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SaaSFest 2015 - "Monetization Matters" by Patrick Campbell of Price Intelligently

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Marketers focus almost exclusively on acquisition as the main lever for growth. While intuitive, Patrick Campbell - CEO of Price Intelligently - walks through why your acquisition strategy is actually the least effective tool for spurring growth in your subscription business.

Patrick also provides a specific framework for quantifying your buyer personas in an effort to properly build out your SaaS pricing strategy.

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SaaSFest 2015 - "Monetization Matters" by Patrick Campbell of Price Intelligently

  1. 1. Monetization Matters for Growth SaaSFest 2015 @PriceIntel
  2. 2. You’re focused too much on “acquisition” as a driver of growth. @PriceIntel
  3. 3. You’re focused too much on getting someone to your landing page and not enough on what you’re putting on that page. @PriceIntel
  4. 4. Bold claim. @PriceIntel
  5. 5. We’ve seen inside the financial data of thousands of subscription companies. @PriceIntel
  6. 6. Qualitatively, two main camps of emerged. @PriceIntel
  7. 7. Lifetime Value (LTV) Beasts. @PriceIntel
  8. 8. 1. Small to no sales team 2. Typically low amounts of funding relative to their size 3. Focus on unit economics and buyer personas above all else @PriceIntel
  9. 9. Customer Acquisition Cost (CAC) Fiends. @PriceIntel
  10. 10. 1. Large sales teams 2. Raised more money than God 3. Unit economics not top of mind and vague buyer personas @PriceIntel
  11. 11. Is this real? Is this driven by our growth culture? @PriceIntel
  12. 12. Looked at 10,432 blog posts. @PriceIntel
  13. 13. We love our acquisition @PriceIntel 0% 25% 50% 75% 100% Acquisition Monetization Retention %oftotalarticles Category of growth articles written in 2014 and 2015 N = 10,432 blog posts written in 2014 and 2015
  14. 14. Acquisition isn’t the most effective channel @PriceIntel
  15. 15. If we improve each lever by the same amount, which lever causes the most growth? @PriceIntel
  16. 16. Impact of improving each growth lever @PriceIntel 3.32% 0% 5% 10% 15% Acquisition Monetization Retention %impactonthebottomline Impact of improvingeach lever by 1% N = Data from 512 companies
  17. 17. Impact of improving each growth lever @PriceIntel 3.32% 6.71% 0% 5% 10% 15% Acquisition Monetization Retention %impactonthebottomline Impact of improvingeach lever by 1% N = Data from 512 companies
  18. 18. Impact of improving each growth lever @PriceIntel 3.32% 12.70% 6.71% 0% 5% 10% 15% Acquisition Monetization Retention %impactonthebottomline Impact of improvingeach lever by 1% N = Data from 512 companies
  19. 19. Improving retention and monetization has 2- 4x the impact of focusing on acquisition. @PriceIntel
  20. 20. 1.68 3.23 11.09 0 5 10 15 No pricingfunction Yearly pricingreview Continual price optimization LTV/CAC vs. Pricing Commitment Impact on efficiency 2015 survey of 96 SaaS companies with ARR greater than $5M
  21. 21. We want customers, but don’t know what to do when we get them. @PriceIntel
  22. 22. We focus on growth as a sledgehammer. @PriceIntel
  23. 23. How do we improve monetization? @PriceIntel
  24. 24. 3 ways to better monetization • Quantify your buyer personas • Implement a pricing process • Utilize a multi-price mindset
  25. 25. Quantify your buyer personas @PriceIntel
  26. 26. Persona-Pricing Fit 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: $325 @PriceIntel
  27. 27. If you don’t know who you’re driving to your pricing page, how do you know what to put on your pricing page? @PriceIntel
  28. 28. Let’s walk through an example… @PriceIntel
  29. 29. My mom’s quilting business has better unit economics than your “real” business… @PriceIntel
  30. 30. @PriceIntel
  31. 31. Persona-Pricing Fit Hipster Henrietta • Valued features: • • • Least valued features • • • WTP = ~$/month • CAC = ~$ • LTV: $ Middle-Aged Mary • Valued features: • • • Least valued features • • • WTP = ~$/month • CAC = ~$ • LTV: $ @PriceIntel
  32. 32. Go to the customer! @PriceIntel
  33. 33. For the love of God. Talk to your customer. @PriceIntel
  34. 34. How to Set Prices the Wrong Way These are simple ways to set your price,but if used alone, will be ineffective Ex: price = closest competitor price Cost-plus pricing Competitor-based pricing Ex: price = cost + 30% margin
  35. 35. Costs Competitors Optimal Price How much your customers are willing to pay for your product/service Setting Prices the Right Way Value $ $ $ $ $ $ $ $ $ $ $ $
  36. 36. Great. How do we do that? @PriceIntel
  37. 37. 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
  38. 38. Basic Plus Premium $49 $149 $299 I  only  have  one  cool   feature. The  same cool  feature. Yup,  same  one. Oh!  You  can  only  get   this here. Well…and  here. Huzzah!  I’m  the  plan   with  absolutely   everything. @PriceIntel
  39. 39. Persona-Pricing Fit Hipster Henrietta • Valued features: • • • Least valued features • • • WTP = ~$/month • CAC = ~$ • LTV: $ Middle-Aged Mary • Valued features: • • • Least valued features • • • WTP = ~$/month • CAC = ~$ • LTV: $ @PriceIntel
  40. 40. Experimental Design @PriceIntel
  41. 41. What type of info do we want? • Demographic Information – How often they quilt? Age? Income?... • Feature/Packaging Information – Modern quilter? Traditional quilter? Mechanical items? Patterns?... • Pricing Information – How much are they willing to pay? What frequency do they want to pay?...
