Is your pricing model broken? OpenView's Kyle Poyar breaks down the top 5 pricing mistakes (and how to fix them).

1. Kyle Poyar
SaaStock 2018
How to fix your
broken pricing model
Proprietary and Confidential ©2018 Copyright OpenView Venture Partners. All Rights Reserved. OPENVIEW

2. “We picked the price
out of thin air”
Every SaaS founder, ever

3. 4
6%
Our pricing model aligns perfectly
with the value the product delivers
Source: openview.vc/saas-pricing-study

4. Where are you in your journey?
Early
Expansion
Growth
Maturity

5. Founders who struggle to raise
capital are…
3x More
likely to say they monetized too late
2x More
likely to say they picked the wrong business model
40% More
likely to say their burn rate was too high
Pricing can
make or break
your business
Source: First Round Capital 2017 State of Startups

6. We help SaaS startups fix their pricing

7. 88
Top 5
pricing mistakes
1. You’re too cheap
2. You picked the wrong value metric
3. You make it hard to buy
4. Your upsell path is broken
5. Your pricing is static

8. You’re too
cheap.
1

9. B2B buyers are not price sensitive.

10. Impact of pricing changes on revenue growth
You have a 2% chance of hurting ARR
Source: saasbenchmarks.com
2%
14%
42%
17%
25%
Decrease 0-9% increase 10-24% increase 25-49% increase 50%+ increase

11. Impact of pricing changes on revenue growth
And a 98% chance of growing ARR
Source: saasbenchmarks.com
2%
14%
42%
17%
25%
Decrease 0-9% increase 10-24% increase 25-49% increase 50%+ increase

12. Proprietary and Confidential ©2017 Copyright OpenView Venture Partners. All Rights Reserved. 13
How to raise prices without losing customers
1 Validate your course of action.
2 Communicate why you’re raising prices.
3 Use the pricing change as a marketing tactic.
4 Give customers a choice.
5 Have an plan for existing loyal customers.

13. 2
You picked the
wrong value metric.

14. 25%
26%
44%
45%
28%
23%
8%
15%
17%
23%
32%
15%
0% 20% 40% 60% 80% 100%
Infrastructure
Vertical app
Horizontal app
User or seat-based Usage-based Company size Other
Source: saasbenchmarks.com
Are seats the right metric for you?

15. The right value metric can help you
differentiate against competitors and
generate more revenue.

17. VTS: One-size-fits-all worked for nobody
Before – Per Building
Problem
One-size-fits-all left money on the table

18. VTS: New value metric increased revenue
After – Per Square Foot
Solution
Price aligned with customer value

19. 3
You make it
hard to buy.

20. 15 Months
10 Months
7 Months
Slow (<30%) Moderate (30-99%) FAST (>100%)
Self-reported CAC payback (Months)
Source: saasbenchmarks.com
Fastest growers seamlessly land
new customers

22. 23

23. Clearly states their
value proposition

24. Crystal clear
about benefits,
not just features

25. Puts lingering
fears to rest

27. 0
50
100
150
200
Subscription
PAYG
Jan-14 Jan-15 Jan-16 Jan-17
Sell to your customers the way they
want to buy

28. 4
Your upsell path is
broken.

29. 82%
84%
89%90%
97%
109%
Slow
(<30%)
Moderate
(30-99%)
FAST
(>100%)
Avg logo retention Avg net $ retention
AnnualRetention
Source: saasbenchmarks.com
Fastest growers see net negative churn

30. Feature packaging and usage-
based pricing help you achieve
net negative churn.

31. Proprietary and Confidential ©2017 Copyright OpenView Venture Partners. All Rights Reserved. 32
There are five types of feature packages
Increasing complexity
All-in
package
Category
packages
Segmented
packages
Good-Better-Best
packages
Modular
packages
One offer with
everything
included
Packages with all
features in a
product category
Packages tailored
to segments or
use cases
Packages with
increasing features
and services
Customized,
build-your-own
packages

32. Proprietary and Confidential ©2017 Copyright OpenView Venture Partners. All Rights Reserved. 33
Good-Better-Best is most popular
(for good reason)
Increasing complexity
All-in
package
Category
packages
Segmented
packages
Good-Better-Best
packages
Modular
packages
One offer with
everything
included
Packages with all
features in a
product category
Packages tailored
to segments or
use cases
Packages with
increasing features
and services
Customized,
build-your-own
packages
70% of SaaS
companies

33. Proprietary and Confidential ©2017 Copyright OpenView Venture Partners. All Rights Reserved. 34

34. 35
HubSpot: Usage-based pricing enables
faster expansion
Before
Fixed packages (2011)
Low upgrade rate
Revenue retention: 75%
After
Contact-based pricing (2014)
High upgrade rate
Revenue retention: 100%
Source: https://labs.openviewpartners.com/how-to-overhaul-pricing-in-3-steps/

35. 5
Your pricing is
static.

36. Pricing should evolve as your
company evolves

37. The single most valuable lesson I’ve learned is that you have
to be ready to constantly iterate on both your pricing and
packaging. Successful companies are those that think of
pricing in the same way they think about product
development – their pricing is in a constant state of
evolution.
Monika Saha
General Manager, Finance Product Line
Zuora
It’s never 100% done.

38. What now?

39. Pricing & packaging is
super important.

40. But most people don’t take it seriously
No, 45%
Yes, cursory
research, 48%
Yes, in-depth
research, 8%
No, 64%Yes, 1 round,
15%
Yes, 2+
rounds, 22%
Have you done pricing research? Have you done price testing?
Source: openview.vc/saas-pricing-study

41. The price is not material enough to be a
factor in the decision.
It is not even a blip on the radar.
“
”

42. 43Proprietary and Confidential ©2018 Copyright OpenView Venture Partners. All Rights Reserved.
There are lots of ways to ask about pricing
Direct methods
Van Westendorp
Price perception
Gabor Granger pricing
Indirect methods
Conjoint measurement
A/B tests
Pricing research methods
Reaction to product loss

43. Who should own pricing?

44. 55%
No one in the company
owns pricing
Source: openview.vc/saas-pricing-study

45. 36%
A piece of someone’s
responsibility is pricing
Source: openview.vc/saas-pricing-study

46. 9%
We have a dedicated
resource for pricing
Source: openview.vc/saas-pricing-study

47. Who should
own pricing?
Marketing
Finance
Sales
Operations
Product

48. Who should
own pricing?
Great for positioning and messaging
Already own TOFU & website
Best grasp of product and roadmap
Already doing customer development
May overly focus on features vs. value
Analytical and data-driven
Best handle on costs and profit
Tend to take a cost plus vs. value-based approach
Closest to the customer
Constantly hearing about needs and pain points
May be too close – want too many options
Best grasp of the data
Great at processes and technology
Less customer-focused
Marketing
Product
Finance
Sales
Operations

49. SaaS Pricing Takeaways
1. Don’t be too cheap
2. The right value metric helps you differentiate & sell more
3. Sell to customers the way they want to buy
4. Usage-based pricing & feature packaging drives net negative churn
5. Experiment and iterate on pricing

50. See this deck: openview.vc/ov-saastock-pricing
Kyle Poyar | kyle@ov.vc
Thank You!
Proprietary and Confidential ©2018 Copyright OpenView Venture Partners. All Rights Reserved.