Speed. Stability. Evangelism.
  16. 16. Speed. Stability. Evangelism.
  17. 17. Speed. Stability. Evangelism.
  18. 18. PRODUCT - market fit
  19. 19. Something changed though.
  20. 20. Subscription Golden Age
  21. 21. Late 1990s to 2013
  22. 22. We got great at building.
  23. 23. We got lucky with distribution.
  24. 24. Everything was great…
  25. 25. …until it wasn’t.
  26. 26. Acquisition costs increased.
  27. 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. 28. Competition exploded.
  29. 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. 30. Value tanked.
  31. 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. 32. Customer satisfaction plummeted.
  33. 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. 34. Sad?
  35. 35. We’ve arrived.
  36. 36. What are we messing up?
  37. 37. Brought to you by Only focused on acquiring customers.
  38. 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. 39. Percentage of expenses that go to acquisition?
  40. 40. 57%
  41. 41. Acquisition is now table stakes.
  42. 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. 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. 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. 45. Pricing/Retention 4-8x more effective than Acquisition
  46. 46. Brought to you by Building the wrong value in product.
  47. 47. “Focus on your customer”
  48. 48. “Steve Jobs didn’t talk to customers…I don’t need to either”
  49. 49. Average number of customer research calls a company does per month?
  50. 50. Yet, we’re building the wrong product.
  51. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 61. Brought to you by “You’re so depressing, Patrick…”
  62. 62. Brought to you by Couple of tactical pieces…
  63. 63. Brought to you by Utilize a Value Metric
  64. 64. Brought to you by Price Localization
  65. 65. Localize your pricing.
  66. 66. Brought to you by Optimize for term
  67. 67. Brought to you by Rapid Fire
  68. 68. • Don’t discount over ~20% DATA WE’VE SEEN TO BE HELPFUL Brought to you by — SAAS IN THE NEW ECONOMY
  69. 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. 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. 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. 72. Brought to you by Enough? Everyone get some value?
  73. 73. 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
  74. 74. Brought to you by Free Benchmark Audits patrick@profitwell.com
  75. 75. Brought to you by patrick@ProfitWell.com

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