  42. 42. Relative Preference Analysis Statistical methodology to measure preferences for features, intention, and value propositions Your Pricing 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?
  43. 43. What do people value? @PriceIntel
  44. 44. Basic Plus Premium $49 $149 $299 I  only  have  one  cool   feature. The  same cool  feature. Yup,  same  one. Oh!  You  can  only  get   this here. Well…and  here. Huzzah!  I’m  the  plan   with  absolutely   everything. @PriceIntel
  45. 45. “Please rank the following features on a scale of 1 to 10…” 0 2 4 6 8 10 Basic Quilting Supplies Unique Quilting Items Pattern and Design Ideas Other Crafting Hobby Supplies Quilting Meetups, Events, and Communities
  46. 46. What do your customers value the most? More on: Relative Preference Analysis
  47. 47. What do your customers value the most? More on: Relative Preference Analysis
  48. 48. What do your customers value the most? More on: Relative Preference Analysis
  49. 49. Your Experimental Design More on: Relative Preference Analysis Main Category Basic Quilting • Thread • Fabric • Needles • …
  50. 50. Your Experimental Design More on: Relative Preference Analysis Main Category Basic Quilting • Thread • Fabric • Needles • … Unique Supplies Patterns/Design Other Hobbies Events/Meetup
  51. 51. Your Experimental Design More on: Relative Preference Analysis Main Category Basic Quilting • Thread • Fabric • Needles • … Unique Supplies Patterns/Design Other Hobbies Events/Meetup All Demographics and Personas
  52. 52. Persona-Pricing Fit Hipster Henrietta • Valued features: • Unique quilting supplies • Meetups • Least valued features • Discounted basic supplies • Other hobby supplies • WTP = ~$/month • CAC = ~$ • LTV: $ Middle-Aged Mary • Valued features: • Discounted basic supplies • Pattern/Design ideas • Least valued features • Discounted basic supplies • Other hobby supplies • WTP = ~$/month • CAC = ~$ • LTV: $ @PriceIntel
  53. 53. Relative Preference Analysis Statistical methodology to measure preferences for features, intention, and value propositions Your Pricing 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?
  54. 54. How much are they willing to pay? @PriceIntel
  55. 55. 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
  56. 56. • 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?
  57. 57. How much are your customers willing to pay? More on: Relative Price Sensitivity Meter
  58. 58. Persona-Pricing Fit Hipster Henrietta • Valued features: • Unique quilting supplies • Meetups • Least valued features • Discounted basic supplies • Other hobby supplies • WTP = ~$50 and $100/month • CAC = ~$ • LTV: $ • Channels: Middle-Aged Mary • Valued features: • Discounted basic supplies • Pattern/Design ideas • Least valued features • Discounted basic supplies • Other hobby supplies • WTP = ~$30, $50, and $100/month • CAC = ~$ • LTV: $ • Channels: @PriceIntel
  59. 59. Persona-Pricing Fit Hipster Henrietta • Valued features: • Unique quilting supplies • Meetups • Least valued features • Discounted basic supplies • Other hobby supplies • WTP = ~$50 and $100/month • CAC = ~$50 • LTV: $675 • Channels: WoM, Facebook, Quilt shops, Meetup.com, design websites, instagram Middle-Aged Mary • Valued features: • Discounted basic supplies • Pattern/Design ideas • Least valued features • Discounted basic supplies • Other hobby supplies • WTP = ~$30, $50, and $100/month • CAC = ~$25 • LTV: $850 • Channels: WoM, Facebook, Quilt shops, Quilt mailing lists @PriceIntel
  60. 60. My mom’s pricing page Free $50/month $100/month • Block of the month pattern • Access to deals newsletter • Curated box of basic quilting supplies (1 quilt pattern) • Curated box of unique quilting supplies (1 non- quilt pattern) • Community
  61. 61. 8 hours total. @PriceIntel
  62. 62. 8 hours total. $1264. @PriceIntel
  63. 63. Implement a pricing process @PriceIntel
  64. 64. What’s the average amount of time spent on pricing amongst companies? @PriceIntel
  65. 65. ~6 Hours. Total. @PriceIntel
  66. 66. Companies lack Companies spend an average of 8 hours total on pricing, but spend hundreds of hours on acquisition.* Commitment Expertise Process No one is hired or trained to manage the pricing process, getting handed off to “whomever wants to take the project.” Pricing is treated as “argue, guess, and check”, rather than a validation process engrained in customer development. *2015 survey of 312 companies @PriceIntel
  67. 67. Pricing Isn’t Hard. @PriceIntel
  68. 68. It’s a process. @PriceIntel
  69. 69. Need to evaluate every 3 months and make changes every 6 months. @PriceIntel
  70. 70. Changing Your Pricing Customer/Market Research Communication Plan Week: 1 2 3 4 5 6 7 8 9 Impact Analysis Customer Advisory Panel Implement Changes Step:
  71. 71. Your Pricing Committee Main Decision Maker (could be a member of the committee, as well) Main Coordinator Typically in Product or Marketing Product Leadership Corp Dev/Finance Sales Leadership Marketing Leadership
  72. 72. Utilize a multi-price mindset @PriceIntel
  73. 73. @PriceIntel
  74. 74. 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. Differentiate Features @PriceIntel
  75. 75. Wistia – Value Metric @PriceIntel
  76. 76. A value metric is what you charge for, and should: 1. Align to your customer’s needs. 2. Grow with your customer. 3. Be easy to understand. @PriceIntel
  77. 77. Monetization matters. It’s the reason you’re in business. @PriceIntel

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